Excess Amount Paid in Service Tax can be Adjusted against Short Payment in Education Cess/SHE Cess: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that excess amount paid in service tax can be adjusted against short payment in Education Cess/Secondary and Higher Education (SHE) Cess.

The appellant, M/s Paharpur Cooling Towers Ltd, stated that they have short paid service tax, education cess and secondary and higher education cess, in some months and made excess payments of the same amount in other heads. However, the Department refused to adjust that excess payment made on the ground that in accordance with provisions of Rule 3(7) of the CCR, 2004 the excess paid service tax cannot be treated as payment towards education cess/SHE and vice versa.

In this regard, they relied on Circular No. 58/7/2003-S.T., dated 20-5-2003, issued by CBEC, wherein the Board has clarified that in the event of mentioning wrong Accounting Code while paying service tax the assessee need not be asked to pay the service tax again.

It was stated that the short payment has been duly highlighted in impugned Order-in-original, however the excess payment made by them has not been considered at all for adjustment against short payment. The Commissioner has ignored the fact that, although under wrong head but tax has already been paid to the Government, and thus, there was no evasion of payment of tax and no revenue loss to the Government, making the entire situation revenue neutral. Accordingly, they contended that the demand confirmed in the impugned order on this count is not sustainable.

The Authorized Representative submitted that Rule 3(4)(e) of Cenvat Credit Rules does not allow the utilization of Cenvat credit for payment of duty on 'Import of Service', as it is not their 'output service'. He also submitted that service tax cannot be used to pay Education Cess or SHE Cess and vice versa. Hence, excess payment, if any, made in service tax cannot be adjusted against Education Cess and SHE Cess. Accordingly, they prayed for upholding the impugned order.

A Two-Member Bench comprising Ashok Jindal, Member (Judicial) and K. Anpazhakan, Member (Technical) observed that “We hold that excess amount paid in service tax can be adjusted against the short payment in Education Cess/SHE Cess. After adjustment, there was a short payment of Rs.8.95.160/- only in the month of January 2008, which has already paid by the Appellant. Accordingly, we hold that the demand confirmed in the impugned order on this count is not sustainable.”

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates