Excess Paid Service Tax Can be Adjust Towards Subsequent Tax Liability: CESTAT [Read Order]

The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) has upheld the adjustment made by the appellant/assessee of excess paid service tax towards the subsequent tax liability.

Gulmohar Park Mall Pvt Ltd, the appellant assessee is engaged in providing the taxable service of renting immovable property and is registered with the Service Tax at the Commissionerate of Ahmedabad. The appellant informed the department that they had paid 100% service tax on the rent. However, the service recipient, i.e., the tenant of the appellant's property, also paid 50% of the service tax liability as per the Supreme Court interim order in the case of RAI ( Retailer Association of India ) there is an excess payment of service tax for which the appellant filed a refund claim.

Since there was a delay in processing by the department, the appellant then requested the department adjust the excess paid service tax against the subsequent liability of service tax. The refund claim was returned by the department, citing the reason that since the 50% service tax was paid by the RAI ( Retailer Association of India ), as per the interim order dated October 14, 2011, by the Supreme Court, the amount cannot be allowed to be adjusted or refunded.

The assessee has adjusted the excess paid service tax in the amount of Rs. 32,67,727 against the periodical service tax liability. The show cause notice was issued demanding the service tax of Rs. 32,67,727 against the short-paid service tax, as the same amount adjusted by the appellant was not allowed.

The adjudicating authority except demand of Rs. 21,839/- remaining amount has been dropped by allowing the adjustment made by the appellant against the excess paid Service Tax. The department filed an appeal before the Commissioner on the ground that the appellant had wrongly taken the credit and used it against the service tax paid by their service recipient, which is not permissible. The Commissioner's appeal confirmed the demand.

The appellant submitted that there is no dispute that the excess amount of service tax was paid; therefore, either the same needs to be refunded or an adjustment made by the appellant in terms of Rule 6(4)(A) of the Service Tax Rules of 1994 should be allowed. The adjudicating authority has rightly considered the Supreme Court judgment allowing the adjustment and consequently dropping the demand; therefore, the order is not sustainable.

It was viewed that neither in the show cause notice nor in the adjudication order was there any issue of wrong availment of CENVAT credit, whereas the appellant has proposed the adjustment of excess paid service tax in the future tax liability.

The two-member bench of Ramesh Nair (Judicial Member) and C. L. Mahar (Technical Member) viewed that the appellant is entitled either to a refund of 50% of the excess paid service tax or to an adjustment against the excess paid towards the future tax liability.

While allowing the appeal, the Tribunal viewed that there is no illegality or error on such adjustment made by the appellant. It is also fact on record that service recipient paid 50% in terms of the Supreme Court interim order has been debited the said amount to the appellant. Therefore, the said amount was also born by the appellant only.

The CESTAT Bench held that the adjustment made by the appellant of excess paid service tax towards the subsequent tax liability is absolutely in order and correct. The Appellate bench set aside the impugned order. Vaibhav K Jajoo appeared for the appellant and  Ajay Kumar Samota appeared for the respondent.

To Read the full text of the Order CLICK HERE

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