Case Law Details
McKinsey & Co. Inc. Vs Commissioner of CGST & Service Tax (CESTAT Mumbai)
CESTAT Mumbai held that claim of extra payment of tax without any documentary evidence (except arithmetical calculation) is not adjustable and unsustainable in law.
Facts-
The appellant are engaged in providing Management Consultant’s services under the provisions of Finance Act, 1994. According to the appellant, during the period June, 2012 they have paid excess service tax of Rs.25,57,778/- for the period April to June, 2012 and later on after more than two years they adjusted the said excess payment for the period April to June, 2014 by disclosing it in their ST-3 return. During Audit the department came to know about the aforesaid adjustment by the appellant and accordingly show cause-cum-demand notice dated 7.12.2016 was issued to the appellant asking to pay the amount of Rs.25,57,778/- alongwith interest and penalty which culminated into the Adjudicating Order dated 24.5.2018 wherein the demand of Rs.25,57,778/- alongwith interest and penalty u/s. 76 and 77 was confirmed whereas penalty u/s. 78 was dropped. Aggrieved, the appellant filed appeal before the Commissioner (Appeals) and the learned Commissioner vide impugned order dated 20.2.2019 rejected the same.
The appellant submits that excess tax was paid in the month of June, 2012 which has been adjusted by the appellant later on for the months of April-June, 2014 therefore no illegality has been committed by the appellant and according to learned Chartered Accountant the same been done in conformity with the provisions of Rule 6(4A) ibid by disclosing the adjustment in the ST-3 return filed for the period April to September, 2014.
Conclusion-
Held that here levy of tax is not disputed, what is disputed is the alleged excess payment by the Appellant in this era of self-assessment and since no documentary evidence has been placed on record except the arithmetical calculation, therefore it cannot be concluded that any extra payment of tax has been made by the Appellant.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been filed assailing the order dated 20.2.2019 passed by the Commissioner of Central Tax, Appeals-I, Mumbai by which the learned Commissioner rejected the appeal by upholding the order passed by the Adjudicating Authority.
2. The issue involved herein is about the interpretation of the term ‘succeeding month or quarter’ used in Rule 6(4A) of Service Tax Rules, 1994 as to whether the said term means immediate succeeding month/quarter or it can be anytime even after couple of years? and also whether the assessee can claim any adjustment without complying with the conditions contained in Rule 6(4B) ibid?
3. The facts of the appeal are stated in brief as follows. The appellant are engaged in providing Management Consultant’s services under the provisions of Finance Act, 1994. According to the appellant, during the period June, 2012 they have paid excess service tax of Rs.25,57,778/- for the period April to June, 2012 and later on after more than two years they adjusted the said excess payment for the period April to June, 2014 by disclosing it in their ST-3 return. During Audit the department came to know about the aforesaid adjustment by the appellant and accordingly show cause-cum-demand notice dated 7.12.2016 was issued to the appellant asking to pay the amount of Rs.25,57,778/- alongwith interest and penalty which culminated into the Adjudicating Order dated 24.5.2018 wherein the demand of Rs.25,57,778/- alongwith interest and penalty u/s. 76 and 77 was confirmed whereas penalty u/s. 78 was dropped. Aggrieved, the appellant filed appeal before the Commissioner (Appeals) and the learned Commissioner vide impugned order dated 20.2.2019 rejected the same.
4. Learned Chartered Accountant for the appellant submits that excess tax was paid in the month of June, 2012 which has been adjusted by the appellant later on for the months of April-June, 2014 therefore no illegality has been committed by the appellant and according to learned Chartered Accountant the same been done in conformity with the provisions of Rule 6(4A) ibid by disclosing the adjustment in the ST-3 return filed for the period April to September, 2014. According to learned Chartered Accountant the term ‘succeeding month or quarter’ used in Rule 6(4A) cannot be interpreted as only immediately succeeding month or quarter since such a narrow interpretation is not permissible in law. Learned Chartered Accountant further submits that the word ‘succeeding month’ is not accompanied by the word ‘immediate’ and hence it does not necessarily mean that the adjustment is required to be made in the moth immediately succeeding the month in which the excess tax is paid and in support of his submissions learned Chartered Accountant relied upon series of decisions of the Tribunal viz. (i) M/s. Schwing Stetter (India) Pvt. Ltd. 2016 (6) TMI 239-CESTAT Chennai; (ii) Gujarat Nre Coke Ltd. 2012 (27) STR 372;(iii) Powercell Battery India Ltd. 2010 (19) STR 400 (Tri-Ban.);(iv) Nirma Architects & Valuers 206 (1) str 305 (Tri-Del.); (v) Aurore Trust 2010 (17) STR 376 (Tri-Chennai); (vi)Agrimas Chemicals Ltd. 2008 (10) STR 424 (Tri-Del.); (vii) Narnolia Securities Pvt. Ltd. 2008 (10) STR 619 (Tri-Kolkata); (viii)Bharti Cellular Ltd. 2006 (1) str 39 (Tri-Del); (ix) Bayer Diagnostics India Ltd. 2007 (8) STR 367 (Tri-Ahmd); (x) Prachar Comunications Ltd. 2006 (2) STR 492 (Tri-Mumbai); (xi) Dell India Pvt. Ltd. 2016 (42) STR 273 (Tri-Bang); (xii) Plantech Consultants Pvt. Ltd. 2016 (41) STR 850 (Tri-Mumbai); (xiii) Chola Business Services Ltd. 2016 (8) TMI 796 CESTAT Chennai and (xiv) M/s. Jubilant Oxganosys Ltd. 2014 (10)TMI 138- CESTAT New Delhi. He also submits that there is no legal requirement to inform the department in case of excess tax paid or adjusted under Rule 6(4A) ibid. According to learned Chartered Accountant the Adjudicating order is beyond the scope of show cause notice as there is no such allegation about the contravention of Rule 6(1A) in the show cause notice and in support of his submission learned Chartered Accountant placed reliance on the decision of the Tribunal in the matter of M/s.. S.D. Fine Chem Ltd.; 2017 (354) ELT 412 (Tri.