Ministry : Ministry of Finance

Department/Board : Central Board of Indirect Taxes and Customs

Instruction No. : CBIC-240137/20/2022-SERVICE TAX SECTION-CBEC

Date : 21.03.2023


1. Pr. Chief Commissioner/Chief Commissioner, CGST & CX (All)

2. Pr. DG/DG (All), DGGI

3. Pr. Commissioner/Commissioner, CGST&CX (All)



Payment of Service Tax by Department of Posts and Ministry of Railways by way of book adjustment

Please refer to above subject.

As you are aware, Board had earlier noted that the practice of payment of Service tax by way of book adjustment adopted by the Department of Posts and the Ministry of Railways was leading to incorrect accounting and reporting as the tax payments could not be reconciled by the field units of CBIC. Book adjustment practice was also unable to provide a service wise, jurisdiction wise segregation of Service tax dues and was posing difficulties in conduct of audit.

2. Accordingly, the then Member (ST) vide DO letter F. No. 137/08/2013-Service Tax dated 21.04.2014 informed the Department of Posts and Ministry of Railways that the practice of payment of Service tax by way of book adjustment by both Ministries is contrary to the provisions of Finance Act, 1994 and Service Tax Rules and also to the Government Accounting Rules, 1990. Accordingly, it was requested to adhere to provisions of the Finance Act, 1994 by paying duty/tax electronically through the NSDL portal or ACES portal. The Controller General of Accounts was also requested to render necessary assistance to the Department of Post and Ministry of Railways for aligning their payment procedure accordingly.

3. Consequent to this and even prior to that, certain field formations under CBIC had raised objections to above practice of tax payment and have issued show cause notices demanding duty/tax, otherwise paid by way of book adjustment. Board has also noted that there are different practices in field in accepting book adjustment as a valid mode of payment. The show cause notices issued to demand the Service Tax/Central Excise duty by some field formations are at different levels of adjudication. A reference in this regard has also been received from the Ministry of Railways in which the demands have been confirmed.

4. Board has examined the issue. While there has been no change in the legal position of the method of duty payment, Board has taken note of the difficulties in reversal of book entries of the Service Tax paid by way of book adjustment and re-payment through ACES/NSDL, as the Government accounts for legacy period are already finalised and laid in the Parliament. Board has also noted that it may not be appropriate to demand the duty once paid by book adjustment again and accordingly, Board has felt the necessity of reducing avoidable litigation where the only issue of contention is mode of payment of the tax/duty. Further, the issue is of non-recurring nature as in the GST regime, the tax is being paid through the Common Portal.

5. Reference is also invited to the order of Hon'ble CESTAT, Kolkata in the matter of FA & CAO, ECR Hajipur Vs. Pr. Commissioner, Patna-II, Commissionerate {Final order number 75629/2021 dated 30.07.2021 in ST Appeal No. ST/75076/2020-DB} wherein the O-i-O confirming demand of duty paid by way of book adjustment has been set aside and the matter has been remanded back for the limited purpose of reconciliation of demand and payment made through book adjustment. The remand directions include that "in the sold remand proceedings, the authorities shall verify with regard to the quantification and supporting documents." On similar lines, a few other judgments have also been passed by Tribunal.

6. Considering the above position in totality with a view to reduce litigation, Board directs that in all cases pending adjudication in respect of Department of Posts and Ministry of Railways, where the duty/tax has been demanded only on account of the fact that amount due as tax/duty has not been paid as per the procedure laid down but by book adjustment, the adjudicating authority may focus on the reconciliation of duty/tax paid by book adjustment. The noticees may for this purpose, submit the reconciliation statement of duty/tax liability and the payment proof in appropriate head and account pertaining to the demand to the satisfaction of the adjudicating authority. A certificate to this effect from O/o CGA may also be provided by the noticees.

7. Board desires that pending adjudications in respect of legacy cases on this account may be disposed of expeditiously in the light of above instructions. Difficulties, if any, in implementing the above instructions may be brought to the notice of the Board.

8. Hindi version will follow.

Yours faithfully,

(Varun Kumar Singh)

Under Secretary to Government of India