Customs, Excise and Gold Tribunal - Delhi
A.C. Nielsen Org Marg (P) Ltd. vs Commissioner Of Central Excise on 21 April, 2006
Equivalent citations: 2006(110)ECC101, 2006ECR101(TRI.-DELHI), 2006[3]S.T.R.503
ORDER
R.K. Abichandani, J. (President)
1. These two appeals arise from the common order made on 11.2.2004 by the Commissioner (Appeals) upholding the demand of service tax amounting to Rs. 87,720/- (Appeal No. Service Tax/71/04-NB-S) and penalty of the like amount along with interest as directed, and demand of Rs. 2,55,929/-(Appeal No. ST/70/04-NB-S) with penalty under Section 76 at the rate of Rs. 100/- per day subject to not exceeding Rs. 1,17,493/-.
2. The appellant company was registered as service provider in the field of marketing research services, which is a taxable service under the provisions of Chapter V of the Finance Act, 1994. The appellant had filed tax return on 8.5.2000 for the months of April 1999 to September 1999 with a delay of 196 days. A show cause notice dated 31.7.2000 was, therefore, issued on the appellant in respect of the recovery of tax short paid with interest and proposing penalties under Sections 76 and 77 of the said Act. The appellant did not file reply, nor did it attend for personal hearing. The adjudicating authority, therefore, made an ex-parte order demanding the amount of Rs. 87,720/- as service tax and imposing a penalty of the like amount under Section 76 and a further penalty of Rs. 5600/- for delay in filing of the returns and also demanding interest of Rs. 78,266/- for the service tax paid later than the on due dates for all the months.
3. For the period from October 1999 to March 2000, the appellant had filed service tax return on 8.5.2000 by a delay of 13 days. A show cause notice dated 31.7.2000 was, therefore, issued for recovery of short payments of total amount of service tax of Rs. 2,55,929/- and a penalty was proposed under the Act for the defaults. The appellant did not submit any reply nor did it avail opportunity of being heard and the matter was, therefore, adjudicated ex parte by demanding service tax of Rs. 2,55,929/- and imposing penalty of Rs. 200/- per week from 25.11.1999 under Section 76 and further penalty of Rs. 400/- under Section 77 for the delay of 13 days at the rate of Rs. 200 per week.
4. The Commissioner (Appeals) held that the appellant had short paid service tax for the months of April, May, June, July, August and September in the financial year 1998-2000 and for the months October and November 1999, and that such short payment had to be made good by them and refund could be claimed by the appellant for excess payment for the months of December 1999 and January 2000 in terms of Rule 7 of the Service Tax Rules, 1994. It was held that the assessment of tax was to be done on monthly basis because the tax returns were required to be filed for each of the months covered in a half-yearly return period under Rule 7. It was observed that the adjudication orders were factually orders for assessment for twelve months covered by two return periods. It was held that the assessee was not entitled to adjustment of tax paid in excess as contended, and such adjustment, if given, would amount to grave disregard of the provisions of Rule 7, because there was an express provision for refund to be applied for. It was also held that the appellant was not entitled to the benefit of Rule 6(3) because that provision was applicable where taxable service was not provided and the assessee had refunded the value of such taxable service as well as the service tax thereon to the person concerned who had received the value. It was also held that the appellant had not proved that it had adjusted any tax paid in excess prior to April 1999. The Commissioner (Appeals), therefore, upheld the demand of tax and imposition of penalties with a variation of reducing the penalty imposed at the rate of Rs. 200/- per day to Rs. 100 per day in the adjudication order relating to the period from October 1999 to March 2000 (Appeal No. ST/70/04).
