Small omission- Big Impact Or Extended period of limitation extended Or Extension by way of omission in “Relevant Date”

[Pradeep Jain]

There has been an amendment in Explanation 1 to section 11A pertaining to Relevant date as follows:-

Explanation 1.- For the purposes of this section and section 11AC, -

(b) “relevant date” means,-

(ii) in the case of excisable goods on which duty of excise has not been levied or paid or has been short-levied or short-paid and the return has been filed on due date, the date on which such return has been filed;

Impact of the omission:- The relevant date for the purpose of computing the time limit for issuing show cause notice is specified in the Explanation no. 1 for different situations. The clause (i) of the Explanation states that in case where no excise return has been filed by the assessee, the relevant date would be the last date on which such return has been filed. The Clause (ii) of the Explanation states that in case where return has been filed on due date, the relevant date will be the date on which such return has been filed. Now, with this Budget, the phrase “on due date” has been omitted which has the following implication:-

Earlier, the law stated that if return has been filed on due date, the relevant date will be the date on which such return has been filed thereby meaning that if the return was filed either before or upto the due date of filing return, then only, the relevant date will be the date of filing of return. The reason for above interpretation is that if the language is interpreted literally, there will be no difference in the clause (i) and (ii) because if return is filed on due date, then the date of filing of return will be the due date of return and consequently, the relevant date will be the due date of return which is same as clause (i) thereby making the clause (ii) as redundant. Accordingly, the limitation period would commence from the date of filing of return, only if the return has been filed by the assessee upto due date. If the return has been filed after the due date, the assessee would be covered by the provision of clause (iii) wherein it was stated that in any other case, the relevant date will be the date on which duty of excise is required to be paid under this Act or the Rules made thereunder. Consequently, the computation of time limit for issuing show cause notice was the date of return filing if the return was filed upto due date and if the return was filed after due date, the date on which excise duty was required to be paid.

However, now, the phrase “on due date” has been omitted thereby meaning that from the enactment of the Finance Bill, 2015, as per amended section 11A, the relevant date in case where return has been filed will be the date of filing of return, irrespective of the fact that the return has been filed after the due date of filing the return. The consequence of this would be that the limitation period available to the revenue authorities has been increased. Now, if the assessee has filed return belatedly, after a period of 2 years from the due date, then the time limit to issue show cause notice available to the revenue authorities will be 5 years from the date of filing return. Hence, the department has been given the benefit of additional 2 years of delay in filing the return by the assessee. Under the erstwhile provision, the revenue department could issue show cause notice latest by 5 years from the due date of filing return or the due date of payment of excise duty. However, henceforth, the revenue department will get the enhanced time limit in case of delay in filing the return by the assessee beyond the due date.

So, the assessees are advised not to file returns at all in tax evasion cases as the revenue authorities have been granted the tool for extending the “extended period of limitation”.

Discussions to this article

[CA. Surender Gupta]

Dear Pradeep Ji

I do agree with the views expressed by you. The intention of the law makers are very much clear. The concept of "on due date", where return has been filed, is not existing in Service Tax under section 73(6).

After reading your article, I got remember one case in which, It was the contention of the appellant that the demand is time barred inasmuch as the show-cause notice for the short levy/non-levy has been made vide Notice dated 15.6.2007 for the period from July 2003 onwards.

But, tribunal confirmed the demand holding the same is within the normal period of limitation by stating that, " Only from the returns filed in October 2006, the Revenue came to know about the activity under taken by the appellant. The show-cause notice was issued in June 2007, well within the normal period of one year, from the date of filing returns and, therefore, the demand for the period with effect from 16.6.2005 is clearly sustainable in law and we hold accordingly."

Therefore, one must be aware of the consequences before filing belated return.

See:- JET AIRWAYS (INDIA) LTD. Versus CCE, THANE-II - 2014 (4) TMI 324 - CESTAT MUMBAI