Service Tax paid in partnership firm registered with Service Tax instead of Proprietorship firm registered with Service Tax

[samiuddin ansari]

Respected Sir,

My friend has two service tax registered firm. One is partnership firm in which he is one of the three partners and another one is his own proprietorship firm. By mistake, the Service Tax liability of former firm has been paid into later one. I need your guidance as to whether there is any provision in the Service Tax Rules which permits to adjust the payment made to one firm where there are no liabilities to another firm where actual liabilities arose or he has to go for lodging refund claim before the Service Tax Department. Also, remember both the firms are registered with Service Tax Department.

[KASTURI SETHI]

Both the firms have separate legal entities. Separate PAN and separate Service Tax Registration Number.No such provision for adjustment.Only option is to apply for refund. Deposit Service Tax immediately without waiting for refund. Refund may take time. Interest will have to be deposited for the delay which is increasing day by day.

There may be case laws on the issue in your favour but note that the department shall not agree to adjustment.

[Ganeshan Kalyani]

I fully agree with Sri Kasturi Sir 's review.

AI Summary

Separate legal entities bar cross-adjustment of service tax payments; refund claim required and interest may apply. No provision permits adjustment of a service tax payment credited to one registered entity against the liabilities of another; separate PAN and separate service tax registrations establish distinct legal entities. The correct course is to deposit the tax for the entity with the liability and file a refund claim for the payment made to the other entity, recognising that refunds may be delayed, the department may not agree to adjustment, and interest may accrue on unpaid liabilities.