Payment of Tax Under Wrong Head/Code - Doomed?
SOME times assessee pays duty/service tax under a wrong code or he pays 12.5% under excise code and does not pay cess separately. In such cases, what should an assessee do to rectify such mistake? Should he file a revised return or does it amount to short payment of cess etc? Please clarify .
This was an issue raised in a meeting of the Regional Advisory Committee (RAC) of the Hyderabad Central Excise Zone recently.
The Department clarified:
The assessee has to necessarily pay the duty/cess, be it of Central Excise or Service Tax, under the correct Accounting Code, as there is no specific provision in the Central Excise Act/Finance Act/Rules for such adjustment. However, if any error is discovered after payment, the Principal Chief Controller of Accounts, CBEC, New Delhi vide their Office Memorandum d.t. 27.05.2009 regarding misclassification of accounting codes, has prescribed the course of action to be taken before the accounts of any financial year are closed, for correction of accounts classification, after getting approval from the Commissioner, if the amount involved is less than Rs. 50 lakhs, and Headquarters approval (Zonal CC) if the amount involved is above Rs. 50 lakhs in each case, provided the total amount of the challan is not changed due to the rectification of accounts codes .
The same issue was raised in the RAC meeting of Mysore Zone in April 2016.
The issue: The Assessee has paid service tax amount to Government, but while paying the same the assessee has mentioned wrong account Code. Now, Excise (Audit) Superintendent is saying that, assessee has mentioned wrong account code & assessee has not paid service tax under proper code & assessee should pay tax along with interest & penalty and apply for refund of amount paid under wrong account code.
But in this case assessee has correctly calculated service tax & paid to government within due date & not evaded the tax, but only mentioned wrong account code while depositing the tax. Under these circumstances is it correct on the part of the Audit Department to insist on taking refund of tax paid under wrong account code and paying the tax at correct code with interest and penalty holding that there is default in payment of tax.
The department has clarified earlier that if the assessee uses wrong account code for payment assessee need not be asked to pay service tax and the matter should be sorted out with PAO.
I request you to clarify the issue once again with necessary instruction to not to insist on taking refund and treating non payment of tax & payment of tax with interest and penalty.
The Department there replied:
It was clarified that for every service, an accounting head has been provided. The service tax has to be paid under appropriate accounting code for which the said tax pertains.
However in case of payment of service Tax under incorrect accounting code, the concerned assessee is required to make an application to the PAO, Service Tax , Mumbai for change of accounting code after scrutiny from JRO/JAC, with the approval of the jurisdictional Commissioner, after submitting required documents and challans through proper channel. The principal CCA CBEC OM NO: Coord/1(5)/R-II/09-10/23 dated 27.05.2009 regarding the procedures to be followed for correction of accounting classification may please be perused .
Ease of doing business?
Recently, the Gujarat High Court decided a similar issue. The High Court held, "Whatever be the internal instructions of the department, the amount not due under a head cannot be appropriated leaving the actual dues unpaid. The department cannot appropriate sum towards the head where there was no liability for the petitioner to pay the tax. If the petitioner is now made to pay said sum of Rs.5,04,700/-, that would be double recovery by the Government, which would be wholly unauthorized".