Custom, Excise & Service Tax Tribunal
Yes vs Represented By : Shri S.R. Dixit, ... on 27 June, 2014
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Zonal Bench, Ahmedabad Appeal No. : ST/10949/2013 Arising out of : OIA No. PJ/457/VDR-I/2012-13 dated 25.02.2013 Passed by : Commr. (Appeals) C. Excise & Customs, Vadodara For approval and signature : Honble Mr. H.K. Thakur, Member (Technical) 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? No 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes Appellant (s) : M/s. Sopariwala Exports Pvt. Limited Represented by : Shri S.R. Dixit, Advocate Respondent (s) : Commissioner of Central Excise & S.T., Vadodara
Represented by : Shri Manoj Kutty, A.R. CORAM :
Honble Mr. H.K. Thakur, Member (Technical) Date of Hearing / Decision : 27.06.2014 ORDER No. A/11153 / 2014 Dated 27.06.2014 Per : Mr. H.K. Thakur;
This appeal is directed against Order in Appeal No. PJ/ 457/ VDR-I/ 2012-13 dated 25.02.2013 passed by the Commissioner (Appeals), Central Excise, Customs and Service Tax, Vadodara.
2. M/s Sopariwala Exports Private Limited, the appellants, are engaged in the manufacture of branded un-manufactured tobacco & export activities. It was noticed during the course of audit that the appellants had paid huge sums of money towards Sales Commission to their foreign agency, which fell under the category of Business Auxiliary Service attracting service tax at the hands of the appellant under reverse charge mechanism with effect from 16.06.2005. Appellants paid basic service tax amounting to Rs. 66,15,748/- in February/ March 2007 against their basic service tax liability of Rs. 52,90,172/- for the financial year 2005-06, thereby paying excess service tax amounting to Rs. 13,25,576/-, the reasons for excess payment advanced by the appellants being wrong computation of service tax based on mercantile system of accounting on receipt of any bill the same is booked as an expense, while liability for payment of service tax arises the moment payment is made in the case of reverse charge mechanism. The appellants did not pay Education Cess amounting to Rs. 1,05,803/- on the basic amount its service tax liability for the year 2005-06. Similarly, the appellants paid service tax amounting to Rs. 21,39,188/- (S. T. Rs. 20,97,244/- plus Ed. Cess Rs. 41,944/-) in May, 2007 against their liability of Rs. 23,29,078/- (Service Tax Rs. 22,83,410/- plus Ed. Cess Rs. 45,668/-) for the financial year 2006-07 leading to short-payment of Rs. 1,89,890/- (S. T. Rs. 1,86,166/- plus Ed. Cess Rs. 3,724/-). According to Revenue there was total short payment of Rs. 2,95,693/- (Ed. Cess Rs. 1,05,803/- for 2005-06 plus S. Tax Rs. 1,86,166/- + Ed. Cess Rs. 3,724/- for 2006-07) for both the financial years against excess payment of basic service tax of Rs. 13,25,576/-. Appellant paid short-paid Education Cess amounting to Rs. 1,09,527/- (Rs. 1,05,803/- for 2005-06 + Rs. 3,724/- for 2006-07) on 07.04.2008, but did not pay basic short-paid service tax amounting to Rs. 1,86,166/- as appellant had already paid excess service tax to the tune of Rs. 13,25,576/- during February/ March 2007. The original adjudicating authority confirmed demand of service tax of Rs. 1,86,166/- along with interest and imposed penalties on the appellants under Sections 76, 77 and 78 of the Finance Act, 1994. The original adjudicating authority also confirmed the demand of Education Cess amounting to Rs. 1,09,527/- and appropriated the same against Education Cess already paid in April 2008, which is not the subject matter of dispute in the present appeal. On appeal by the appellants, the Commissioner (Appeals) upheld the order of the adjudicating authority vide the impugned Order-in-Appeal dated 25.02.2013.
3. Shri S. R. Dixit, (Advocate) appearing for the appellant argued that the appellants have already paid excess service tax of Rs. 13,25,576/- for the financial year 2005-06 in February/March 2007, against which the service tax liability of Rs. 1,86,166/- for the period 2006-07 could be adjusted; that the appellants were not required to pay any service tax under the reverse charge mechanism before coming into force of Section 66A of the Finance Act 1994 with effect from 18.04.2006, and thus the entire amount of service tax paid for the financial year 2005-06 in Feb/ March 2007 is available for adjustment towards appellants service tax liability for the year 2006-07, and consequently there has been no short-payment of service tax for the year 2006-07; that the issue involved is revenue neutral in as much as the payment of differential service tax would have been available as CENVAT Credit to the appellants; and that the appellants case is squarely covered by the following case laws:
(i) BSNL Vs. Commissioner of Central Excise, Chandigarh [2011-TIOL-2026-CESTAT-Del];
(ii) Narnolia Security Services Pvt. Limited vs. Commissioner of Service Tax, Ranchi [2008 (10) STR 619 (Tri. Kolkata)];
(iii) Commissioner of Central Excise, New Delhi vs. Sentinal Security (P) Limited [2006 (2) STR 520 (Tri. Del.)];
(iv) Commissioner of Central Excise, Mysore vs. Powercell Battery India Limited [2010-TIOL-1090-Bang];
(v) Gujarat NRE Coke Limited vs, Commissioner of Central Excise, Rajkot [2012-TIOL-600-CESTAT-AHM].
