Service Tax Excess payment can be adjusted in Subsequent months not restricted to succeeding month only
Facts of the Case & Contention of the Appellant:-
Appellant is the centrally registered taxpayer and the error committed could not be detected immediately and it took almost a month to recognise the excess payment made in the month of May, 2011 and hence it was adjusted against the tax liabilities for the month of July, 2011. He submits that Rule 6 (4A) of Service Tax Rules allows re-credit in the succeeding month and July 2011 can also be accepted as succeeding to May, 2011 though not immediately succeeding month. He submits that in service tax, returns are submitted half yearly and these adjustments can be monitored only during the scrutiny of single return itself. Therefore, short payment in the month of July, 2011 is due to the adjustment of service tax paid in excess in the month of May, 2011. He submits that the short payment in the month of July, 2011 is illusory and not real and therefore Section 73(1) cannot be invoked for a non-existing short payment. He further submits that there is no revenue loss to the exchequer as it was a mistaken debit and re-credit. He submits that there has been no suppression of facts on the part of the appellant and hence there should not be any demand on the adjustment of service tax made in the month of July, 2011, against excess paid in the month of May, 2011. He relied on the following case laws in support of his contention and submitted that the issue stands settled in favour of the appellants and is no longer res integra.
General Manager (CMTS) Vs. CCE, Chandigarh 2014 (36) STR 1084 (Tri.-Del)
Jubilant Organosys Ltd. Vs. CCE, Meerut-II – 2014-TIOL-1870-CESTAT-DEL
M/s. Plantech Consultants Pvt. Ltd. Vs. CCE, Pune – 2015-TIOL-2497-CESTAT-MUM
Garima Associates Vs. CCE, Chandrapur 2015 (40) STR 247 (Tri.-Mum.)
He submits that in the case of Garima associates (supra), it has been held that intention of the Rule is very clear that whatsoever excess amount was paid in advance, the same should be adjusted against forth coming tax liability and if it is not allowed it will amount that Government will be unujustly enriched with excess amount which cannot be the intention of the statute. Merely for non-observance of the procedure laid down in the rule, cannot be made a reason for denial of adjustment and non-allowance of the adjustment in subsequent tax liability of service tax. In the case of Jubilant Organosys Ltd. (supra), it has been held that the issue was no longer res integra and stands settled in favour of the appellants that the adjustment of service tax paid in excess towards the service tax liability of the subsequent months cannot be denied on technical grounds and hence penalty imposed is also not sustainable. He submits that as the excess amount of service tax paid in advance was adjusted in the tax liability of the subsequent months, no question of short payment arises and the demands are not sustainable.
Contention of the Revenue
Revenue submitted that the appellant has not intimated the department about excess amount of service tax paid in the month of May and the same was adjusted in the month of July instead of June. He further submitted the both the authorities below denied the adjustment only on the ground that the appellant’s case is covered under Rule 6 (4A) and not under 6 (1A) of Service Tax Rules, 1994. He submitted that as per the provisions of Rule 6 (1A) of the said Rules, the adjustment of excess payments can be made only in the succeeding month/quarter as the case may be. In the case on hand, excess amount paid in May was adjusted against the tax liability for the month of July, which is not in order and cannot be considered as payment of tax liability for the month of July. Hence the demands are sustainable.
Held by CESTAT
The short issue to be decided is whether the appellant has short paid the service tax during the month of July, 2011 by wrongly adjusting the service tax excess paid by them in the month of May, 2011 or otherwise. Both the authorities below have observed that as per Rule 6 (4A) of STR, 1994, it is a wrong adjustment since Rule says that the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month or quarter and not in the subsequent months. The contention of the appellant is that the benefit of the same should be extended to the subsequent months after the succeeding month. It is a well settled legal principle that the statute should be interpreted as it is even if the intention is imperfect, imprecise or there is an obvious omission.
Even though the appellants have not specifically intimated the department in this regard, but adjustment was declared in their ST3 returns, accordingly intimation of such adjustment stands made to the department. Even if it is not adhered to, at the most it is a procedural lapse and merely for this procedural lapse the excess amount paid could not be deviated and cannot be permitted to be retained by the government. Section 13 of the General Clauses Act, 1897 provides that singular include the plural. Accordingly, month includes months. Further the case laws relied on by the appellants are squarely applicable to the facts of the present case. The issue stands settled against the Revenue and in favour of the appellant assessee.
In view of the above, I am of the considered view that the excess amount paid in the month of May, 2011 adjusted by the appellants in the subsequent months tax liability is absolutely in order. Therefore, invoking Section 73(1) for a non-existing ‘short payment’ is not sustainable. Accordingly, the impugned order is set aside and the appeal is allowed with consequential relief, if any, in accordance with law.
The judgement will be useful to many of the assessees in case of excess payment of service tax by mistake and under the impression that same can be adjusted only in succeeding month, but not thereafter.