Demand and Recovery - Service Tax Practice Manual / Ready Reckoner - Service Tax

Demand and Recovery A. Demand / Recovery Section 73 B. Time Limit C. Relevant Date - 73(6) D. SCN - Date of issue versus Date of Serve E. Power to issue Show Cause Notice F. When SCN is not to be issued - Suo moto payment of service tax - 73(3) G. [When SCN is not to be issued - Payment of service tax on detection - 73(4A) ] ( Omitted vide THE FINANCE ACT, 2015 w.e.f. 14th May 2015 ) H. Recovery through Alternative mode - Section 87 ================== A. Demand / Recovery Section 73 Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the central excise officer can initiate the recovery proceedings. Therefore in the following circumstances recovery proceedings can be initiated: - - Service tax has not been levied or short levied - Service tax has not been paid or short paid - Service Tax erroneously refunded No recovery proceeding can be initiated without issuing a show cause notice (SCN). Subsequent show cause notices on similar grounds may contain only a statement. One important provision has been introduced vide Finance Act, 2015, w.e.f. 14-5-2015 that in case service tax has been self assessed in the return furnished but not paid or short paid then recovery can be made with out issuing any SCN by any modes specified in section 87. It means no bar of limitation / time limit is applicable in those cases. Show cause notice (SCN) must be specific and an opportunity must be provided to the assessee before confirming any demand. No show cause notice can be issued beyond the prescribed time limit from the relevant date. ================== B. Time Limit Section 73(1) prescribes the time limit for issuance of show cause notice as: - Situation Time-limit Where short levy, non-levy, short payment, non-payment or erroneous refund of service tax due to: - (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax. [Known as extended period of limitation] Five years from the relevant date Where short levy, non-levy, short payment, non-payment or erroneous refund of service tax due to: - Any other reason [i.e. Known as Normal period of limitation] Thirty Months from the relevant date. (Prior to 14-5-2016, it was18 months from the relevant date and Prior to 27-5-2012 it was 12 months from the relevant date) ================== C. Relevant Date - 73(6) Section 73(6), prescribes the term relevant date as,- Situation Relevant Date Where return was required to be filed and so filed The date on which return has been filed. Where return was required to be filed but no return filed The last date on which such return is to be filed In any other case Date of payment of Service Tax Where service tax is provisionally assessed The date of adjustment of the service tax after the final assessment Where any sum, relating to service tax, has erroneously been refunded Date of such refund ================== D. SCN - Date of issue versus Date of Serve For the purpose of section 73 and recover of service tax, show cause notice must be served to the person within the stipulated time period. Date of issuance of show cause notice is taken for calculation for the purpose of calculating the limitation of period. Instead, the date on which the notice has been received by the person shall be taken to calculate the period. Suppose a Show Cause notice is received by Mr. X alleging short payment of Service Tax for an amount of ₹ 5,00,000 dated 30-11-2005 due to fraud covering the period from 1 st January 2000 to 30 th April 2003. The show cause notice was received by Mr. X only on 28-4-2006. In this case, the amount demanded in the show cause notice beyond five years from 28-4-2001 is not valid as beyond the time limit. ================== E. Power to issue Show Cause Notice Show cause notice which has been issued without authority is null and void. Notification no. 30/2005 ST dated 10.8.2005 as amended by notification no. 48/2010 ST dated 8-9-2010 issued u/s 83A No Central Excise Officer Amount of service tax or CENVAT credit specified in a notice for the purpose of adjudication (1) (2) (3) (1). Superintendent of Central Excise Not exceeding ₹ 1 lakh (excluding the cases relating to taxability of services or valuation of services and cases involving extended period of limitation.) (2). Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise Not exceeding ₹ 5 lakhs (except cases where Superintendents are empowered to adjudicate.) (3). Joint Commissioner of Central Excise Above ₹ 5 lakhs but not exceeding ₹ 50 lakhs (4). Additional Commissioner of Central Excise Above ₹ 20 lakhs but not exceeding ₹ 50 lakhs (5). Principal Chief Commissioner / Chief Commissioner / Commissioner of Central Excise Without limit. ================== F. When SCN is not to be issued - Suo moto payment of service tax Section 73(3) When the assessees before issuance of show cause notice: - - The assessee shall on the basis of his own assessment or on the basis of tax ascertained by a Central Excise Officer - Pays the amount of service tax with interest - Inform the Central Excise Officer of such payment in writing, - Central Excise office shall not issue any show cause notice in respect of the amount so paid: However, there may be some chances that the person even after own ascertainment or ascertained by the Central Excise officer, pays short amount then actually required. In such situation, it has been provided that, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section. In such circumstances, the period of Thirty months or Five Years shall be counted from the date of receipt of such information of payment. No penalty under any provisions of the act or the rules shall be imposed on above Service tax payment with interest. However, no person can escape from show cause notice if: - Section 63(4) provides that show cause notice shall be issued even if the assessee makes the payment before issuance of show cause 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- (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax. ================== G. [When SCN is not to be issued - payment of service tax on detection Section 73(4A)] ( Omitted vide THE FINANCE ACT, 2015 w.e.f. 14th May 2015 ) ================== H. Recovery through Alternative mode - Section 87 Where any amount payable by a person to the credit of the Central Government under any of the provisions of this Chapter or of the rules made thereunder is not paid, the Central Excise Officer shall proceed to recover the amount by one or more of the modes mentioned below:- Adjustment with the amount payable by the department Clause (a) provides that the Central Excise Officer may deduct or may require any other Central Excise Officer or any officer of customs to deduct the amount so payable from any money owing to such person which may be under the control of the said Central Excise Officer or any officer of customs; Recovery from Third Party - Garnishee Proceedings Clause (b) provides that the Central Excise Officer may, by notice in writing, require any other person from whom money is due or may become due to such person, or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central Government either forthwith upon the money becoming due or being held or at or within the time specified in the notice, not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount; It further provided that, every person to whom a notice is issued under this section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary; In a case where the person to whom a notice under this section is sent, fails to make the payment in pursuance thereof to the Central Government, he shall be deemed to be an assessee in default in respect of the amount specified in the notice and all the consequences of this Chapter shall follow; Detaining any movable or immovable property Clause (c) that the Central Excise Officer may, on an authorisation by the Commissioner of Central Excise, in accordance with the rules made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus amount, if any, to such person; It further provided that the person from whom the service tax or any other sum of any kind, is recoverable, will not transfer or otherwise disposes of his business or trade in whole or part or effects any changes in ownership thereof. In case of any such event, all goods in the custody or possession of the person so succeeding may also be attached sold. Also see: 196/06/2016-ST - 27-7-2016 Recovery as an arrear of land revenue Clause (d) provides that the Central Excise Officer may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business and the said Collector, on receipt of such certificate, shall proceed to recover from such person the amount specified thereunder as if it were an arrear of land revenue.