2025 (7) TMI 1455 - AT - Service Tax

Adjustment of excess paid service tax - failure to comply with condition no. (iii) and (iv) of sub-rule (4B) of Rule 6 of Service Tax Rules 1994 in as much as the amount adjusted by appellant exceeded the monetary limit of one lakh rupees per month / quarter and further the appellant had failed to intimate the details and reasons of such adjustment to the Jurisdictional Superintendent within a period of 15 days from the date of adjustment - extended period of limitation - HELD THAT - It is admitted fact that the appellant had paid service tax in excess of their liability during the material period and therefore appellant is justified to make adjustments in accordance with relevant circular letters and rules. It is also agreed with the learned counsel for the appellant that the demand of the department is time barred because it cannot be said that the appellant paid excess amount of service tax with malafied intention or he made adjustments with malafied intention. The show cause notice issued in December 2012 for the recovery of excess amount of service tax adjusted by appellant during the quarters October 2007 to December 2007 and January 2008 to March 2008 is time barred and extended period cannot be claimed by the department on the ground of suppression of facts with intention to evade tax. The learned consultant for the appellant cited Arun Excello Foundation vs. Commissioner of GST and Central Excise Chennai 2019 (11) TMI 1266 - CESTAT CHENNAI in which assessee adjusted excess payment of service tax continuously made for previous month and quarter. Revenue while allowing adjustment for immediate preceeding one quarter disallowed adjustment for earlier period on the ground that such adjustment required to be done in immediate succeeding month / quarter. It was held that Rule 6 (4A) of Service Tax Rules 1994 allow such adjustment against liability of service tax for succeeding month or quarter as the case may be i.e. period of filing returns under service tax law. The department cannot be allowed to invoke extended period of limitation of five years in this case because excess payment of service tax by appellant is admitted position by the department. The issue regarding adjustment was observed by Audit. The record e.g. Service Tax Returns etc. were filed by appellant with the department from time to time and the same returns were presented at the time mentioned above. Thus there cannot be any suppression of material facts. The department should have issued show cause notice within normal period of 18 months as provided under section 43 (1) of Finance Act 1994 but the Show Cause Notice was issued in fact beyond the period of limitation which is time barred. It is pertinent to mention here that the case is not about evasion but about adjustment of service tax already paid and there seems to be no intention to evade payment of tax. The impugned order passed by the learned Commissioner dated 13th May 2014 and Order-in-Original dated 29th April 2013 regarding demand of service tax interest and imposition of penalty are set aside - Appeal allowed.

Summary

ISSUES:

1. Whether excess payment of service tax can be adjusted against subsequent service tax liability despite non-compliance with procedural conditions under sub-rule (4B) of Rule 6 of Service Tax Rules, 1994.

2. Whether the demand for recovery of excess adjusted service tax is barred by limitation, particularly regarding invocation of extended period under proviso to Section 73(1) of the Finance Act, 1994.

3. Whether failure to intimate adjustment details to the jurisdictional Superintendent within prescribed time constitutes suppression attracting extended limitation and penalties under Sections 75, 76, 77, and 78 of the Finance Act, 1994.

RULINGS / HOLDINGS:

1. The Court held that adjustment of excess service tax paid is permissible even if procedural conditions under Rule 6(4B) are not complied with, as the excess payment itself is undisputed; non-compliance constitutes only a procedural lapse.

2. The Court ruled that the demand for recovery of excess adjusted service tax is time barred because there was no malafide intention or suppression of facts by the appellant, and hence extended period of limitation under proviso to Section 73(1) of the Finance Act, 1994 cannot be invoked.

3. The Court concluded that mere failure to intimate the adjustment details within fifteen days is a procedural lapse and does not amount to suppression of facts; therefore, penalties under Sections 75, 76, 77, and 78 are not justified.

RATIONALE:

The Court applied the provisions of sub-rules (4A) and (4B) of Rule 6 of Service Tax Rules, 1994, which allow adjustment of excess service tax paid against succeeding month or quarter liabilities subject to certain conditions, including monetary limits and intimation requirements.

The Court relied on precedent establishing that extended period of limitation applies only where there is "conscious or deliberate withholding of information" or suppression, not mere procedural lapses or absence of malafide intent.

The Court referenced the principle that adjustment of excess payment without intimation is a procedural lapse and that the department cannot retain excess tax paid where there is no dispute over the payment itself.

The Court noted that the limitation period under Section 43(1) of the Finance Act, 1994 (normal period of 18 months) had expired before issuance of the show cause notice, and extended period could not be invoked due to lack of suppression.

No dissenting or concurring opinions were recorded.