-Ahmd.) in which it has been held that where the show cause notice denies the credit on account of delay in availing the credit, the same cannot be denied for non- compliance of the conditions to the notification and such an order is not sustainable as it is beyond the scope of show cause notice. He further submits that denial of adjustment of excess tax payment made is contrary to Article 265 of the Constitution of India. Per contra learned Authorised Representative appearing on behalf of revenue supported the findings recorded in the impugned order and prayed for dismissal of appeal. According to learned Authorised Representative, the appellant initially tried to misled the department by declaring the challan date as 6.7.2014 instead of 6.7.2012 which was filed with the department on 24.10.2014 and failed to give any satisfactory reasons for committing the same. According to him if any excess payment made then the appellant ought to have informed the department with relevant details which they failed to do rather after almost 2 1/2 years they suo motu made the adjustment of the alleged excess amount paid which is contrary to the provisions of Rule 6(4A) & 6(4B) ibid. He further submits that the Appellant has failed to furnish any documentary evidence in support of their claim of excess payment.
5. I have heard learned Chartered Accountant for the appellant and learned Authorised Representative for the Revenue and perused the case record including the synopsis/written submissions and case laws placed on record by the respective sides. In order to appreciate the issue involved herein, Rules 6(4A) & 6(4B) ibid are reproduced hereunder:-
“6 (4A). Notwithstanding anything contained in sub-rule (4), where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month or quarter as the case may be.
6(4B) The adjustment of excess amount paid, under sub-rule (4A), shall be subject to the condition that the excess amount paid is on account of reasons not involving interpretation of law, taxability,”
A perusal of the aforesaid Rule 6(4A) would make it clear that the word used is succeeding month or quarter as the case may be. Succeeding month denotes the month, which succeeds the current month, i.e., the next month and dictionary meaning of succeeding means immediately following. The aforesaid clause (4A) do not uses the word ‘any’ before the words ‘succeeding month or quarter’ as the case may be. Rule 6(4B) provides that the adjustment shall be subject to this condition that the excess amount paid was not on account of taxability. As per the law laid down by the Hon’ble Supreme Court in catena of decisions, in a taxing statute, it is the plain language of the provision that has to be preferred, where language is plain, unambiguous and is capable of determining a defined meaning. Purposive interpretation can be given only when there is an ambiguity in the statutory provision, which is not found in the present case. It cannot be said that this interpretation lead to absurdity as the procedure is prescribed in the statute itself. If, for example, the assessee misses the subsequent month or quarter as the case may be, then still it is open for the assessee to apply for refund, therefore it cannot be said that once the assessee misses the subsequent month or quarter he will be remediless. If the assessee establishes that they were prevented from adjustment in the succeeding month or quarter due to no production or no services in the subsequent month/quarter then it could be month or quarter thereafter else the definition as put forth by learned Chartered Accountant would lead to absurdity. The appellant, prior to adjusting the alleged excess payment on its own, did not inform the department about the same nor provided any documentary evidence except arithmetical calculation about their claim of payment of excess service tax amount which also goes against the claim made by the appellant. It is settled law that a taxing statute has to be strictly construed. The Hon’ble Supreme Court in the case of Commissioner of Sales Tax, U.P. v. Modi Sugar Mills – 12 STC 182 has observed that the Court must look clearly at the words of the statute and interpret them accordingly. While interpreting the taxing statute, the importance has to be given to the clear expression used therein and no intent can be examined in case of any unambiguity in the wordings of the Notification. In my view there is no ambiguity in the wording of Rule 6(4A) ibid. The Hon’ble Supreme Court in the matter of Commissioner of Sales Tax, Uttar Pradesh v. The Modi Sugar Mills Ltd. [AIR 1961 SC 1047/1961 SCR (2) 189] has laid down as under:-
’10…….. In interpreting a taxing statute, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The Court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed it. Cannot imply anything which is not expressed it cannot import provisions in the statutes so as to supply any assumed deficiency.‘
