Custom, Excise & Service Tax Tribunal
Arun Excello Foundations vs Commissioner Of Gst&Amp;Cce(Chennai ... on 8 November, 2019
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL, CHENNAI
REGIONAL BENCH - COURT NO. - III
Service Tax Appeal No. 41563 of 2019
(Arising out of Order-in-Appeal No. 219/2019 (CTA-I) dated 18.7.2019 passed by
the Commissioner of Central Excise (Appeals - I), Chennai)
M/s. Arun Excello Foundation Appellant
No. 18, Bhattad Towers
West Cott Road, Royapettah
Chennai - 600 014.
Vs.
Commissioner of GST & Central Excise Respondent
Chennai North Commissionerate No. 26/1, Mahatma Gandhi Road Chennai - 600 034.
APPEARANCE:
Shri N. Viswanathan, Advocate for the Appellant Shri M. Jagan Babu, AC (AR) for the Respondent CORAM Hon'ble Ms. Sulekha Beevi C.S., Member (Judicial) Final Order No. 41272 / 2019 Date of Hearing: 08.11.2019 Date of Decision: 08.11.2019 Brief facts are that the appellant is engaged in the construction of flats for which they rendered works contract service. They paid service tax under the said category. They are also engaged in selling plots after development of the area. During the course of audit for the period from April 2016 to June 2016, it was noticed that they had adjusted the excess payment made by them during the period April 2015 to June 2016 in September 2016. The department was of the view that as per Rule 6(4A) of Service Tax Rules, 1994, the excess 2 service tax paid could be adjusted only in the immediate succeeding month or quarter and therefore the adjustment made by the appellant is against the provisions of law. The department, however, allowed adjustment made by the appellant for the period April 2016 to June 2016 holding that the adjustment made is within the time prescribed in the provision. Show Cause Notice was issued proposing to demand an amount of Rs.9,19,016/- for the period January 2016 to June 2017 alleging that the adjustment of the excess service tax made during September 2016 against the provisions of law is not in order. After due process of law, the original authority confirmed the demand, interest and imposed penalty. In appeal, Commissioner (Appeals) upheld the same. Hence this appeal.
2. On behalf of the appellant, ld. counsel Shri N. Viswanathan appeared and argued the matter. He referred to the provisions contained in Rule 6(4A) of the Service Tax Rules, 1994 and submitted that the said provision speaks of adjustment of excess service tax against the service tax liability for the succeeding month or quarter. The department has interpreted the said provision to read as the adjustments can be made only in the immediate succeeding month or quarter. The word 'immediate' is absent in the provision and therefore the disallowance of adjustment by the department is against the provisions of law. He submitted that the appellant had sold certain vacant plots which is transaction of immovable property and therefore not subject to levy of service tax. By mistake the value received on such sale of immovable property was also included in the taxable value for payment of service tax. No service tax was collected on such sale value. This excess payment of service tax came to the 3 knowledge of the appellant only in September 2016. Therefore, the excess service tax paid by the appellant during the period April 2015 to June 2016 was adjusted in the quarter of September 2016. 2.1 The ld. counsel submitted that the word 'immediate' being absent in Rule 6(4A), the department cannot interpret the provision by adding the word to disallow the adjustment. The department does not have a case that the appellant had collected service tax from the customer or that the burden of service tax has been passed on to another. In any case, the appellant would have been eligible for refund and the adjustment has been made in accordance with the provisions of law. He relied upon the decision of the Tribunal in the case of General Manager (CMTS) Vs. Commissioner of Central Excise, Chandigarh - 2014 (36) STR 1084 (Tri. Del.) to canvass the point that the excess amount paid by an assessee cannot be retained by the department since the same would be against Article 265 of Constitution of India. The decision in the case of Commissioner of Central Excise Vs. Rajdeep Buildcon Pvt. Ltd. - 2011 (21) STR 663 was relied upon by the ld. counsel to argue that even if there is delay in intimating to the department with regard to the adjustment made, the demand cannot sustain. In Electrical Manufacturing Company Ltd. Vs. Commissioner of Central Excise, Bhopal - 2017 (3) GSTL 196 (Tri. Del.), it was held that it is not mentioned in Rule 6 that the adjustment has to be done on monthly basis. That failure to intimate to the department is only a procedural lapse. In Commissioner of Central Excise, Hyderabad Vs. State Bank of Hyderabad - 2016 (43) STR 415 (Tri. Hyd.), it was held that when the excess paid amount has been adjusted towards the service tax liability of subsequent 4 period, the demand made alleging that it is against the provisions of law cannot sustain as the excess payment made is not on account of rendering any services and has not been recovered from the customers.
3. The ld. AR Shri M. Jagan Babu appeared and argued on behalf of the respondent. He submitted that the Rule is for adjustment of the excess service tax paid towards service tax liability for succeeding month or quarter. Since the word quarter is used after the word 'month', it is to be understood that such adjustment can be made only in the immediate succeeding month or quarter. If in any case, the appellant is not able to make such adjustment in the immediate month or quarter, the option is to file a refund claim for the excess service tax paid. Thus, the appellant cannot adjust the service tax liability to any other succeeding months or quarters. The authorities below have rightly adjusted the excess payment made during April 2016 to June 2016 towards the service tax liability for immediate succeeding quarter in September 2016. The excess amount paid during the period from April 2015 to March 2016 has not been allowed to be adjusted and the demand has been raised only for this period. That the impugned order does not call for any interference.
4. Heard both sides.
5. For better appreciation, Rule 6(4A) of Service Tax Rules, 1994 is reproduced as under:-
"Notwithstanding anything contained in sub-rule (4), 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 his service tax liability for the succeeding month or quarter, as the case may be."5
6. From the above provision, it can be seen that the word 'immediate' is absent in the Rule. The Rule says that the assessee can adjust the excess amount paid by him against the service tax liability for the succeeding month or quarter, as the case may be. The department is of the view that since the word 'quarter' is used after the word 'month', the only meaning that can be inferred from the Rule is that adjustment of excess amount paid can be made only in the immediate succeeding month or quarter. Needless to say that when the language in a statute is plain and unambiguous and admits of only one meaning, effect must be given to it, irrespective of the consequences. On understanding the plain and natural sense of the Rule, an assessee is allowed to adjust the excess amount paid by him to the service tax liability for succeeding month or quarter.
7. In September 2016, appellant realized the excess payment made during April 2015 to June 2016 and adjusted it in September 2016 while filing returns. The excess amount paid by appellant during April 2016 to June 2016 has been allowed by department to be adjusted in September 2016, holding the view that it is adjusted in the immediate succeeding quarter. However, the excess payments made by appellant from April 2015 till March 2016 was not allowed to be adjusted for which the present demand has been made. The demand therefore does not arise out of short-payment of tax. It arises out of a situation where appellant adjusted his excess payment towards the liability that incurred later. The ld. AR has much stressed that since the word 'month' is followed by the word 'quarter', the Rule has to be interpreted in such a way that the adjustment can be made only in the immediate succeeding month or quarter. 6
8. In a hypothetical situation, if an assessee does not have any service tax liability for the immediate succeeding month or quarter, the question arises how can he utilize this provision for adjustment of excess service tax paid. So also when the excess paid is higher than the service tax liability in the immediate succeeding month or quarter, the Rule does not say that only part of the excess can be adjusted towards the immediate succeeding month or quarter and that assessee has to file refund for the balance excess amount. The ld. AR contended that the assessee then has to avail the option of refund. It can be reasonably understood that the Rule intends an assessee to adjust excess payment to his liability that is accrued later. This is to avoid hassles of a refund claim. When there is already excess amount in the hands of the Revenue, while making such adjustment, there is no revenue loss. In fact, the Revenue is enriched by the interest on the excess amount till the adjustment.
