ST - Appellant had informed department that they have adjusted excess payment of tax by filing revised ST returns–SCN issued after three years for recovery of tax is time barred: CESTAT
By TIOL News Service
MUMBAI, APRIL 12, 2018: THE appellants are registered under 'Banking and Other Financial Services' and 'Business Auxiliary Services' for distribution of mutual funds.
During the course of audit, on reconciliation of their financial records with the ST-3 returns, it was observed that the appellant had not discharged the service tax liability correctly.
Vide their letter dated 25.07.2009, the assessee agreed to fact of short payment of service tax of Rs. 62,63,534/- and Rs. 7,60,091/- in the financial years 2006-07 and 2007-08 respectively.
They also explained that they had paid excess service tax of Rs. 93,27,555/- in the financial years 2005-06 which they intended to set off against the short payment of service tax amounting to Rs. 70,23,625/- in the FY 2006-07 and 2007-08.
The appellant had filed the return of service tax for the period from April 2005 to September 2005 on 24.10.2005. The appellant paid the entire liability in cash as the CENVAT credit details were under compilation. Vide letter dated 03.03.2006 the appellants filed revised service tax return for the period April 2005 to September 2005 and reported excess payment of service tax amounting to Rs.40,02,782/- after utilization of CENVAT Credit. The appellant had also mentioned in the aforesaid letter that the excess payment of service tax liability would be adjusted in subsequent months.
A SCN dated 21.10.2009 was issued demanding service tax of Rs.70,23,625/- for the period from 01.04.2006 to 31.03.2008. The main allegation is that the appellants are not entitled to adjust the excess amount of service tax paid, on two grounds, firstly, the adjustment in the present case is not on account of non-receipt of information from the branches and secondly, the adjustment is not made in the succeeding month of such excess payment.
The demand was confirmed by the Commissioner along with interest and penalties.
While granting Stay in the matter, the CESTAT had held -
ST - limitation - Appellant adjusted the excess tax paid under mistaken impression of law against the ST liability due for the subsequent period - it is not in dispute that the ST law does not provide for adjustment of excess tax paid against subsequent liability except in certain specified situations and the present case does not involve those - appellant informed the department of the excess ST paid and suo motu adjustment towards their liability on 24.4.2006 - However, the department has chosen to issue the SCN only on 21.12.2009, i.e., after a gap of three and a half years - prima facie case made out for wavier of pre-deposit on account of time bar: CESTAT [Para 6]
We reported this order as 2014-TIOL-2188-CESTAT-MUM.
The appeal was heard recently.
While arguing that the entire demand is hit by limitation, the appellant also submitted that such adjustments have been allowed in favour of the assessee in the following cases –
(a) Gujarat NRE Coke Ltd. - 2012-TIOL-600-CESTAT-AHM
(b) Narnolia Securities Pvt. Ltd. - 2008-TIOL-538-CESTAT-KOL
(c) M/s Plantech Consultants Pvt Ltd I - 2015-TIOL-2497-CESTAT-MUM
(d) CCE vs Hexacom India Ltd) - 2005-TIOL-975-CESTAT-DEL
(e) Tata Consultancy Services Ltd - 2012-TIOL-1034-CESTAT-MUM
(f) Honda Siel Power Products Ltd - 2006-TIOL-992-CESTAT-DEL
The Bench considered the submissions and observed -
+ We find that the appellant vide various letters dated 03.03.2006 and 24.04.2006 has informed the department that they have adjusted the excess payment of service tax by filing revised service tax returns. Further, we find that the appellant vide the said letter dated 03.03.2006 has specifically stated that the excess payment of service tax of Rs.40,02,782/- shall be adjusted against their future liability on taxable services during the current financial year.
+ The department was fully aware that the appellant have adjusted the payment of service tax excess paid by them during the subsequent month but inspite of that the department did not issue any show-cause notice for more than three years and finally a show-cause notice was issued on 21.12.2009 seeking demand of service tax for the period from 01.04.2006 to 31.03.2008 by invoking the extended period.
+ The department has not been able to bring on record any material which says that there was suppression of fact on the part of the appellant with intention to evade payment of service tax.
Concluding that the entire demand is barred by limitation of time, without going into the merits of the case, the appeal was allowed by setting aside the impugned order with consequential relief.
(See 2018-TIOL-1154-CESTAT-MUM)
