CESTAT Allows Adjustment of ₹22.37 Lakh Excess Service Tax
In a significant relief to taxpayers, the Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has allowed adjustment and refund of ₹22.37 lakh excess service tax paid by Eastern India Enterprise. The tribunal also set aside the penalty imposed under Section 78 of the Finance Act, 1994.
This ruling offers a fresh interpretation of procedural compliance under erstwhile service tax laws, especially regarding adjustment of excess tax paid and penalty waiver due to bonafide conduct.
Case Summary: Key Facts
- Assessee: Eastern India Enterprise
- Period of Dispute: Pre-GST era (Service Tax regime)
- Amount Involved: ₹22.37 lakh excess service tax
- Department’s Stand: Rejected adjustment and imposed penalty under Section 78
- Tribunal Verdict: Allowed adjustment and refund; penalty waived
Why This Matters for Indian Taxpayers
Many service providers had overpaid or wrongly deposited service tax before the rollout of GST in July 2017. This ruling clarifies two important points:
- Adjustment is valid under Rule 6(3) of the Service Tax Rules, 1994, even without pre-intimation, if there is no revenue loss.
Legal Angle: Relevant Provisions
- Rule 6(3), Service Tax Rules, 1994: Allows adjustment of excess service tax if no unjust enrichment and payment made in good faith.
- Section 78, Finance Act, 1994: Penalty for suppression of facts or wilful misstatement.
CESTAT held that Eastern India Enterprise’s case involved a bonafide transaction error — not fraud or suppression.
Citation: [Final Order No. 75231/2024, CESTAT Kolkata]
What Taxpayers Should Learn
- If you’ve overpaid service tax (or any legacy tax), check if adjustment under the old rules is possible.
- Penalties can be challenged and waived if you can demonstrate intent was bonafide.
- Keep invoices, bank challans, and communication trails intact – they help during appeals.
Expert Insight
“This is a welcome precedent. It reaffirms that tax compliance isn’t about punishment but about intent. Businesses must document overpayments clearly to defend their case,” says a GST consultant based in Kolkata.
Summary
CESTAT Kolkata allows ₹22.37 lakh service tax refund to Eastern India Enterprise, holding that bonafide errors in tax billing can be adjusted. Penalty under Section 78 set aside.
FAQs
Q1. Can excess service tax be adjusted now, post-GST?
A: Yes, if the issue pertains to the pre-GST period and supported by evidence, adjustment/refund claims can still be pursued under transitional provisions.
Q2. Is penalty under Section 78 automatic?
A: No. Penalty requires intent to evade tax.
Q3. What documents help in claiming such refunds?
A: Copies of invoices, challans, service agreements, and a detailed computation of excess tax paid.
Final Take
This ruling strengthens the taxpayer’s hand when facing legacy tax issues. If you’ve paid more than what was due in the service tax era, don’t write it off. Efiletax can help you assess, document, and pursue valid claims and appeals.