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.

AI Summary

Service Tax Error: Payment Made to Wrong Firm; Refund Required Due to Separate Legal Identities and Tax Registrations. A query was raised regarding a mistake where the Service Tax liability of a partnership firm was paid into a proprietorship firm, both registered for Service Tax. The issue was whether the payment could be adjusted between the two firms or if a refund claim should be filed. A response clarified that since both firms have separate legal identities with distinct PANs and Service Tax Registration Numbers, there is no provision for adjustment. The advised course of action is to apply for a refund and pay the correct tax immediately to avoid accruing interest, as adjustment is not accepted by the department.