9. The words 'month' or 'quarter' is followed by the phrase 'as the case may be'. This phrase connotes that one out of the various alternatives would apply to a given situation. In Khan Chand Vs. State of Punjab - AIR 1996 (P&H) 423 (FB), the meaning of the phrase 'as the case may be' was analyzed. In paras 38 and 39, the Hon'ble High Court observed as under:-
"38. One of the basic principles of interpretation of statues is that it must be presumed that every word used in a section of a legislative enactment has been inserted with a purpose and some meaning must be assigned to it. The intention of having uselessly added surplus words or phrases should never be attributed to the Legislature. It has been authoritatively held by their Lordships of the Supreme Court in J.K. Cotton Spinning and Weaving Mills Co. Ltd. Vs. State of Uttar Pradesh, AIR 1961 SC 1170, that the Courts always presume, while interpreting statues, that the Legislature inserted every part thereof for a purpose and the legislative intention is that every part of the statute should have effect.7
39. Keeping the above principles in view we must assume that the Legislature has deliberately used the well-known expression "as the case may be" in the proviso in question with some definite purpose and intendment. This expression necessarily means that at least two situations are envisaged by the earlier part of the section and two separate provisions or alternatives are provided in a later part of the same sub-section to one of which the one alternative and to the other of which the other is intended to be applicable. The expression "as the case may be" cannot permit the application of the same alternative to both the contingencies or vice versa. It is implicit in the use of this phrase that one out of the various alternatives would apply to one out of the various situations and not otherwise. "One" here would of course include more than one contingencies for one set of circumstances in a given case."
10. In Rule 6(4A), the two alternatives envisaged are adjustment of the excess amount in succeeding month or quarter. Thus in a given situation of adjustment of excess amount, the alternatives available to an assessee is to adjust in the succeeding 'month' or 'quarter'. The word 'month' or 'quarter' is used to indicate the filing of returns. The adjustment is made while filing returns. Service tax returns are generally filed on quarterly basis. If returns have to be filed on monthly basis, the adjustment can be made in any succeeding month. The argument of the ld. AR that since the word 'quarter' follows the word 'month', the adjustment can be made only in the immediate succeeding month or quarter is without any substance. The word 'immediate' being absent in the Rule, the only interpretation possible is that the assessee can adjust the excess payment to any succeeding month or quarter when he has service tax liability. It has to be borne in mind that such adjustment has to be made within reasonable time.
11. In the present case, the period for which excess payment has been disallowed is from April 2015 to March 2016. Even if the assessee files a refund claim in September 2016, when he realized that there is excess payment, the claim would be well within the time 8 limit under section 11B. Further, it is also brought out from the record that the assessee has not collected service tax from the customer and therefore not passed on the tax burden to another. This being the case, the appellant would be otherwise eligible for refund. The provision for adjustment is to avoid the hassles of refund. In my view, the adjustment made by the assessee in the month of September 2016 can be said to be adjustment in accordance with Rule 6(4A) of the Service Tax Rules, 1994.
12. The Tribunal in the case of General Manager (CMTS) cited supra considered a similar issue and observed that the excess payment made by the assessee is not for any services rendered by him and therefore the amount collected by Revenue as service tax is without authority of law and cannot be retained. It is also decided in various cases relied by the ld. counsel that non-intimation to the department about the adjustment is only a procedural lapse. The other decisions relied by the appellant has held the issue of adjustment of excess payment of service tax in favour of the assessee.
13. After appreciating the facts of the case and also following the decisions rendered in above judgments, I am of the view that the impugned order cannot sustain and requires to be set aside, which I hereby do. The appeal is allowed with consequential relief, if any.
(Dictated and pronounced in open court) (SULEKHA BEEVI C.S.) Member (Judicial) Rex