[2016] 71 taxmann.com 133 (Bangalore-CESTAT) Dell India (P) Ltd. vs. Commissioner of Service Tax

Facts:
The Appellant continued to pay service tax at old rate although there was reduction in service tax rate.  This resulted in excess payment of service tax. Later, appellant issued credit notes to customers and issued fresh invoices by applying correct rate of service tax. However, the Appellant revised their ST-3 returns for the said period by showing this adjustment by way of reduction in valuation, though strictly speaking, this was not reduction in value, but applicability of correct rate of tax. Revenue did not allow the suo motu adjustment of excess payment of service tax as it was contended that this was neither strictly covered under Rule 6(3) of the Service Tax Rules 1994 (Rules) nor under Rule 6(1A) of the Rules. Therefore, issue involved was whether appellant could claim refund of excess payment by following procedure governing refund claim or whether they could claim the credit of excess payment by way of adjustment as per Rule 6 of the Rules.

Held:
Liberal interpretation and generous view of provisions of service tax rules was required to be adopted. Though the appellant’s case was not strictly covered by provisions of different sub-rules of Rule 6 of Service Tax Rules, 1994, admittedly appellant was entitled to benefit of adjustment of excess service tax paid by them. Reliance was placed upon decision in the case of General Manager (CMTS) v. CCE [Final Order No. ST/A/52446/2014-CU (DB), dated 8-5-2014], wherein it was held that when an assessee during certain months, for reasons other than interpretation of law, taxability, classification, valuation or applicability of exemption, has paid service tax in excess of his actual tax liability, the Government cannot retain the excess tax paid by the assessee by refusing its adjustment against his tax liability during other months and refusing adjustment of such excess tax payment during a month against tax liability during other months and appropriation and retention of the same would amount to collection of tax without the authority of law which is contrary for the provisions of Article 265 of the Constitution of India.  
[Note: Readers may note that in case of Schwing Stetter India (P.) Ltd. vs. Commissioner of Central Excise, LTU, Chennai [2016] 71 taxmann.com 228, Chennai Tribunal held that in terms of Rule 6(4A) of STR, 1994, assessee is entitled to adjust excess payment against any of the subsequent months/quarters and department is not permitted to retain such excess payment by stating a reason of mere procedural lapse.]