Case Law Details
IL & FS Transportation Networks Ltd. Vs Commissioner of Service Tax-IV (CESTAT Mumbai)
Introduction: The Central Excise and Service Tax Appellate Tribunal (CESTAT) Mumbai recently delivered a significant judgment in the case of IL & FS Transportation Networks Ltd. vs. Commissioner of Service Tax-IV. The crux of the matter revolved around a service tax demand of Rs. 60,17,195 levied against IL & FS Transportation Networks Ltd. for an alleged breach of conditions under Sub-Rule (4B) of Rule 6 of the Service Tax Rules. However, CESTAT Mumbai quashed this service tax demand as the violation of conditions remained
1. Background and Allegations:
IL & FS Transportation Networks Ltd. is a service provider duly registered under the Service Tax. The appellant held centralized registration encompassing its head office and 16 branches, with service tax payments for all branches and the head office being made from its Mumbai office. In a peculiar scenario, the appellant overpaid service tax by Rs. 60,17,195 in September 2012, which they subsequently adjusted in December 2012. The Revenue contended that, as per Rule 6(4A) of the Service Tax Rules, 1994, the excess service tax should have been utilized for adjustment during the immediate next succeeding month.
2. Legal Framework:
The case hinged on Rule 6(4A) and Rule 6(4B) of the Service Tax Rules, 1994. Rule 6(4A) permits the adjustment of excess paid service tax in the succeeding month or quarter. Rule 6(4B), invoked by the Revenue, imposes conditions for such an adjustment.
3. Show Cause Notice and Response:
The Revenue issued a show cause notice to the appellant on July 20, 2015, invoking Rule 6(4B) and raised a service tax demand of Rs. 60,17,195. The notice also included proposals for penalty and interest. In response, the appellant contended that the excess service tax was adjusted in accordance with Rule 6(4A) during the succeeding month of December 2012. The appellant argued that Rule 6(4A) did not require immediate adjustment in the very next month.
4. Impugned Order:
The original authority upheld the service tax demand, imposed an equivalent penalty, and ordered the appellant to pay interest under Section 75 of the Finance Act, 1994. Dissatisfied with this order, IL & FS Transportation Networks Ltd. approached CESTAT Mumbai.
5. Appellant’s Argument:
The learned Chartered Accountant representing the appellant argued that Rule 6(4A) allowed for adjustment in the succeeding month, without mandating an immediate adjustment in the next month. The appellant also pointed out that the show cause notice did not allege that the excess service tax payment was due to an interpretation of law, taxability, valuation, or the applicability of any exemption notification.
6. Revenue’s Position:
The learned authorized representative for Revenue supported the impugned order.
7. CESTAT’s Decision:
CESTAT Mumbai meticulously reviewed the case records, the show cause notice, and the relevant rules (Rule 6(4A) and Rule 6(4B) of the Service Tax Rules, 1994). The Tribunal noted that Rule 6(4A) allowed for the adjustment of excess paid service tax in the succeeding month or quarter, without specifying an immediate adjustment in the very next month.
Additionally, the conditions stipulated in Rule 6(4B) were invoked by the Revenue in the show cause notice but were unsubstantiated in the notice itself. Therefore, CESTAT concluded that the Revenue had failed to establish that the appellant violated any conditions specified in Rule 6(4B).
Consequently, CESTAT Mumbai ruled that IL & FS Transportation Networks Ltd. was eligible to utilize the excess paid service tax of Rs. 60,17,195 during the month of December 2012.
8. Conclusion: This judgment by CESTAT Mumbai emphasizes the importance of a thorough understanding of tax regulations. It also underscores the need for Revenue to provide substantial evidence when alleging tax violations.
The ruling by CESTAT Mumbai in the IL & FS Transportation case is a reminder of the significance of adherence to tax regulations. It clarifies the permissible timeline for the adjustment of excess service tax payments and highlights the necessity for Revenue to substantiate claims of tax violations with adequate evidence.
