Provisional Assessment - Service Tax Practice Manual / Ready Reckoner - Service Tax

Provisional Assessment A. What is provisional assessment? B. Provisional Assessment - Procedure C. Provisional Assessment - Finalization D. Consequences of finalization of provisional assessment ================ A. What is provisional assessment? Rule 6(4), (5) (6) of service tax rules, 1994 There may be certain circumstances in which assessee would like to opt for provisional assessment till availability of complete information or documents as the case may be. Circumstance in which provisional assessment may be opted Where an assessee is, for any reason, unable to correctly estimate, on the date of deposit, the actual amount payable for any particular month or quarter, as the case may be. ================ B. Provisional Assessment - Procedure Application to be made - Rule 6(4) Assess may make a request in writing to the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, giving reasons for payment of service tax on provisional basis. Permission for provisional assessment Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, on receipt of such request, may allow payment of service tax on provisional basis on such value of taxable service as may be specified by him. Applicability of Provisions of Central Excise Rules, 2002 The provisions of the Central Excise Rules, 2002 , (= rule 7 ) relating to provisional assessment, except so far as they relate to execution of bond, shall, so far as may be, apply to such assessment. (Note: in the rule 6(4) Central Excise (No. 2) Rules, 2001 is mentioned; however these rules have been replaced by Central Excise Rules, 2002 ) No Need to execute bond It is specifically mentioned that there is no requirement of execution of bond (PD Bond) for provisional assessment. Submission of ST-3A return - Rule 6(5) Where an assessee under sub-rule 4 requests for a provisional assessment he shall file a statement giving details of the difference between the service tax deposited and the service lax liable to be paid for each month in a memorandum in Form ST-3A accompanying the quarterly or half yearly return, as the case may be. ================ C. Provisional Assessment - Finalization Finalization of Provisional Assessment - Rule 6(6) Where the assessee submits a memorandum in Form ST-3A under sub-rule (5), it shall be lawful for the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, as the case may be, to complete the assessment, wherever he deems it necessary, after calling such further documents or records as he may consider necessary and proper in the circumstances of the case. Whether there is any time limit for finalization of Provisional Assessment Rule 7(3) of Central Excise Rules, 2002 as extended to these rules by rule 6(4) Yes, there is a time limit of finalization of provisional assessment and this time limit is six months. The Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise as the case may be, shall pass order for final assessment as soon as may be, after the relevant information, as may be required for finalizing the assessment, is available, but within a period not exceeding six months from the date of the communication of the order issued. Therefore the provisional assessment must be finalized within 6 months. However, this limit of six months can be extended for a further period upto 6 months by the commissioner of Central Excise. This period may, further, be extended by the Chief Commissioner of Central Excise for such further period as he deem fit. ================ D. Consequences of finalization of provisional assessment Payment of Additional Tax Upon final assessment, where the assessee is found as liable to pay additional tax, than he shall pay the same shall be paid by the assessee and the provisions of recovery of tax would be applicable from the date of finalization of provisional assessment. Payment of Interest on additional tax Where the assessee is liable to deposit additional tax on the basis of finalization of provisional assessment, he shall be liable to pay interest at rate of as specified under section 11AA of Central Excise Act, 1944 . Such interest shall be paid for the period starting from the first day of the month succeeding the month for which such amount is determined, till the date of payment of thereof. Refund consequent to finalization of provisional assessment Upon finalization of provisional assessment, the assessee may be found as entitled to get refund from the department. Such refund shall be granted to him along with interest. Refund is not automatic: The assessee is required to file a refund application stating therein with appropriate proof that he has not passed the burden of such tax on the other person. The provisions of unjust enrichment are applicable in case of refund which is due to the assessee. If the assessee is unable to satisfy that he has not passed the burden on another person than such amount of refund shall be credited to consumer welfare fund instead of paid to the applicant. Refund application shall be made within one year from the date of finalization of assessment. Interest on Refund Interest at the rate specified under section 11BB of the Central Excise Act, 1944 . Interest shall be payable from the date immediately after the expiry of three months from the date of receipt of such application till the date of refund of such duty.