Failure to Establish Violation of Conditions under Sub-Rule (4B) of Rule 6 of Service Tax Rules: CESTAT quashes Service Tax Demand against IL & FS Transportation [Read Order]

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), quashed service tax demand against IL & FS Transportation Networks Ltd, the appellant as the Revenue failed to establish violation of conditions under sub-rule (4B) of Rule 6 of Service Tax Rules, 1944.

The appellant provides various services to their clients and is registered with Service Tax. Appellant has also taken centralized registration in respect of their head office and 16 branches and service tax for all branches and head office is paid from their Mumbai office covered by centralized registration. Appellant paid service tax of Rs.60,17,195/- in excess of service tax that should have been paid by them for the month of September 2012.

It appeared to Revenue that as provided under Rule 6(4A) of Service Tax Rules, 1994, appellant should have utilized the excess paid service tax for adjustment during the immediate next succeeding month. Therefore, the appellant was issued with a show cause notice dated 20.07.2015 wherein Revenue invoked Rule 6(4B) of Service Tax Rules, 1994 and by invoking proviso to sub-section (1) of Section 73 of Finance Act, 1994, raised a demand of service tax of Rs.60,17,195/- through the said show cause notice.

The original authority confirmed the demand of service tax of Rs.60,17,195/- and imposed equal penalty and also ordered the appellant to pay interest under the provisions of Section 75 of Finance Act, 1994. Aggrieved by the said order, appellant is before the Tribunal.

The Chartered Accountant for the appellant submitted that Rule 6(4A) of Service Tax Rules, 1994 provides for adjustment of excess paid service tax during the succeeding month. He has submitted that the rule does not require adjustment to be made during the immediate succeeding month but in the succeeding month as can be interpreted by the provisions of the said rule.

It was further submitted that the appellant has rightly adjusted the excess paid amount as provided by the said sub-rule (4A) of Rule 6 of Service Tax Rules, 1994. He has further stated that Revenue has invoked the extended period of limitation for issue of the subject show cause notice. It was argued that the issue was within the knowledge of Revenue through ST-3 return for that month when the adjustment was done by the appellant and, therefore, there was no suppression on the part of the appellant to enable Revenue to invoke extended period of limitation.

A Two-Member Bench comprising Anil G. Shakkarwar, Member (Technical) and Dr. Suvendu Kumar Pati, Member (Judicial) observed that “The conditions stipulated in sub-rule (4B) of Rule 6 of Service Tax Rules, 1994 though invoked by Revenue, the same are unsubstantiated in the said show cause notice. Therefore, we hold that Revenue has failed to establish that the appellant has violated any conditions specified in the said sub-rule (4B) of Rule 6 of Service Tax Rules, 1994. We, therefore, hold that the appellant was eligible for utilization of excess paid service tax of Rs.60,17,195/- during the month of December 2012.”

The Bench noted that the show cause notice and the provisions of sub-rule (4A) and sub-rule (4B) of Rule 6 of Service Tax Rules, 1994. The said sub-rule (4A) provides for adjustment of excess paid service tax during the succeeding month or quarter and the said subrule does not require the said adjustment to be made during the immediately succeeding month.

Therefore, the Bench did not find any violation of the said sub-rule by the appellant in adjusting the amount excess paid for the month of September 2012 during the month of December 2012.

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