5. The learned Counsel appearing for the appellant contended that under Rule 7(4), the appellant was entitled to get the excess payment made in any particular month/s adjusted against the service tax assessed and if this process was adopted in respect of half yearly return filed for the period of October 1999 to March 2000, the excess payment of Rs. 2,64,072/- would have got adjusted against the short payment of Rs. 2,55,929/- and the appellant would have been required to pay the short fall of Rs. 18,181/- with interest which the appellant would have been ready to pay. It was also contended that the Commissioner (Appeals) had erroneously mentioned in the impugned order maximum penalty as Rs. 13,77,419/- because no penalty in excess of the tax short paid could have been imposed and the tax short paid was admittedly Rs. 2,55,929/- even as per the show cause notice. He further contended that as regards the half-yearly assessment period of April 1999 to September 1999, though admittedly there was short payment of Rs. 87,720/-, the earlier excess payment of Rs. 2,39,829/- for the period from October 1999 to March 2000 was adjustable in view of the provisions of Rule 6(3) of the said rules. It was also submitted that the appellant had never received assessment orders though at the relevant time the assessing authority was required to fill up the "Assessment Memorandum" prescribed in the form of Return ST-3. It was submitted that no assessment under Section 71 was done by the assessing authority and at the time when these returns were filed by the appellant, there was no provision of self-assessment.
6. The learned authorized representative for the department supporting the reasoning and findings in the impugned order, argued that no adjustment was permissible in respect of excess payments made in particular months and each month was required to be separately assessed in view of the liability of the assessee to pay service tax on monthly basis. He submitted that adjustments of taxes paid in different months in the same assessment period or amongst different assessment periods were not permissible either under Rule 6(3) or Rule 7(4) of the said rules. It was argued that under Rule 6(3), the assessee was required to prove that the excess was claimed in the context of the service not having been rendered and refund of the value of service and the tax recovered thereon. It was submitted that in the present case, no such evidence was adduced. On being asked, the learned authorized departmental representative, even after enquiry, was unable to state whether the assessing authority had made the assessment, as contemplated by the assessment memorandum of form ST-3 in respect of any of these periods.
7. There is no dispute about the liability of the appellant to pay service tax in respect of the taxable service of marketing research rendered by the appellant. The short question that arises in the context of the half-yearly assessment period from October 1999 to March 2000 (Appeal No. ST/70/04) is whether two excess payments made in December 1999 and January 2000 were required to be adjusted against the short payments in the rest of the months while assessing the half-yearly return. Rule 7, required every assessee to submit a half-yearly return in the prescribed form for the months covered in the half-yearly returns. Under Sub-rule (2) of Rule 7, every assessee was required to submit half-yearly return by the 25th of the month following the particular half -year. The Central Excise Officer thereupon was required to assess the service tax payable thereon including tax and complete the "Assessment Memorandum" under Sub-rule (3) of Rule 7. It is clear from this provision that it was obligatory upon the assessing officer to assess the service tax payable and complete the "Assessment Memorandum", which is prescribed at the end of ST-3 return. A copy of the return so assessed was required to be sent to the assessee under this Sub-rule. Sub-rule (4) of Rule 7 which falls for interpretation reads as under:
(4) The service tad determined and paid by the assessee shall be adjusted against the service tax assessed by the Central Excise Officer under Sub-rule (3) and where the service tax so assessed is more than the service tax determined and paid by the assessee, the assessee shall pay the deficiency, alongwith amount of interest determined thereupon, within ten days of the receipt of the copy of the return from the Central Excise Officer and where such service tax is less, the assessee may apply for refund in accordance with the provisions of Section 11B of the Central Excise Act, 1944 (1 of 1944).
7.1 The contention that adjustment of excess payment in any month during the half-yearly period was not required to made was canvassed on behalf of the Revenue on the basis of the provision that, 'the assessee may apply for refund', occurring in the above Sub-rule (4). The Commissioner (Appeals) has proceeded on the footing that Sub-rule (4) of Rule 7, does not contemplate assessment on half-yearly basis since ST-3 return was required to incorporate information for each calendar month.
7.2 Under Rule 6(1), the service tax on the value of taxable services received during any calendar month is required to be paid to the credit of Central Government by the 25th of the month immediately following that calendar month. This would mean that the liability to pay service tax for services received during a month arises on the part of the assessee on such monthly basis. However, the return has to be submitted on a half-yearly basis and the time to file the return, as indicated in Sub-rule (2) of Rule 7, is by the 25th of the month following the particular half-year. The return in form ST-3 seeks month-wise particulars, because, the liability to pay taxable service is on monthly basis under Rule 6(1), Late payment would entail liability to pay interest which amount is also to be mentioned month-wise in the prescribed form. However, merely because the liability to pay tax arises month-wise, it cannot be inferred therefrom that a monthly assessment is to be done. This is clear from the provisions of the "Assessment Memorandum", in which the assessing officer has to indicate the extent of service tax short/excess paid without reference to any month-wise payment. If the assessee is entitled to refund, the assessee is required to apply for refund and if he is, on correct assessment, required to pay the deficiency, such order is to be made under the "Assessment Memorandum". There is no scope for monthly assessment and providing for monthly returns or monthly orders of paying deficiency. The whole concept of half-yearly assessment will fall to pieces if mere indication of monthly tax liability is to be read as, "a requirement for monthly assessment".
