Set off of Service Tax Paid incorrectly instead of Excise Duty

[K R Prasanna Bhaskaran]

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.

AI Summary

Restaurant Owner Mistakenly Paid Service Tax on Bakery Products; Must Pay Excise Duty and Seek Refund for Overpayment. A client in the restaurant business mistakenly paid service tax on bakery products, which should incur excise duty instead. Since these products are exempt from SSI benefits, the query was whether the service tax paid could be offset against the excise duty liability. Responses from forum participants clarified that the service tax cannot be set off against excise duty. Instead, the excise duty must be paid through CENVAT or cash, and the incorrectly paid service tax can be reclaimed as a refund from the department.