Judgment:
1. Heard both sides.
2. The present appeal was allowed by a short order after hearing both sides with the following observation:-
“Both sides agree that the appellants have paid excess amount of service tax in advance, which has been adjusted against the future liability for the subsequent period. In such a case, lenient consideration is called for to allow such adjustment as was held in the case of Narnolia Securities Pvt. Ltd. Vs. Commissioner of Service Tax, Ranchi - 2008(10) STR 619 (Tri.-Kolkota). I order accordingly and set aside the impugned order including the penalty imposed.” (Order dictated and pronounced in the Open Court)
3. In an appeal filed by the Department, the following question was raised before the Hon’ble Madras High Court:-
“Whether the Tribunal would be justified in allowing the appeal at the instance of the assessee by taking a lenient view for a claim of adjustment only on the ground that the assessee has paid excess amount in advance, without going into the factual aspect in respect of a particular case?”
4. The Hon’ble High Court while disposing the Department’s appeal has observed as follows:-
“7. In that view of the matter, we are of the considered view that the CESTAT cannot set aside the order of the Commissioner only by holding that a lenient view had to be taken, without any supportive finding as to such decision. The lenient view may be possible depending upon the facts of each case and it cannot be a uniform rule to be applied in all cases. For that reason, the order of the CESTAT is liable to be set aside and the matter has to be remitted to the Tribunal for fresh consideration.”
“8. Accordingly, the substantial question of law raised in this appeal is answered in favour of the Revenue and the order of the CESTAT is set aside and the matter is remitted to CESTAT for fresh consideration. We make it clear that by disposal of this appeal, we have not expressed any opinion on merits and all contentions are left open for both the Revenue as well as the assessee to canvas before the Tribunal. The appeal is allowed.”
5. It is seen from the afore-cited observations of the Hon’ble High Court that it has not expressed any opinion on merits while observing that the lenient view may be possible depending upon the facts of each case and it cannot be a uniform rule to be applied in all cases. The facts of the present case are as follows:-
M/s. Tamilnadu Newsprint and Papers Ltd., a State Government undertaking, manufacturing Newsprint etc., registered itself under the Service Tax Law. Admittedly, they were not providing GTA service but they were the recipients of Goods Transport Agents Service. In respect of GTA services, the recipient is required to pay the service tax. For the months of March, 2005 and March, 2006, the appellants were required to pay the appropriate amount of service tax on the last day of March ie., on 31st March. They calculated the actual amount of service tax upto 30th March but for 31st March instead of actual amounts they calculated the average amount of tax and paid the same not to be in default. The appellant found that on both the occasions on 31st March, 2005 and on 31st March, 2006, they have over paid the service tax amounts than where actually due. In respect of over payment made on 31st March, 2005, and 31st March, 2006, the adjustments were made in April, 2005 and April, 2007 respectively. Against the proposed adjustment, the department took objection and issued a show cause notice to the appellants on 12.07.2006, but the case was dropped after adjudication by the jurisdictional Assistant Commissioner by an order No. 69/07 (ST) dated 15.08.2007, with the following observation:-
“6. Whereas it was argued by TNPL that in terms of Rule 6(3) of Service Tax Rules, 1994, they are eligible for adjustment of excess payment during the subsequent period. I find that TNPL happened to pay excess service tax on the closing date of the financial year, since they could not calculate the exact quantum of service tax payable. In order to avoid unnecessary short payment, they adopt the method of excess payment as a precautionary measure. As the Rule 6(3) payment provides for such adjustment, I find no fault from assessee side, especially for the reason that since the adjustment of tax was done for the category of Goods Transport Agency, there is no need to verify the passing-on of service charges as provided in Rule 6(3) of Service Tax Rules, 1994; for the payment is made by TNPL themselves on behalf the service provider in terms of Rule 2(1)(d)(v) of Service Tax Rules, 1994. In this regard I rely the decision of CESTAT in the case of M/s. Nirma Architect and Valuers Vs. CCE, Ghaziabad-2006(1) STR 305. As such the demand of service tax is not sustainable and subsequently there is no need to demand interest, or no penal proposals are sustainable. Accordingly, I pass the following order.”
“7. I drop further proceedings contemplated against M/s. TNPL, Pugalur in the notice dated 20.10.2006.”
6. The Ld. Advocate appearing for the appellants states that this order clearly states that as per Rule 6(3) of Service Tax Rules, 1994, the appellants were eligible for adjustment of excess payment during the subsequent period and hence there was no fault on the part of the assessee. She further states that this order dated 15.08.07, was not taken up for further appeal and the same attained finality. Subsequently, another proceeding was started in respect of the adjustment made towards excess payment made in March,2006 by a show cause notice dated 18.12.07, and the matter was again dropped by the jurisdictional Assistant Commissioner by his order dated 20.06.08. This order has been taken up in revision leading to the impugned order in Revision by the jurisdictional Commissioner who has held the adjustment to be not appropriate and has confirmed the demand as well as interest and has imposed various penalties under Sections 76, 77 and 78 of the Finance Act, 1994, leading to the present appeal.
