Excess Service Tax Paid Can Be Adjusted Towards Service Tax Liability For The Succeeding Month Or Quarter: CESTAT

The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that excess service tax paid can be adjusted towards service tax liability for the succeeding month or quarter.

The bench of Justice Dilip Gupta (President) and P. Anjani Kumar (Technical Member) has observed that the mistake of short or excess payment has occurred due to the newly introduced Works Contract Service. The appellant has certainly paid short service tax in the initial months of April, August, and September and excess tax in the months of May, June, and July.

The appellant or assessee has short-paid or overpaid the service tax payable by them in the months of April, May, June, August, and September 2007. While paying the service tax short paid or adjusting the service tax excess paid, the appellant reflected it in the ST-3 returns filed for the period April 2007 to September 2007 under column 4A (I) (a) (iii), describing it as "by adjustment of excess amount paid earlier and adjusted in this period under Rule 6 (3) of Service Tax Rules.

On being asked by the department, the appellant explained that the excess payment made in the months of June and July was adjusted in the returns for the months of August and September.

The appellant explained to the department month-wise details of adjustments on account of short payments or excess payments in April to September 2007.

The department contended that the adjustment under Rule 6(3) of the Service Tax Rules, 1994, is permissible only when the appellant has paid service tax for a taxable service that was not provided wholly or partially and when the appellant refunds the consideration received to his customers before making an adjustment of the excess paid service tax. Despite the explanation given by the appellant, a SCN was issued to the appellant seeking to recover the service tax alleged to have been wrongly adjusted by the appellant, along with interest and penalty.

The adjudicating authority confirmed the demand and imposed a penalty of Rs. 1,60,00,000 on the appellant.

The appellant contended that instead of adjusting the service tax paid in terms of Rule 6 (4A), they have wrongly mentioned the details under Rule 6 (3) of STR in the ST-3 returns filed by them. They have made good on the service tax shortfall, along with interest. Service tax due was fully paid by them, along with interest. It cannot be demanded again simply because the same was mentioned under the wrong column in the returns.

The department contended that the appellant has failed to show satisfactorily that they have refunded the service tax for which no service has been provided.

The tribunal noted that the adjudicating authority did not counter or negate the claims and submissions of the appellants. Not even a single piece of evidence has been adduced to show that the appellants have in fact violated the provisions of Rule 6(3) of the Service Tax Rules., 1994.

Case Title: M/s B.L. Kashyap & Sons Ltd. Versus Commissioner of Service Tax

Case No.: Service Tax Appeal No.54315 Of 2014

Date: 30.05.2023

Counsel For Appellant: R.P. Jindal

Counsel For Respondent: Rajeev Kapoor

Click Here To Read The Order