7.3 The half-yearly assessment contemplated by Rule 7(4) requires the assessing officer to take into account the monthly liability of tax as well as the liability to pay interest, if it is not paid within the time prescribed in Rule 6(1), and to work out the service tax paid during the half-yearly period, the interest amount paid, the deficient/excess amount, and to fill in the "Assessment Memorandum" on the assessment of the entire of six months covered by the half-yearly return as a result of which if any excess is still found after the assessment, then alone he would specify the refund amount of such excess under the "Assessment Memorandum". Until that is done, the assessee can never claim refund in respect of any month in which he had paid the excess. It is only on the strength of the final assessment, as reflected in the "Assessment Memorandum" in respect of the entire period of six months that the question of deficiency or excess can be crystallized into the liability of the assessee to pay the deficiency or claim the refund, as the case may be. It is, therefore, clear that under Rule 7(4) read with form ST-3 including the "Assessment Memorandum", that the assessee would be entitled to the adjustment of any excess paid in any month/s during the months covered under the half-yearly return against any short payment in any other month/s covered by that half-yearly return. Such adjustment cannot be made between separate half-yearly returns by carrying forward the excess from the earlier half- yearly return to a subsequent half-yearly return because, the excess found on assessment of the earlier half-yearly return will be subject to the provision of Rule 7(4) and require a refund application to be made by the assessee.
7.4 It, however, appears in respect of the said half-yearly period of October 1999 to March 2000, in which excess payment of Rs. 2,64,072/- is said to have been made in December 1999 and January 2000, that the Commissioner (Appeals) did not verify whether "Assessment Memorandum" was filled in by the assessing officer making the assessment at the end of which the question of deficiency/excess could have arisen. It was repeatedly stated on behalf of the appellant by the learned Counsel, that the appellant had not received the assessment order in respect of this half-yearly period; and the learned authorized representative, despite his best efforts, was unable to state whether assessment order was made or not. The authorities below ought to have verified about the assessment order which was required to be made as per the "Assessment Memorandum", and in the context of the provisions of Section 71 as applicable at the relevant time, which required assessment to be made by the assessing officer, since there was no provision for self assessment at that time.
7.5 In this view of the matter in Appeal No. ST/70/04, the matter will have to be remanded to the Commissioner (Appeals) for ascertaining whether any assessment order was made or not and for taking a fresh decision in the matter after hearing both the sides in the light of what has been held hereinabove in the context of Rule 7 of the said rules. This appeal is accordingly allowed with a direction to the Commissioner (Appeals) to consider the matter afresh and take a decision in accordance with law.
8. As regards the half yearly return for April 1999 to September 1999 (A.No. ST/71/04), the contention tried to be raised was that earlier excess payments for the half-yearly period prior to the period of October 1999 to March 1999 should be adjusted towards the short payment in this particular half-year. It would appear from Rule 6(3), in the context of which this contention was raised that unless it is shown by the assessee that he has refunded the value of taxable service and service tax, no such claim can be countenanced. There is nothing on record brought forth by the assessee to substantiate a claim of such nature under Rule 6(3). There is no averment made at any point of time on behalf of the assessee that the assessee had refunded the value of taxable service and the service tax thereon under Sub-rule (3) of Rule 6. No reply was sent to the show cause notice, nor was such contention raised at any stage thereafter uptil now. In this view of the matter, there is no scope for claiming any adjustment of earlier excess payments, if any, in respect of the period of half- yearly return covering October 1999 to March 2000. Appeal No. ST/71/04 is, therefore, dismissed.
(Dictated and pronounced in the open Court on 21.4.2006)