The Hindu Business Line : Refund of excess service tax deposited

We forgot to claim Cenvat credit as our accountant was on leave for two months and as such we had paid about Rs 10 lakh as excess service tax in cash. Can we now claim the refund of the service tax paid in cash?

Ramesh Thapar

Though Cenvat credit, which is eligible to claim, cannot be refunded (unless it is an export), the excess service tax paid in cash can be taken back as refund. As per Service Tax Rules, the amount of excess service tax paid in cash can be adjusted against short payment of service tax for the same period of deposit as the whole amount of service tax paid for the period then will be equal to the amount to be paid.

The adjustment is tenable and the assessing officer (AO) cannot question it. If the assessee is not able to make such adjustment and goes on to pay the service tax resulting in excess payment, he would be entitled for refund.

When he seeks such refund, it would be a case of refund of excess service tax paid and not a refund of Cenvat credit not utilised. In CCE vs Bayer Diagnostics India Ltd (2007 11 STJ 57 Cestat, Ahmedabad), where the assessee due to ignorance or misunderstanding had not fully utilised the Cenvat credit available and paid 65 per cent of tax by way of cash and sought the refund, it was held that the excess amount of service tax paid in cash could be adjusted by short payment of service tax of the same period of return with total service tax liability remaining the same.

It was a clear case of excess payment of service tax when eligible credit was available to the assessee. As such, it can be said that excess payment of service tax paid in cash can be claimed as refund and the department will not have any legal and sustainable answer to reject the same.

Letting out space

As an authorised service station, we are engaged in sale and service of vehicles. We have provided a table space to one of the finance companies in our office since June 2005 for which we charge Rs 7,500 per month. Barring the letting out of space, we do not provide any other service. Would this result in rendering of any taxable service? The department wants to tax it under business auxiliary services?

Sampath Rao

Under Section 65(19) which defines business auxiliary services, the service should be rendered in relation to promotion or marketing for or on behalf of clients.

As per the query, the nature of activity undertaken is only receipt of rental consideration for the space provided to the finance company for its operations. The service station does not get any commission or consideration for marketing of products or services. The Finance Act, 2007 has introduced a new taxable service, viz., renting of property for commercial use, w.e.f. June 1, 2007. According to Section 65(90a) of Finance Act, 1994 (as amended ), renting of immovable property includes renting letting out, leasing , licensing or other similar arrangements of immovable property for use in course of or furtherance of business or commerce.

For a transaction to be called renting of immovable property, the following three tests must be satisfied:

the transaction should be renting, letting, leasing, licensing or any other similar arrangement;

it must be in relation to immovable property except specified exclusions; and

use of such immovable property should be in course of or furtherance of business or commerce.

In view of this, such leasing of table for commercial purpose shall be taxable under ‘renting of immovable property’ and not under ’business auxiliary service’. The service tax shall be leviable w.e.f. June 1, 2007, and not earlier. In Silicon Honda vs CCE (Appeals II), Bangalore (2007 11 STJ 107 Cestat, Bangalore), it has been held that payment received by assessees who was servicing motor vehicles, from financial institutions for lease of table space is not a taxable service under business auxiliary service.

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SANJIV AGRAWAL

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