Service tax liability can be discharged through book adjustment method with proper reconciliation and documentation

The CESTAT NEW DELHI allowed the appeal concerning service tax liability discharge through book adjustment. The appellant had paid service tax via book adjustment method, which was challenged by the revenue authorities. The tribunal relied on CBIC instructions dated 21.03.2023 that accepted payment of service tax through book adjustment, provided proper reconciliation was maintained. The tribunal found that the appellant had submitted adequate details of book transfer from the Controller General of Accounts website, fulfilling the board's directions. The Principal Commissioner's order dated 31.10.2022 was set aside, confirming that book adjustment constituted valid payment of service tax liability.

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Issues:
The appeal involved the consideration of whether the appellant could discharge service tax liability by 'book adjustment' and the acceptance of such method by the Board.

Issue 1 - Payment of Service Tax by Book Adjustment:
The appellant filed an appeal challenging three show cause notices for the period from October 2012 to June 2017. The main issue was whether the appellant could have discharged service tax liability by 'book adjustment'. The department contended that payment should have been made through TR-6 challan or electronically, not by book adjustment. The appellant relied on Instructions by the Central Board of Indirect Taxes and Customs, which allowed payment by book adjustment in certain cases to avoid unnecessary litigation. The Board directed that in cases where tax was demanded due to non-compliance of payment procedure but paid through book adjustment, the focus should be on reconciliation of the payment. The appellant submitted a reconciliation statement and evidence of payment through book adjustment, as per the Board's instructions.

Issue 2 - Reconciliation of Payment by Book Adjustment:
The adjudicating authority did not accept the reconciliation provided by the appellant, citing the lack of final accounts or evidence of audit by the Comptroller and Auditor General. However, the Tribunal noted that the accounts had been audited by the Controller General of Accounts, not the Comptroller and Auditor General. The Railway Board's communication detailed the remittance of service tax through book adjustment, providing evidence of payment. The Tribunal found that the appellant had fulfilled the requirements laid down in the Instructions by submitting data from the Controller General of Accounts website. Consequently, the Tribunal set aside the impugned order and allowed the appeal.

The impugned order dated 31.10.2022 was set aside, and the appeal was allowed based on the fulfillment of requirements for payment by book adjustment as per the Instructions by the Central Board of Indirect Taxes and Customs.

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