6. A Taxing Statute has to be strictly construed and in Taxing Statute one has to look merely at what is clearly said. When we have to interpret the taxing statute, the interpretation should not be avoided since it is very impractical for either of the side. Justice G.P. Singh in his land mark work on Principles of Statutory Interpretation, 14th Edition under the heading Strict Construction of Taxing Statute, has observed as under:
“General Principles of strict construction
A taxing statute is to be strictly construed. The well-established rule in the familiar words of LORD WENSLEYDALE, reaffirmed by LORD HALS-BURY and LORD SIMOND, means : “The subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to the natural construction of its words” (Re, Micklethwait, (1885) 11 Ex 452, p.456. In a classic passage LORD Chartered Accountant IRNS stated the principle thus : “If the person sought to be taxed comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand, if the Crown seeking to recover the tax, cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of law the case might otherwise appear to be. In other words, if there be admissible in any statute, what is called an equitable, construction, certainly, such a construction is not admissible in a taxing statute where you can simply adhere to the words of the statute”. [Partington v. A.G., (1869) LR 4 HL 100, p.122 : 21 LT 370]. VISCOUNT SIMON quoted with approval a passage from TOWLATT, J. expressing the principle in the following words : “In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used”. [Cape Brandy Syndicate v. IRC, (1921) 1 KB 64, p.71 (ROWLATT, J.)]. Relying upon this passage LORD UPJOHN said : “Fiscal measures are not built upon any theory of taxation.” (Commr. of Customs v. Top Ten Promotions, (1969) 3 ALL ER 39, p.90 (HL).”
7. The Hon’ble Supreme Court has taken similar view in large number of cases in respect of Taxing Statutes, which are as follows. V. Fernandez v. State of Kerala, 1957 SCR 837; referred to in CIT, Bombay v. Provident Investment Co., 1957 SCR 1141; Gursahai v. CIT, (1963) 3 SCR 893; Banarsi Debi v. ITO (1964) 7 SCR 539; CIT, Gujarat v. Vadilal Lallubhai, (1973) 3 SCC 17; Diwan Brothers v. Central Bank, Bombay, (1976) 3 SCC 800; McDowell & Co. Ltd. v. Commercial Tax Officer, (1977) 1 SCC 441; Mohammad Ali Khan v. Commissioner of Wealth Tax, 1997 (3) SCC 511; Hansraj & Sons v. State of Jammu & Kashmir, (2002) 6 SCC 227 and Geo Miller & Co. (P) Ltd. v. State of M.P., (2004) 5 SCC 209.
8. From the above one thing is clear that one has to look at the words of the statute and interpret them. A Taxing Statute has to be interpreted in the light of what is clearly expressed, it cannot imply anything which is not expressed nor can it merge provisions in the statute so as to supply any assumed deficiencies.
9. After examining the interpretation of Rule 6(4A) ibid now I will examine the facts of the case in the light of the decisions cited by the learned Chartered Accountant . I am not convinced with the contention of learned Chartered Accountant who, while importing the provisions of General Clauses Act, submits that singular means plural and therefore succeeding month or quarter as used in Rule 6(4A) means succeeding months or quarters. I am afraid that the aforesaid interpretation as suggested by learned Chartered Accountant would be contrary to the interpretation of statute as laid down in catena of decisions of the Hon’ble Supreme Court. If the interpretation, as suggested by learned Chartered Accountant is accepted then it would render the aforesaid provision redundant. Although in few decisions as cited by learned Chartered Accountant this Tribunal has allowed the adjustment after few months but that was in the facts of those cases. May be some reasonable cause was shown therein, which is absent in the facts of the present case, which prevented the assessee therein to adjust it in the succeeding months but in none of the decision cited by the learned Chartered Accountant such a long duration of two years, which is involved herein, was involved. Although the word ‘immediate’ has not been used in the aforesaid provision but that doesn’t mean that it’s endless. There has to have some reasonable period but not as long as two years. Very carefully the legislature has used the words ‘subsequent month or quarter’, else it could have also used ‘subsequent year’ or so.
10. It is not that the appellant is not aware about the filing of refund claim of excess payment as the learned Commissioner has observed that in the year 2011 the appellant has applied for the refund of the excess payment made which was sanctioned by the Adjudicating Authority vide refund order dated 20.5.2011. I agree with the submission that filing of refund claim is not mandatory but then the adjustment under Rule 6(4A) ibid has to be done within a reasonable period if not in the immediate succeeding month or quarter.
11. So far as Article 265 of the Constitution of India is concerned I am afraid that the same will also be of no help to the Appellant. The said Article provides that no tax shall be levied or collected except by authority of law. Here levy of tax is not disputed, what is disputed is the alleged excess payment by the Appellant in this era of self-assessment and since no documentary evidence has been placed on record except the arithmetical calculation, therefore it cannot be concluded that any extra payment of tax has been made by the Appellant.
12. Therefore in the facts of this case, I do not find any infirmity in the impugned order and accordingly the appeal filed by the appellant is dismissed.
(Pronounced in open Court on 23.01.2023)
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