PRODUCTION OF RECORDS UNDER SERVICE TAX

[Dr. Sanjiv Agarwal]

Freedom has been given to the assessee under service tax provisions to maintain their own set of records but however to show the required particulars for taxation purposes.

It should be remembered that —

•      Invoices should be made clearly indicating goods or service portion separately

•      The permissible deductions can be availed on the Invoice value before paying service tax

•      Where goods and service portion cannot be separated, abatement facility, if any, should be made use of

•      It is better to make separate invoices for exempted and taxable services separately with separate serial numbers.

 

Production of Records

It may be noted that the books of accounts and other relevant records would also include records like annual report, balance sheet, cost audit report, copies of returns, detailed financial accounts etc. Assessees are under obligation to produce the records before the 'Department. Under Rule 173(G)(i) and (ii), there is a specific provision for production of such records to the audit parties of the comptroller and Auditor General of India and to the Central Excise Officers.

The assessees can not take the plea that these are still under preparation even beyond six months period from the date of the financial year and/or the same are lying with their chartered accountants. These contentions may not be legally tenable. In case of corporate bodies, annual accounts are generally required to be finalised within six months from the close of the financial year. In case of other assessees like individuals and firms, though no time limit has been prescribed under any statute, balance sheet and profit and loss account is required to be filed alongwith the Income Tax returns by the specified dates under the Income Tax Act, 1961.

There would generally, be no valid reason for non-finalisation or preparation of accounts beyond the  due date for submission of income tax returns.

Section 209 of the companies Act, 1956 provides that every company is required to keep proper books of accounts at its registered office. In case the same are kept at any other place, intimation thereof should be given to the Registrar of Companies within seven days. Under section 146 of the companies Act, the company shall declare one of its office as its registered office soon after it commences business or obtains the certificate of incorporation, whichever is earlier. If it is contended that the records are lying at the chartered accountant's office, his office can be treated as the registered office where the books of accounts have been kept.

The assessees can, pending finalisation of their annual accounts, produce interim, unaudited or provisional accounts to the visiting officers or audit team.

Rule 5(3) makes it obligatory for an assessee to preserve records at least for a period of five years from the close of relevant financial year. As per Rule 5(4), these records are also required to be made available to Central Excise Officer for inspection or examination at its registered premises.

Following is an illustrative list of records which may be asked for —

·  General ledger                                     -           Journal vouchers

·   journal and vouchers                           -           Costing record and cost audit reports

·   Debtors/Creditors ledger                      -           Interim accounts

·   Stock verification reports                     -           Purchase/Sales ledger

·    Sales tax/VAT returns                         -           Purchase/sales day book

·    Income Tax returns                              -           Cash/bank books

·    Cash / bank books                               -           Statutory audit reports

·     Debit/ credit notes                                -           Debt/ Credit Notes

·     Reconciliation statements                    -           other subsidiary records

·     internal audit reports                            -

According to Rule 5A of Service Tax Rules, 1994, inserted by Notification No. 45/2007-ST dated 28.12.2007, following records are required to be made available to audit party deputed by Commissioner or audit team of Comptroller and Auditor General of India, within a reasonable time not exceeding 15 working days from the day when such demand was made or such extended period, if any —

(i)    all the records prepared or maintained by the assessee for accounting of transactions in regard to, —

(a)   providing of any service, whether taxable or exempted;

(b)   receipt of procurement of input services and payment for such input services;

(c)   receipt, purchase, manufacture, storage, sale, or delivery, as the case may be, in regard of inputs and capital goods;

(d)   other activities, such as manufacture and sale of goods, if any.

(ii)   all other financial records maintained by in the normal course of business.

(iii)  trial balance or its equivalent; and

(iv)  the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961,

for the scrutiny of the officer or audit party, as the case may be.

Visits by Department officers to the premises of service tax Assessees

Central excise officers are empowered to pay visits to the premises of the assessees. Such visits shall be subject to the following rules:

(i)    All visit to the premises of service tax assessees will be made by control excise officers only after giving a notice in writing explaining therein the purpose of such visit.

(ii)   The officers will clearly indicate the documents which may be required by them during their visits.

(iii)  No such visits will be made without giving a clear notice of 15 days to the assessee.

(iv)  Such visits will be made only with the prior approval of the commissioner.

The above guidelines would not apply to cases where the department has in its possession or has received any specific information/intelligence regarding evasion of service tax or contravention of law by an assessee. In such cases, the process of law will be followed and action will be taken accordingly.

Rule 5A of Service Tax Rules, 1994 commissioner or audit team of comptroller and Auditor General of India can also visit the assessee for audit purposes

 

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