Question25:

Please inform how service tax liability detected by Internal audit for the period 2015-16 may be debited from cenvat credit when return Trans 1 is not submitted yet now.

Answer:

As per section 142(7)( a) any liability relating to earlier regime is to be paid in cash and refund relating that period will be given in cash

But this will apply after the balance of the earlier ITC(cenvat) account is taken in Trans  1,which in your case is pending so there is scope of adjustment

You should file a revised return for the month of June  2017 which may not be permitted 

Now you have to take decision taking following points in mind

If the demand is big and you have heavy balance in ITC and as per pattern of the tax involved you can not use ITC and also cannot take refund of unutilized ITC like in case of textile and railway parts  then adjust the ITC  and take less balance in Trans 1 in this case you may have to go for legal fight because the opening balance is changed without changing in balance of Cenvat account(as per excise records)

But in case you can use your ITC which is more possible then don't go for litigation simply deposit the demand in cash because it is only interest cost to you to deposit tax and use your ITC at   latter stage but at the cost of interest you can avoid litigation.

So take decision as per the cost and benefit analysis (Reply Dt. 26/12/2017)