CESTAT Upholds Adjustment Of Excess Paid Service Tax Towards Subsequent Tax Liability

The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has upheld the adjustment made by the appellant/assessee of excess paid service tax towards the subsequent tax liability.

The bench of Ramesh Nair (Judicial Member) and C. L. Mahar (Technical Member) has observed that the appellant is entitled either to a refund of 50% of the excess paid service tax or to an adjustment against the excess paid towards the future tax liability. As a result, the adjustment made by the appellant of excess paid service tax towards the subsequent tax liability is absolutely in order and correct.

The appellant/assessee is engaged in providing the taxable service of renting immovable property and is registered with the Service Tax at the Commissionerate of Ahmedabad. The appellant informed the department that they had paid 100% service tax on the rent. However, the service recipient, i.e., the tenant of the appellant's property, also paid 50% of the service tax liability as per the Supreme Court interim order in the case of RAI (Retailer Association of India); thus, there is an excess payment of service tax for which the appellant filed a refund claim.

Since there was a delay in processing by the department, the appellant then requested the department adjust the excess paid service tax against the subsequent liability of service tax. Instead of claiming the refund, the refund claim was returned by the department, citing the reason that since the 50% service tax was paid by the RAI (Retailer Association of India), as per the interim order dated October 14, 2011 by the Hon'ble Supreme Court, the amount cannot be allowed to be adjusted or refunded.

The assessee has adjusted the excess paid service tax in the amount of Rs. 32,67,727 against the periodical service tax liability.

The show cause notice was issued demanding the service tax of Rs. 32,67,727 against the short-paid service tax, as the same amount adjusted by the appellant was not allowed.

The adjudicating authority, except for demand of Rs. 21,839/-, has dropped the remaining amount by allowing the adjustment made by the appellant against the excess paid service tax.

The department filed an appeal before the Commissioner on the ground that the appellant had wrongly taken the credit and used it against the service tax paid by their service recipient, which is not permissible. The Commissioner's appeal, agreeing with the grounds of the appeal, confirmed the demand.

The appellant contended that there is no dispute that the excess amount of service tax was paid; therefore, either the same needs to be refunded or an adjustment made by the appellant in terms of Rule 6(4)(A) of the Service Tax Rules of 1994 should be allowed. The adjudicating authority has rightly considered the Supreme Court judgment allowing the adjustment and consequently dropping the demand; therefore, the order is not sustainable. Neither in the show cause notice nor in the adjudication order was there any issue of wrong availment of CENVAT credit, whereas the appellant has proposed the adjustment of excess paid service tax in the future tax liability; therefore, the case is not of CENVAT credit.

The tribunal, while allowing the appeal, held that in normal course, a demand for cenvat is raised under Rule 14 of the CENVAT Credit Rules, which is not the case here. The adjudicating authority has also decided the matter, considering the adjustment of excess service tax. Therefore, it is apparent from the grounds of appeal that the appeal filed by the revenue is absolutely on the wrong footing. Therefore, the order of the commissioner appeal was also passed, assuming the issue of the wrong availment of CENVAT credit is completely vitiated and not maintainable.

Counsel For Appellant: Vaibhav K Jajoo

Counsel For Respondent: Ajay Kumar Samota

Case Title: Gulmohar Park Mall Pvt Ltd Versus Commissioner Of Central Excise And Service Tax-Service Tax - Ahmedabad

Case No.: Service Tax Appeal No. 11495 Of 2016-DB

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