FULL TEXT OF THE CESTAT MUMBAI ORDER
1. Brief facts of the case are that the appellant provides various services to their clients and is registered with Service Tax. Appellant has also taken centralized registration in respect of their head office and 16 branches and service tax for all branches and head office is paid from their Mumbai office covered by centralized registration. Appellant paid service tax of Rs.60,17,195/- in excess of service tax that should have been paid by them for the month of September 2012. The said excess paid service tax was adjusted by the appellant in the month of December 2012. It appeared to Revenue that as provided under Rule 6(4A) of Service Tax Rules, 1994, appellant should have utilized the excess paid service tax for adjustment during the immediate next succeeding month. Therefore, the appellant was issued with a show cause notice dated 20.07.2015 wherein Revenue invoked Rule 6(4B) of Service Tax Rules, 1994 and by invoking proviso to sub-section (1) of Section 73 of Finance Act, 1994, raised a demand of service tax of Rs.60,17,195/- through the said show cause notice. The said show cause notice also had proposals for imposition of penalty and recovery of interest. Appellant contested the show cause notice and stated in their reply dated 21.10.2015 that the appellant was required to pay service tax in respect of 16 branches and head office for the month of September 2012 before 5th October 2012 and due to high volume and various locations of branches, could not correctly calculate the service tax payable and paid excess service tax and the same was adjusted by them during the month of December 2012 and the said adjustment was in accordance with the provisions of Rule 6(4A) of Service Tax Rules, 1994. Revenue did not appreciate the said submission and decided the said show cause notice through the impugned order-in-original. The original authority confirmed the demand of service tax of Rs.60,17,195/- and imposed equal penalty and also ordered the appellant to pay interest under the provisions of Section 75 of Finance Act, 1994. Aggrieved by the said order, appellant is before this Tribunal.
2. Heard the learned Chartered Accountant for the appellant. He has submitted that Rule 6(4A) of Service Tax Rules, 1994 provides for adjustment of excess paid service tax during the succeeding month. He has submitted that the rule does not require adjustment to be made during the immediate succeeding month but in the succeeding month as can be interpreted by the provisions of the said rule. He has submitted that Revenue has invoked the provisions of Rule 6(4B) of Service Tax Rules, 1994 which states that the excess amount paid should not be on account of interpretation of law or taxability or valuation or applicability of any exemption notification. He has submitted that through show cause notice dated 20.07.2015 though Revenue has invoked the said sub-rule, but did not make any allegation that the appellant has paid excess service tax on account of interpretation of law or taxability or valuation or applicability of any exemption notification. Therefore, the appellant has rightly adjusted the excess paid amount as provided by the said sub-rule (4A) of Rule 6 of Service Tax Rules, 1994. He has further stated that Revenue has invoked the extended period of limitation for issue of the subject show cause notice. He has argued that the issue was within the knowledge of Revenue through ST-3 return for that month when the adjustment was done by the appellant and, therefore, there was no suppression on the part of the appellant to enable
Revenue to invoke extended period of limitation.
3. Heard the learned AR for Revenue. He has supported the impugned order.
4. We have carefully gone through the record of the case and submissions made. We have perused the show cause notice and the provisions of sub-rule (4A) and sub-rule (4B) of Rule 6 of Service Tax Rules, 1994. We understand that the said sub-rule (4A) provides for adjustment of excess paid service tax during the succeeding month or quarter. We note that the said sub-rule does not require the said adjustment to be made during the immediately succeeding month and, therefore, we do not find any violation of the said sub-rule by the appellant in adjusting the amount excess paid for the month of September 2012 during the month of December 2012. We also note that the conditions stipulated in sub-rule (4B) of Rule 6 of Service Tax Rules, 1994 though invoked by Revenue, the same are unsubstantiated in the said show cause notice. Therefore, we hold that Revenue has failed to establish that the appellant has violated any conditions specified in the said sub-rule (4B) of Rule 6 of Service Tax Rules, 1994. We, therefore, hold that the appellant was eligible for utilization of excess paid service tax of 60,17,195/- during the month of December 2012. We, therefore, hold that the impugned order is liable to be set aside.
5. We set aside the impugned order and allow the appeal.
(Order pronounced in the open court on 12.09.2023)
