ADJUSTMENT FOR SHORT PAYMENT OF SERVICE TAX EARLIER AGAINST EXCESS PAYMENT MADE IN SUBSEQUENT PERIOD

[Mr. M. GOVINDARAJAN]

PAYEMNT O F SERVICE TAX:

Sec. 68 of the Finance Act, 1994 ('Act' for short) provides for the payment of service tax by the service providers within such manner and within such period as may be prescribed. Rule 6 of Service Tax Rules, 1994 provides for the manner of payment of service tax.  According to this Rule the service tax shall be paid to the credit of the Central Government-

§ by the 6th day of the month, if the duty is deposited electronically through internet banking; and

§ by the 5th days of the month, in any other cases, immediately following the calendar month in which the payments are received, towards the value of taxable services;

§ where the assessee is an individual or proprietary firm or partnership firm, the service tax shall be paid to the credit of the Central Government by the 6th day of the month if the duty is deposited electronically through internet banking, or, in any other case, the 5th day of the month, as the case may be, immediately following the quarter in which the payments are received, towards the value of taxable services;

§ the service tax on the value of taxable services received during the month of March, or the quarter ending in March, as the case may be, shall be paid to the credit of the Central Government by the 31st day of March of the Calendar year.

ADVANCE PAYMENT OF SERVICE TAX:

Rule 68 (1A) provides for the advance payment of service tax.  According to this Rule every person liable to pay service tax, may, on his own volition, pay an amount as service tax in advance, to the credit of the Central Government and adjust the amount so paid against the service tax which he is liable to pay for the subsequent period. The assessee shall intimate the details of the amount of service tax paid in advance, to the jurisdictional Superintendent of Central Excise within a period of fifteen days from the date of such payment and indicate the details of the advance payment made, and its adjustment, if any in the subsequent return to be filed under Section 70 of the Act. Thus in the case of advance payment no question of short payment of service tax arises. If the advance payment is short the balance amount should be paid by the assessee. If the advance payment is excess it may be adjusted against the subsequent payment.

PROVISIONAL PAYMENT:

Rule 6 (4) provides that where an assessee is, for any reason, unable to correctly estimate, on the date of deposit, the actual amount payable for any particular month or quarter, as the case may be, he may make a request in writing to the Assistant Commissioner of the Central Excise or the Deputy Commissioner of Central Excise, as the case may be, giving reasons for payment of service tax on provisional basis and the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, on receipt of such request, may allow payment of service tax on provisional basis on such value of taxable service as may be specified by  him and the provisions of Central Excise Rules, 2001, relating to provisional assessment, except so far they relate to execution of bond, shall, so far as may be, apply to such assessment. On finalization of the amount of service tax payable the service provider has to pay with interest if the provisional payment is short of final amount.  If the provisional amount is excess than the actual amount it can be adjusted in future. Where an assessee requests for a provisional assessment he shall file a statement giving details of the difference between the service tax deposited and the service tax liable to be paid for each month in a memorandum in Form - ST 3A accompanying the quarterly or half yearly returns as the case may be.

EXCESS PAYMENT:

Rule 6 (4A) provides that where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, the assessee may adjust such excess amount paid by him against the service tax liability for the succeeding month or quarter, as the case may be.

The adjustment of excess amount shall be subject to the following conditions:

§ excess amount paid is on account of reasons not involving interpretation of law, taxability, classification, valuation or applicability of any exemption notification;

§ excess paid by an assessee registered under sub-rule (2) of Rule 4, on account of delayed receipt of details of payments towards taxable services may be adjusted without monetary limits;

§ in other cases the excess amount paid may be adjusted with a monetary limit of one lakh rupees for  relevant month or quarter, as the case may be;

§ the details and reasons for such adjustment shall be intimated to the jurisdictional Superintendent of Central Excise within a period of fifteen days from the date of such adjustment.

SHORT PAYMENT:

The service tax shall not be paid in short. If it is paid in short the short amount along with interest should be paid to the credit of the Central Government. In case a service provider pays short payment of service tax in one month and paid excess in another month, there may be a question arised as to whether the short payment of service tax can be adjusted against the excess paid in the next month. There is no specific provision for this in the Act or Rules.

The CESTAT, Principal Bench, New Delhi confirmed the above in 'Lilason Breweries Ltd., V. Commissioner of Central Excise' - STA No.160 of 2009 -SM, dated 10.09.2009. The tribunal held that on plain reading of Sub-rule (1) of Rule 6 of the Rules, it is clear that service tax shall be paid to the credit of the Central Government by the 5th of the month immediately following the calendar month in which the payments are received, towards the value of taxable service. Sub-rule (3) of Rule 6 provides, that where an assessee paid excess service tax he may adjust the excess service tax so paid by him against his service tax liability for the subsequent period, if the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received. It is clear that the adjustment of the excess service tax is permissible against the subsequent period and subject to fulfillment of the condition that if the assessee has refunded the value of taxable service and the service tax thereon to the person from whom it was received. There is no provision for adjustment for short payment of tax earlier period against excess payment of tax in the subsequent period. Learned Chartered Accountant submits that the excess amount paid in the subsequent period may be treated as mere deposit which can be adjusted against the earlier short payment and it may be paid along with interest. I am unable to accept the contention of the learned Chartered Accountant. The assessee paid the service tax of excess amount against the taxable service which cannot be treated as mere deposit. Therefore, such adjustment is contrary to the provisions of Rule 6(3) of the Rules. Hence, demand of tax on this issue is justified.