State Bank of India Vs Deputy Commissioner (Madras High Court)
The appeal before the Madras High Court arose from an order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai, which had dismissed the assessee’s appeal. The appellant, a nationalised bank, had paid service tax amounting to ₹20,23,916 on the basis of instructions issued by the audit team of the Central Excise and Service Tax Department. The audit team had taken the view that the share of profit earned in foreign exchange transactions constituted a taxable service. Acting on this advice, the appellant remitted the amount on 22.12.2006.
Subsequently, upon verification, the appellant concluded that such share of profit was not liable to service tax. Accordingly, it filed a refund claim stating that the payment had been made erroneously. However, the refund claim was rejected on the ground of limitation. Meanwhile, the appellant adjusted the amount suo motu in a subsequent return. This adjustment was objected to by the department, resulting in an order confirming a demand of ₹19,87,688 along with interest under Section 75 of the Finance Act, 1994 and a penalty of ₹1,00,000 under Section 76.
The appellant challenged this order before the Commissioner (Appeals), but the appeal was dismissed. Thereafter, the appellant approached the CESTAT, which also rejected the appeal. The Tribunal reasoned that the issue of taxability had already been decided in the earlier adjudication related to the refund claim, which had not been challenged by the appellant. Therefore, according to the Tribunal, the appellant could not take suo motu credit of the tax paid. It further held that Rule 6(3) of the Service Tax Rules, 1994 did not apply to disputes regarding taxability, but only permitted credit in cases where services were not provided.