Learned advocate also argued that payment of service tax on reverse charge basis under Section 66A of the Finance Act, 1994 came into effect from 18.04.2006. That as the department was aware of the activities of the appellant, therefore, the entire demand is time barred.
4. Shri Manoj Kutty (AR) appearing for the Revenue argued that there was no provision in service tax law for adjustment of excess paid service tax for the year 2005-06 against service tax liability for the year 2006-07. He cited the case law BBC World (I) Pvt. Limited vs. Commissioner of Service Tax, New Delhi [2009 (14) STR 152 (Tri. Del.)] in support of his arguments.
5. Heard both sides and perused the case records. It is observed that in this case the disputed amount of short-paid basic service tax for the period 2006-07 is Rs. 1,86,166/-, while the appellant had paid excess amount of service tax to the extent of Rs. 13,25,576/- in Feb./ March 2007 for the period 2005-06. There is no dispute with regard to extra payment of service tax of Rs. 13,25,576/-. I note that the appellants case is covered by the provisions of Rule 6(3) of the Service Tax Rules, 1994, which read as under during the material period:
(3) Where an assessee has paid to the credit of Central Government service tax in respect of a taxable service, which is not so provided by him either wholly or partially for any reason, the assessee may adjust the excess service tax so paid by him (calculated on a pro rata basis) 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.
5.1 It is also observed that the CESTAT has held in the matter of Commissioner of Central Excise, New Delhi vs. Sentinal Security (P) Limited (supra) as under:
4.? After hearing both sides and after going through the facts, we find that there is no dispute on facts. The assessee has paid extra tax and in the subsequent returns they have adjusted that amount, however, they did not follow the prescribed procedure. In the interest of justice when there is no dispute with regard to the extra payment, the matter be regularised as has been done in the impugned order-in-appeal. After careful consideration of the matter, we do not find any infirmity in the view taken by the Commissioner (Appeals). We do not find any merit in the appeal filed by the Revenue, the same is rejected. 5.2 Further, in the matter of Commissioner of Central Excise vs. Powercell Battery India Limited (supra), this Tribunal has held as under:
6.?I have considered the submissions made at length by both sides and perused the records. The issue to be decided in this case is whether the adjustment made by the appellant on the excess payments made by them under the provisions of Rule 6 of the Service Tax Rules for payments of service tax, a liability that arose subsequently.
The relevant rule which provides for such adjustment is Rule 6 (3) which is reproduced herein below.
(3) Where an assessee has paid to the credit of Central Government service tax in respect of a taxable service, which is not so provided by him either wholly or partially for any reason, the assessee may adjust the excess service tax so paid by him (calculated on a pro rata basis) 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.
7.?I find that the very same rule was interpreted by the coordinate bench in the cases cited by the learned Commissioner. Nothing is brought to my knowledge that an appeal has been filed and stay has been granted against these three decisions. I specifically find that the decision in the case of CCE, New Delhi v. Sentinel Security (P) Ltd. - 2006 (2) S.T.R. 520 (Tri.-Del.) and Oriental Insurance Co. Ltd. v. CCE, New Delhi - 2006 (3) S.T.R. 587 (Tri.-Del.) = 2005 (182) E.L.T. 463 (Tribunal) is on the point. There is no dispute that the respondent had paid excess service tax during the period, which they sought to adjust subsequently. In view of this, I am of the considered view that the learned Commissioner (Appeals) order is proper and correct and does not suffer from any infirmity. Appeal filed by the revenue is rejected.
6. It has also been argued by the appellant that the entire demand is time barred. It is an admitted fact that the service tax on reverse charge basis came into effect from 18.4.2006. Before this period no service tax on reverse charge can be demanded. Secondly, the unit was registered and department was aware of the nature of services being provided. The period of demand is from 2005 to March 2007 and the show cause notice is issued on 01.12.2008. As appellant was registered with the department and filing returns, extended period can not be invoked in the present proceedings. The demand is thus also hit by limitation.
7. In view of the above observations, the impugned Order-in-Appeal is set aside and the appeal filed by the appellant is allowed.
(Operative part of the order pronounced in the Court) (H.K. Thakur) Member (Technical) .KL 6