Wrong service tax credit due to accounting error warranted adjustment and relief, subject to verification of non-utilisation.

An inadvertent accounting error that credited service tax paid from one unit's bank account to another concern's account did not justify sustaining the demand where the substantive tax payment was undisputed and the other concern certified that the amount had not been used or credited elsewhere. The key issue was whether the wrong accounting entry could defeat adjustment of the tax payment; on the facts stated, relief against duty, interest and penalty was warranted, subject to verification of the certificate and non-utilisation of the amount. The matter was therefore remanded for verification and corresponding adjustment of the wrong credit.

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Issues: Whether the appellant was entitled to adjustment of service tax wrongly credited to another unit's account and consequential waiver of demand of duty, interest and penalty despite an inadvertent accounting error.

Analysis: The amount paid from the appellant's bank account was reflected in the account of another concern due to an inadvertent mistake by the common accountant. The substantive tax payment was not doubted, and a certificate from the other concern showed that the amount was not utilised and no credit had been taken. In these circumstances, the earlier error could not justify sustaining the demand, though verification of the certificate and non-utilisation of the amount was necessary.

Conclusion: The appellant was entitled to relief against the demand of duty, interest and penalty, and the department was directed to verify the wrong credit and adjust the amount accordingly, with remand ordered for verification.

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