WAIVER OF SHOW CAUSE NOTICE ON PAYMENT OF SERVIE TAX WITH INTEREST

[Mr. M. GOVINDARAJAN]

The Central Excise Officers are empowered to issue show cause notice to the assessees for recovery of service tax not levied or paid or short levied or short paid or erroneously refunded under Sec. 73 of the Finance Act, 1994 ('Act' for short).  Sec. 73(1) provides that where any service has not been levied or paid or has been short levied or short paid or erroneously refunded, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short levied or short paid or the person to whom such tax refund has erroneously been made, requiring to show cause why he should not pay the amount specified in the notice.

Where any service tax has not been levied or paid or has been short levied or short paid or erroneously refunded by reason of-

·  fraud; or

·  collusion; or

·  willful misstatement; or

·  suppression of facts; or

·  contravention of any of the provisions or the rules made there under with intent to evade payment of service tax

the show cause notice may be issued by the Central Excise Officer within five years from the relevant date.

     In "Bhoruka Aluminium Ltd., V. Commissioner of Central Excise, Mysore" - 2008 -TMI - 3756 - CESTAT, BANGALORE the appellant paid certain commission to the foreign agents to procure export orders for their goods.   Since the commission was paid in foreign exchange, the appellants were under misconception that they were not liable to pay service tax.   However when the departmental authorities informed that they are liable to pay service tax, they immediately paid the service tax along with interest much before the issue of show cause notice.   The period involved in this case is from 9.7.2004 to 31.3.2006.   The show cause notice was issued on 09.10.2006.  The appellants invited the attention of the tribunal to Sec. 73(3) of the Act by which there was no need for issue of show cause notice in view of the discharging of service tax liability along with interest by the appellant, the moment the non payment was pointed out to them.  In spite of the provisions contained in Sec. 73(3) the lower authority apart from confirming the demands imposed a penalty under Sec. 78 of the Act which was strongly challenged by the appellants.   The Commissioner (Appeals) has also upheld the order of the lower authority holding that there was suppression of fact.

      The tribunal heard the arguments put forth by the both parties to the case.   The tribunal analyzed the provisions of Sec.73 (3) of the Act.   Sec. 73(3) provides that where any service tax has not been levied or paid or has been short levied or short paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertain thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under Sec. 73(1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under Sec. 73(1) in respect of the amount so paid.   The explanation to this Section provides for the removal of doubts, it is hereby declared that the interest under Sec.75 shall be payable on the amount paid by the person under this sub section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the Central Excise, but for this section.

      The tribunal held that it is not dispute that service tax along with interest had been paid on 30.08.2006 and 12.9.2006 but the show cause notice itself had been issued much latter only 9.10.2006, hence, the issue is squarely covered by Sec. 73 (3) of the Act and therefore, there would not have been any necessity even to issue the show cause notice.  This is also in consonance with the Board's Circular dated 03.10.2007.

    Similar to the provisions of Service tax, the Central Excise Act, 1944 also gives power to the Central Excise Officers to issue show cause notice.   Sec. 11A of Central Excise provides that when any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, whether or not such non levy or non payment or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty on or valuation of excisable goods under any other provisions of this Act or rules made there under, a Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short levied or short paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. The limitation period of issuing show cause notice is five years from the relevant date where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reason for fraud, collusion or any willful mi-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made there under with intent to evade payment of duty, by such person, or his agent.

        Further Sec. 11A(2B) provides that where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer before service of notice on him in respect of the duty and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not service any notice in respect of the duty so paid.

      The Commissioner of Central Excise, Madurai has now issued a trade notice No. 48/2008, dated 03.10.2008.  It provides that it is hereby brought to the notice of the assessees that they can make immediate payments of the Central Excise duty/service tax involved as soon as they receive the intimation from the Central Excise Officers determining the amount of duty/service tax involved under the provisions of Sec. 11A (2B) of Central Excise Act, 1944 and under the provisions of Sec. 73(3) of the Finance Act, 1994. It further  provides that show cause notice under Sec. 11A(1) of the Central Excise Act, 1944 and Sec. 73(1) of Finance Act, 1994 will not be served to the defaulters provided they made immediately payment of the duty involved along with interest.