In the case of M/s. L & T Sargent & Lundy Limited V/s. Commissioner of Central Excise & S.T., Vadodara, it was held that the requirement under Rule 6(4A) and 6(4B) of the Service Tax Rules, 1994 to intimate the department regarding adjustment of excess service tax paid is only procedural in nature and such infringement of the procedure is not serious enough to deny the benefit of sou motto adjustment of excess service tax paid.
Facts of the Case
The appellants herein M/s. L&T Sargent & Lundy Limited had made excess payment of service tax of Rs. 2,49,858/- in May 2010 and subsequently adjusted the said excess amount paid towards payment of service tax during the months of June, July and August, 2010. However, the appellants had not intimated the said adjustment to the department and have suo-moto adjusted the same. Revenue was of the opinion that they are not eligible to do so in terms of Rules 6(4A) and 6(4B) of the Service Tax Rules, 1994 and confirmed the demand of service tax, alongwith interest. Penalties of Rs. 10,000/- under Section 77, and equivalent penalty of Rs. 2,49,858/- under Section 78 of the Finance Act, 1994 were also imposed on the appellants. The Commissioner (Appeals) upheld the demand and equivalent penalty under Section 78, and reduced the penalty of Rs. 10,000/- under Section 77 to Rs. 5,000/-. Aggrieved by the order of the Commissioner (Appeals), the appellants are this Tribunal.
Contentions of the Assessee
The assessee contended that there was no intention to evade payment of service tax and they have not adjusted any ineligible amount. It is not in dispute that they have paid the excess service tax amount of Rs. 2,49,858/- and the same is eligible to be adjusted towards the future service tax liabilities. It is contented that though they had to intimate the department for such adjustments under the provisions of Rule 6(4A) and 6(4B), there was no such requirement under Rule 6(3) of the Service Tax Rules, 1994. The limit of adjusting amount up to Rs. one lakh in the succeeding month was also applicable to adjustments under Rule 6 (4A) only and there were no such restrictions under Rule 6(3). The issue is only of minor procedural defect, if any, and does not warrant imposition of equivalent penalty under Section 78 of the Finance Act, 1994.
Contentions of the Revenue
The Revenue contended that the appellants are an established Company belonging to a big industrial group and that they are aware of the provisions, Rules and procedures. Therefore, such a unit ought to follow the procedures as laid down and violation of the same should be viewed seriously.
Held by Hon’ble CESTAT
The Hon’ble CESTAT stated that the dispute revolves around the procedure they have followed in adjusting the said excess amount against the future service tax liabilities in June, July and August 2010 suo-moto. The Hon’ble CESTAT stated that infringement of the procedure is not serious enough to impose equivalent penalty of Rs. 2,49,858/- under Section 78 in the instant case. It is so especially, since in reality there is no short payment of service tax of Rs. 2,49,858/- in the instant case, and it is a question about adjustment of excess service tax paid which has been adjusted suo-moto against the subsequent service tax liability.
Under the facts and circumstances of the instant case, the demand of Service Tax of Rs. 2,49,858/- and interest thereupon cannot be sustained, and the excess amount of Service Tax of Rs. 2,49,858/- paid earlier in May 2010 should be regularised against the Service Tax liability of Rs. 2,49,858/- during the months of June, July and August, 2010. The penalty of Rs. 2,49,858/- imposed under Section 78 is liable to be set-aside.