Set off of Service Tax Paid incorrectly instead of Excise Duty

[Guest]

One of our clients engaged in restaurant business have been paying service tax on all the food served. Food served includes bakery products for which the department claims excise duty. SSI exemption is also not available as bakery products are specifically exempt through SSI notification.

Now we want to know whether service tax paid for these bakery products can be set off agains the duty liability.

[DR.MARIAPPAN GOVINDARAJAN]

It cannot be set off.

[PAWAN KUMAR]

Dear Sir,

The reply quoted by Sh.MARIAPPAN GOVINDARAJAN is correct. The service tax paid incorrectly can not be set off. You have to pay the excise duty liability either through cenvat or in cash. The incorrect service tax paid can be taken back as refund from the department.

[Guest]

Thanks Mariappan and Pawan Kumar sirs.

AI Summary

Set off of service tax cannot be applied against excise duty; refund sought and excise paid separately. Service tax paid on bakery products served by a restaurant cannot be set off against excise duty liabilities; bakery items are excluded from SSI exemption. The correct approach is to pay the excise duty separately via cenvat credit or cash, and to seek a refund of any service tax paid incorrectly.