Full Judgment
3. The respondents are provider of cellular phone services and were charging Service tax from their customers. The respondents are also paying charges along with the Service tax to DOT junction links provided by the DOT. On coming to know that respondents are not liable to pay any Service tax in respect of junction links to DOT. The respondent filed necessary return on 24-10-2002 for the period April, 2002 to September, 2002 whereby an amount of Rs. 6,60,720/- was shown to be adjusted in terms of Sub-rule (3) of Rule 6 of Service Tax Rules, 1994. The respondents filed another return dated 22-10-99 for the period April 1999 to September, 1999 showing adjustment of the Service tax paid to the DOT. Revenue issued two show cause notices dated 16-10-2003 and 20-4-2004 denying the adjustment of Service tax paid to DOT under Rule 6(3) of Service Tax Rules, 1994. The adjudicating authority confirmed the demand and imposed the penalty.
4. The Commissioner (Appeals) allowed the appeal. The contention of the Revenue is that as per the provisions of Rule 6(3) of the Rules, the adjustment is permissible if the assessee has paid to the credit of Central Govt. Service tax in respect of taxable service which is not so provided by him and the assessee has refunded the value of Service tax to the persons from whom it was received.
5. The contention is that the appellant paid to the DOT the Service tax regarding which adjustment is asked for. Therefore, no adjustment is permissible under Rule 6(3) of the Service Tax Rules, 1994, as respondents had not refunded any amount in respect of the value of taxable service and the service tax to the persons to whom it was received. The contention of the Revenue is that appellants have not disclosed these facts in the return, therefore, the finding of the Commissioner (Appeals) that the demand is time-bar also not sustainable.
6. The contention of the respondent is that as per the Circular issued by the Central Board of Excise and Customs no service tax is payable in respect of the junction connectivity provided by the DOT. Therefore, the respondents have paid wrongly the Service tax, which was adjusted subsequently. The respondents submitted that in the return they had specifically mentioned that this adjustment in respect of the Service Tax on DOT inter-connectivity Bills. Therefore, no suppression can be alleged on the respondents.
7. We find that the provisions of Rule 6(3) of Service Tax Rules provide adjustment of Service tax which had been paid by the assessee to the credit of Central Government Service Tax in respect of the taxable service, which is not so provided by him and the assessee has refunded the value of taxable service and the amount of Service tax to the persons from whom it was received. In the present case, the respondents had not paid the amount in question to the credit of Central Government Service Tax. It is not the case of respondents that as they had not provided any taxable service to their customer and they had refunded the amount of service tax to their customers. The respondent paid the service tax to DOT. Therefore, the respondents are not entitled for any adjustment in terms of the Rule 6(3) of Service Tax Rules, 1994. In view of the clear provisions of the rule, the finding of the Commissioner (Appeals) whereby such adjustment was allowed is not sustainable and set aside.
8. In respect of limitation, we find that the demand raised in the show cause notice dated 16-10-2003 is in respect of the period April, 2002 to September, 2002 and the necessary return was filed on 24-10-2002. As the return was filed on 24-10-2002 and show cause notice was issued on 16-10-2003, therefore, the show cause notice is issued within the period of normal limitation and as the appellants are not entitled for the adjustment as discussed above, the demand raised in the show cause notice dated 16-10-2003 is not time-bar. Therefore, finding of the Commissioner (Appeals) regarding demand raised in the show cause notice dated 16-10-2003 is time-bar and is also set aside.
9. The demand issued under the show cause notice 20-4-2004 for the period April, 1999 to September, 1999, the respondents filed necessary return on 22-10-99 and in the return they specifically mentioned that the adjustment of Rs. 8,93,244/- relates to Service tax on DOT inter-connected bills. As the respondents declared the reasons for adjustment, therefore, no suppression with intent to evade Service tax can be alleged against the respondents in respect of the demand raised in the show cause notice dated 20-4-2004. Therefore, the demand raised in the show cause notice dated 20-4-2004 is time-bar. The appeal is disposed of as indicated above.