Excess payment of Service tax claimed as Cenvat receivable

[Haresh Raithatha]

With Reference to above we have to state that one of our Client is engaged in business of Construction and repairing work of Port Jetty. He has been allotted work contact for Repairs and Rehabilitation of Existing Wharf at Port during 2016-17. During the work Contract he has received Advance Payment at different stages of completion of work. He has paid Service tax as and when payment received @ 10.50% i.e. after taking 30% abatement. However on completion of contract when he gave final Bill charging service tax @ 10.50%, the receiver of service denied to accept Bill and asked to charge Service tax @ 6% after taking 60% Abatement. Because of this our client has already paid service tax amount for Apr to Sept half, got excess by (10.50% less 6% = 4.5%).

This excess service tax paid amount comes to ₹ 4,80,212/- due to such abatement rate difference.

For adjustment of this excess paid service tax client has shown this excess service tax paid amount as cenvat credit receivable in Oct to Mar-17 half yearly return and utilized the same as cenvat credit for Apr to June 17 Quarter of next year and balance shown in TRANS-1 of GST Regime and utilized fully in GST Regime.

Now during Service tax audit of the client, department has raised issue of Cenvat credit taken of that excess paid service tax. Their argument is that we should have claimed refund of that excess paid service tax within 1 year of the payment made. On that basis they have issued notice to justify our cenvat claim or pay that amount considering it as wrong availment of cenvat credit.

As the time limit for Refund claim has already been lapsed and we have utilized as cenvat credit that excess payment. Now What is the remedy. Pl advise.

[PAWAN KUMAR]

Dear Sir,

As per my view, Excess paid service tax is adjustable in future liability. If after adjustment, some amount is gone pending, refund procedure is there. But in your case, already you have taken excess service tax as cenvat credit which is not as per the provisions. It is better to file refund even after the time limit has expired. in the refund application, clearly mention the thing that the excess which was availed now being reversed. it will be refunded to you thru. litigation mode.

[KASTURI SETHI]

The Department's objection is 100% correct. Recently the Supreme Court has decided such issue in favour of the department. Undoubtedly, the department will follow that judgement. The Supreme Court refused to allow any relief.

[CASeetharaman KC]

Excess paid service tax cannot be classified as Cenvat credit as refund application was to be filed.The department stand is correct

[KASTURI SETHI]

Otherwise also ST paid on output service cannot be treated as tax paid on inwards service.

AI Summary

Client Must Justify Cenvat Credit Use or Repay Excess Service Tax from Jetty Work; Refund Application Suggested Despite Time Lapse. A client involved in construction and repair work for a port jetty paid excess service tax due to a misunderstanding about the applicable abatement rate. The client treated this excess payment as Cenvat credit, which was later utilized in the GST regime. During a service tax audit, the tax department challenged this treatment, arguing that a refund should have been claimed within a year. The client now faces a notice to justify the Cenvat claim or repay the amount. Responses suggest filing a refund application despite the time lapse, acknowledging the department's stance is supported by recent Supreme Court rulings.