CESTAT, CHENNAI BENCH
Cholamandalam Ms General Insurance Co. Ltd.
Commissioner of Service Tax, Chennai
Final Order Nos. 667 & 668 of 2012
Stay Order Nos. 495 & 496 of 2012
ST/S/12/2012 in ST/13/2012
ST/S/248/10 in ST/413/2010
June 12, 2012
Dr. Chittaranjan Satapathy, Technical Member
Heard both sides. In this case, the Adjudicating Commissioners have confirmed demand of Rs. 1,34,03,427/- and Rs. 1,10,05,167/-along with appropriate interest and have also imposed penalty under section 76 of the Finance Act, 1994.
2. The dispute in these two appeals relate to the adjustments made by the appellants under Rule 6(3) of the Service Tax Rules, 1994, for two periods. The said Rule 6(3) reads as under:-
“Where an assessee has paid to the credit of Central Government service tax in respect of a taxable service, which is not so provided by him either wholly or partially for any reason, the assessee may adjust the excess service tax so paid by him (calculated on a pro rata basis) against his service tax liability for the subsequent period, if the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received.”
The above quoted Rule allows an assessee to adjust excess service tax paid by him if the taxable service on which service lax has been paid in the previous period was not provided.
2.1 The Ld. Advocate appearing for the appellants states that the appellants are in the ‘General Insurance’ business and there are a large number of transactions on monthly basis. There are many instances where the service is not provided on account of subsequent cancellation of insurance policies, even though the tax in respect of such policies has already been paid by the appellants. In such cases, the appellants return the value of service plus service tax by way of cheque in respect of individuals, but maintain an account for each one of the corporate clients to whom the refund is made by way of credit entries. He further states that for subsequent period under adjudication by the Commissioner, full details have been offered to be provided to show that in all the cases, where excess service tax has been adjusted by the appellants, refund of the service tax plus value for the service have been given by the appellants either through cheque or through giving credits. However, in respect of both the impugned periods involved in these two cases, such details were not culled out and provided at the time of adjudication. He further states that these details have been filed with the Tribunal but since these were not filed before the adjudicating Commissioner, he had no means to verify the details and satisfy himself that wherever excess service tax has been adjusted in the succeeding period, the refund of value and the service tax was actually given. As such, he prays for waiver of pre-deposit and remanding the cases back to the Commissioner for verification of the details now provided. He assures that all co-operation will be extended in this regard by the appellants to enable the department to verify the details.
3. Heard the Ld. DR, who supports the impugned order. She also points out that in para-16 of the adjudication order dated 29.09.11, the adjudicating Commissioner has referred to the fact that the appellants have not actually refunded the amounts in several cases though in some cases they refunded the amounts by issue of cheques. Further, the adjudicating Commissioner has also stated that there was absence of clear material evidence to prove the fact that the service tax has been paid on total premium received inclusive of amounts refunded and that the amounts refunded have actually been received by the clients of the appellants.
4. After considering the arguments from both sides, we find that the impugned orders have been passed by the adjudicating Commissioner in the absence of transaction-wise details of service tax amount paid and amounts refunded, which have been produced before the Tribunal today. These are required to be gone into to satisfy that the credits have been actually made in respect of the clients who were required to be refunded the insurance premiums as well as service tax on the same. The adjudicating Commissioner has also taken objection to the fact that the refunds have been made by way of credit and not by issue of cheques. In this respect, we note that a large number of transactions are involved and the industry practice is to make refunds by way of book adjustment allowing credit as stated by the Ld. Advocate (which is subject to verification). Hence, the department cannot insist that in every case the refund may be made in particular manner i.e., by cash or by issue of cheque. The whole rationale behind Rule 6 (3) is that where the service tax has been paid on amounts received for providing particular service and that service for some reason has not been provided by an assessee, he can make adjustment of the excess tax paid in the succeeding period. That rationale would be defeated if the condition of refund is insisted to be satisfied only in a particular manner. The Rule itself does not provide for particular manner of refund and if it is a common industry practice to give refund by way of credits for any particular industry, there would be no harm in allowing refund by adopting such widely accepted industry practice. What is required to be verified is that either by credit or by cheque the appellants have refunded the amounts, for which they should make available their books of account/computerized records or statements as may be required by the adjudicating Commissioner. In a case like this, where numerous policies are involved and the number of transactions are many, there should be co-operation between the department and the assessee to come to a fair conclusion as to whether the provision of Rule 6(3) has been satisfied and whether the amount of adjustment made by the appellant equals the excess service tax paid by them in the proceeding period and also if the concerned amounts of insurance premium and tax have been refunded to the clients of appellants, who have not been provided the service.
5. For undertaking a detailed exercise as indicated above, we waive the requirement of pre-deposit in both the cases and set aside the impugned orders and remand the matter to the adjudicating Commissioner for fresh decision. Both the appeals are allowed in the above terms by way of remand.