Double recovery of service tax is impermissible where liability was already discharged through book adjustment and accounting records.

Service tax already discharged through the departmental accounting system by book adjustment could not be demanded again merely because no separate challan payment was produced. The Tribunal treated the accounting entry in the prescribed government head as payment of the tax liability and held that a second demand for the same liability amounted to impermissible double recovery, contrary to the statutory scheme and Article 265 of the Constitution. On that basis, the impugned demand, interest and penalty were set aside, and consequential relief was held to follow in accordance with law.

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Issues: Whether the service tax demand could be sustained when the tax was already discharged by book adjustment and a further demand would amount to recovery of tax twice.

Analysis: The appellant produced material showing that the service tax for the relevant period had been booked and accounted for in the prescribed government head through the departmental accounting system. The demand was nevertheless raised again on the footing that no challan payment had been made. In the circumstances, the Tribunal held that once the tax stood paid through the established government accounting mechanism, a second demand for the same liability was inconsistent with the statutory scheme and offended Article 265 of the Constitution of India.

Conclusion: The demand could not be sustained and the appeal was allowed in favour of the assessee.

Final Conclusion: The impugned demand, interest and penalty were set aside, and the appellant was held entitled to consequential relief in accordance with law.

Ratio Decidendi: Tax already discharged through a recognised accounting or book-adjustment mechanism cannot be demanded again for the same liability, as such double recovery is impermissible under Article 265 of the Constitution of India.

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