2009 (2) TMI 375 - AT - Service Tax

Demand and Penalty- The original authority had confirm the demand of service tax along with interest and penalties on the assessee on the ground there was short payment of service tax and education cess. He further held that so far as the assessee s contention was concerned that there had been excess payment of service tax during April 2005 to September 2005 and in October 2005 and that the said excess payment was adjusted against the service tax payable from November 2005 to March 2006 the assessee had not made any claim in that regard to the department and it was only after the issue of the notice that the above reason was given as defence for adjustment of the short payment. The Commissioner (Appeals) directed for pre-deposits of the entire service tax demand and 50 percent of the penalties imposed. In the light of the decision of A.C. Nielsen ORG. Marg (P.) Ltd. v. CCE in which the tribunal held a contrary view. The rule 6(3) of the Service Tax Rules 1994 provides for adjustment of tax paid in respect of taxable service not provided by an assessee towards its subsequent tax liability on returning the tax collected to the clients. However in view of divergent views held in different decision of the Tribunal cited by the parties. It was appropriate and necessary that the Commissioner (Appeals) without insisting on any pre-deposits of the dues adjusted against the assessee.

Summary

Issues:
1. Confirmation of demand of service tax, interest, and penalties
2. Dismissal of appeal for non-compliance with directions
3. Excess payment of service tax and education cess
4. Adjustment of excess paid tax for future liability
5. Precedential value of tribunal decisions

Issue 1: Confirmation of demand of service tax, interest, and penalties
The original authority confirmed the demand of service tax, interest, and penalties against the appellants. The Commissioner (Appeals) directed pre-deposit of the entire service tax demanded and 50% of the penalties imposed. The impugned order dismissed the appeal due to the appellants' failure to comply with the directions issued by the Commissioner (Appeals) under section 35F of the Central Excise Act read with section 83 of the Act. The appeal was taken up for disposal after hearing both sides on the stay application.

Issue 2: Dismissal of appeal for non-compliance with directions
The appeal filed by the appellants was dismissed for their failure to comply with the directions issued by the Commissioner (Appeals) under section 35F of the Central Excise Act read with section 83 of the Act. The matter was taken up for disposal after hearing both sides on the stay application.

Issue 3: Excess payment of service tax and education cess
The appellants had allegedly not determined correctly the service tax and education cess payable, resulting in short payment. The appellants claimed that they had included the value of services rendered at Special Economic Zones in their previous returns and paid service tax, unaware of the exemption available for services at SEZs. The excess paid service tax from the previous period was adjusted against the service tax payable for a later period.

Issue 4: Adjustment of excess paid tax for future liability
The original authority found that the appellants had not made any claim of excess payment for a specific period to the department before being issued a notice. The authority noted that there is a provision for adjusting excess paid tax for future liability under certain circumstances, as per Rule 6(3) of the Service Tax Rules.

Issue 5: Precedential value of tribunal decisions
The original authority considered various tribunal decisions cited by the appellants but found them to have been passed sub-silentio and lacking precedential value. The authority referred to a decision where excess payment of service tax was adjusted against later liability, contrasting with another decision holding a contrary view. Due to divergent views in different tribunal decisions, the matter was remanded for a fresh decision by the Commissioner (Appeals) without insisting on any pre-deposit of the dues adjudged against the appellants. The appeal was allowed by way of remand, and the stay application was disposed of.