Service tax – No adjustment of excess tax - CAG
THE CAG cites the case of Bharti Airtel Ltd. engaged in providing telephone service, paid service tax of Rs. 195.73 lakh for the month of March 2005 against the liability of Rs. 189.19 lakh. The amount of Rs. 6.54 lakh paid in excess by oversight was adjusted against service tax liability for the subsequent month of April 2005. This suo-moto adjustment of service tax against future liability was not allowable under the rules and for this the assessee was required to file a refund claim under the provisions of section 11B of the said Act. The wrong adjustment of the service tax was liable to be recovered along with interest.
On this being pointed out, the department stated that the adjustment of excess service tax paid was permissible in view of various judicial pronouncements.
The reply of the department is not tenable (to Audit) as judicial pronouncements cited are not in the case of the assessee or by the jurisdictional court. Also, the reply is contradictory to the Ministry's clarification (13 October 1997) that there is no provision in the Finance Act, 1994 to adjust service tax already paid.
The department further intimated (June 2008) that a show cause notice was being issued. The reply of the Ministry has not been received (January 2010).