2026 (2) TMI 398 - AT - Service Tax

Inadvertent payment credited to third party: waiver of duty, interest and penalty granted; verification and adjustment ordered

Tribunal allowed waiver of duty, interest and penalty where an inadvertent payment was credited to a third party, reasoning that the substantive ... Waiver of duty, interest and penalty - Inadvertent payment credited to third party - benefit of underlying credit -verification and adjustment of wrongly credited amount - remand for verification of non-utilisation - costs for lack of due diligence - HELD THAT:- The learned advocate is before us pleading for the party. He has sought to place reliance on various case law on the judgment of Welspun Corp Ltd Vs. C.C.E & S.T.-Rajkot [2023 (2) TMI 780 - CESTAT AHMEDABAD] whereby the DB of this Tribunal had allowed the benefit of underlying credit in the face of error in payment of service tax wherein service tax registration number of another unit was wrongly mentioned. The decision is based on various other judgments of coordinate bench of this Tribunal only. The decision quoted by the appellant is applicable even to the facts of this case, the ratio applies since the substantive transaction is not doubted. No doubt they has been lack of diligence on the part of accountant of the appellants putting everyone concerned to inconvenience. Considering the factum, while the appeal is being allowed by this Court and waiver of demand of duty, interest and penalty is being granted, department is directed to adjust amount wrongly paid to the credit of M/s. Sonal Engineering after verification of the certificate to allow the credit to the appellant. The interest would not be there in case no credit is deemed to be taken at that time in their account. However, for wrongful credit and lack of due diligence relating to maintains of improper Government Accounts a cost of Rs. 10,000/- as consented shall be imposed by the verifying authority i.e. AC or DE., and same shall be deposited in P M Care Relief Fund within the stipulated time as indicated by the verifying authority. With above directions, the matter is remanded for verification of the amount paid in the credit of M/s Sonal Engineering and its non-utilisation by either party. Issues: Whether the appellant is entitled to adjustment of service tax credit wrongly reflected in another entity's account due to inadvertent accounting error and waiver of demand of duty, interest and penalty, subject to verification of non-utilisation.Analysis: The Tribunal examined whether the substantive transaction and payment by the appellant were genuine and whether the mis-credit arose from an inadvertent error by the appellant's accountant. Reliance was placed on precedent where benefit of underlying credit was allowed despite errors in recording registration details, on the basis that the substantive transaction was not doubted. The Tribunal balanced the need to grant relief where the payment and underlying transaction are established against departmental inconvenience and the appellant's lack of diligence. Consequential directions were considered necessary to verify that the amount credited to the other account was not utilised and to permit adjustment after verification. A modest cost was imposed for the accounting lapse and procedural inconvenience.Conclusion: Adjustment of the wrongly credited amount is permitted after verification of non-utilisation; demand of duty, interest and penalty is waived; interest will not be charged if no credit was deemed to be taken at the relevant time; a cost of Rs. 10,000 is imposed to be deposited in the PM Care Relief Fund; matter remanded for verification.