7. The Ld. Advocate argues that once having issued the show cause notice on 12.10.06 and having dropped the matter, without filing any appeal against the same, the department was precluded from issuing another notice in respect of the same issue. Secondly, in the order dated 15.08.07, it was clearly held that the appellants were entitled to make adjustment of excess payment under Rule 6(3) of the Service Tax Rules, 1994. Since, this order was not appealed against or reversed, the subsequent adjustment made by the appellants in the month of April, 2007 cannot be called in question which was perfectly in terms of the said order. She argues that in fact when the said order was passed on 15.08.07, the jurisdictional Assistant Commissioner was fully aware of the adjustment made by the appellants in the month of April, 2007. She further states that the initial provision in the rules permit adjustment to be made in the subsequent period and that only with effect from 01.03.07, the provision was made under sub-rule 4(A) that such adjustment should be made in the succeeding month or quarter, as the case may be. The right to make adjustment accrued to the appellants in the month of March, 2006 itself when they made the excess payment and that time there was no stipulation that it should be adjusted in the succeeding month. She also relies on the decision of the CESTAT, Eastern Bench, Kolkata in the case of Narnolia Securities Pvt. Ltd. Vs. CST, Ranchi - 2008 (10) STR 619 (Tri.-Kolkata), where such adjustments have been allowed in respect of payments made in excess in December, 2004 for the month of February, 2005. She states that this decision of the Tribunal has been accepted by the department and no further appeal appears to have been filed by the department.
8. Heard the Ld. DR. He raises a preliminary objection that the appeal has been filed by a State Government undertaking but no clearance from the Committee on Disputes has been obtained. This preliminary objection is over-ruled as no such objection was raised in the appeal filed before the Hon’ble High Court of Madras by the department and subsequently it has now been ruled by the Hon’ble Supreme Court that there is no requirement for any appellant to obtain such a clearance from the Committee on Disputes.
9. He further states that the Order dated 15.08.07 was passed in respect of the show cause notice dated 12.10.06, when no adjustment was made for the excess payment made in the month of March, 2006. Hence, non-review of the said order cannot come in the way of the department from issuing another show cause notice and decide the matter afresh. This argument of the Ld. DR cannot be sustained in as much as the impugned order was issued on 15.08.07, by this time, the adjustment was made in the month of April, 2007 for the excess payment made in the month of March, 2006 and therefore, while passing the said order, the jurisdictional Assistant Commissioner was fully aware of the adjustments made. Further, he has specifically held that in terms of Rule 6(3) of the Service Tax Rules, 1994, the appellants were within their rights to make such adjustments. This order having attained finality, it was not open to the department to subsequently issue another show cause notice on 18.12.07, on an issue which was already covered by the earlier show cause notice dated 12.10.06. I also find the fact that there was a previous adjudication has not been disclosed to the Hon’ble High Court in the appeal filed by the department.
10. The Ld. DR further submits that Rule 6(3) is not applicable to the present case and further states that un-amended sub-rule 4(A) was not applicable in the case of the appellants and that sub-rule 4(A) has amended from 01.03.07 applies to the present case in terms of which adjustments can only be made in the subsequent months. He also states that the department was justified in issuing the second show cause notice as it came to know about the adjustments only when the returns were filed in October, 2007, for the period April to September, 2007. He also states that the sub-rule (4A) as amended from 01.03.07 has a monetary limit of Rs.50000/- under sub-rule (4B). He, therefore, supports the order in Revision passed by the jurisdictional Commissioner.
11. After hearing both sides and perusal of the cited rules, case laws and the various orders passed by the authorities below, I find that the appellants, a public sector unit, took extra care to be on the right side of the law by making extra deposits on the last day of the financial year, so that, they are not charged with payment of less tax than was due from them. Sub-rule (4A) before it was amended on 01.03.07, applied to service providers having centralized registration as rightly pointed out by the Ld. DR and it had no application in the case of the appellants. The subsequent sub-rule (4A) and (4B) came into force with effect from 01.03.07 and that cannot govern the rights of the appellants to make adjustments against excess payment which was made on 31.03.06. That right accrued to them under the Rule 6(3) of the Service Tax Rules, 1994. The said Rule had no stipulation that the adjustment should be made in the succeeding month or quarter. The expression used there under states that the adjustment can be made for service tax liability for the subsequent period. No doubt, the said sub-rule (3) had conditions regarding refund of value of taxable service not provided etc. but these conditions would apply to a service provider. The appellants in this case were not the service providers but were service recipients. Hence, in my considered view, while the main clause of Rule 6(3) permits the appellants to make adjustment of excess payments made earlier in the subsequent period, the conditions peculiar to the service providers cannot be made applicable in their case. Hence, I find that the orders dated 15.08.07 and 20.06.08 passed by the jurisdictional Assistant Commissioner are legal and proper in so far as he holds that the appellants were eligible to make adjustment against excess tax paid by them. The first order having not appealed against has also become final and on the very same issue, there is no scope for issuing a second show cause notice dated 18.12.07 by the department. The second show cause notice and the orders emanating from it including the impugned order in revision are not sustainable on that ground. Besides, a public sector assessee who has been extra careful to make excess payment to be on the right side of the law requires to be treated differently and the action by the jurisdictional Commissioner in not allowing the excess tax paid to be adjusted and imposing another tax burden of equal amount on them along with interest and heavy penalties under three different Sections of the law cannot be approved of. Accordingly, the impugned order is set aside and the appeal is allowed.