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ST - As per Rule 6(3) of STR adjustment for excess service tax paid is only in respect of services which are not provided by service provider - adjustments in respect of volume discounts and other rebates is prima facie not covered - pre-deposit ordered: CESTAT

By TIOL News Service

MUMBAI, NOV 03, 2013: THE applicants are providing port service and paying Service Tax. They had suomotu adjusted the amounts in question by citing the provisions of Rule 6(3) of the Service Tax Rules, 1994.

The demand of Rs.1,64,01,668/-, interest and penaltiesis confirmed by the CCE, Raigad on the ground that the adjustment of the excess service tax paid is available only in respect of the taxable service which is not provided by the service provider and the amount has been refunded to the person from whom it was received . However, the applicants had adjusted the amounts which are not in respect of the services not provided .

Before the CESTAT, the appellant submitted that in respect of the amount of adjustment, verification was conducted by the Deputy Commissioner of Service Tax; that as the applicants had refunded the amounts of service tax collected from the service recipient by way of credit notes, therefore, the adjustment is permissible and the demand is not sustainable.

The Revenue representative relied upon the provisions of Rule 6(3) of the STR, 1994 and submitted that the adjustment can be done in respect of the service which is not provided by the service provider and the amount of service tax has been refunded to the person from whom it was received. In the present case the applicants were giving some volume discounts and other rebates and the ST paid on such amounts were adjusted against the payment of service tax for subsequent period, which is not permissible and hence the demand is rightly made.

The Bench extracted the contents of Rule 6(3) of the STR, 1994 and observed -

“…In the present case, the adjustments are made in respect of volume discounts and other rebates as noted in para 15.2 of the adjudication order.

6. As per the provisions of Rule 6(3) of the Rules, the adjustment in respect of excess service tax paid is only in respect of the services which are not provided by the service provider. In the present case, the adjustment is not in respect of services which are not provided rather it is by way of discounts and rebates. In view of this, prima facie the applicants have not made out a case for total waiver of service tax….”

In fine, the applicant was directed to deposit an amount of Rs.1,00,00,000/- and report compliance.

( See 2013-TIOL-1633-CESTAT-MUM)


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