Period to issue Show Cause Notice raised from 12 month to 18 month-How to Calculate ?

[Sumeet Tholle]

Dear Sir,

W.e.f. 28/05/2012, time limit to issue SCN raised to 18 month from 12 month.

I have following query,

Final Statement recorded on 06/03/2012 & SCN issued on 06/07/2013 i.e. after 16 month from the date of recording of statement.

Is SCN time barred as when statement recorded, time limit to issue SCN was 12 month ?

Pl. Guide.

Thanks.

Sumeet C. Tholle, CA.

 

[Mahir S]

 

The time limit  from 12 to 18 monhts is extended only when the Service Tax case is not due to (i)  fraud, (ii) colusion, (iii) wilful statement, (iv) suppression of facts or (v) contravention of any provisions.

As statenent also recorded,  it appears the SCN is either due to all or any of the five points referred in above para and hence in such cases the period of calculation for demand and issue of SCN is 5 years and not 18 months,

Refer Section 73.

 

[NEERAJ KUMAR, RANCHI]

Dear Sir,

For calculating 18 month time take the date of issue of show cause notice and calculate 18 months backward. 

[Sumeet Tholle]

Dear Sir,

Thanks for your reply.

But my query is that on 06/03/2012, time to issue SCN was 12 months. So SCN to be issued on or before 05/03/2013.

i.e. within 12 month from the date of knowledge i.e. recording of final statement.

If statement recorded on or after 28/05/2012 then and only then period to issue SCN 18 months from the date of knowledge ?

Pl. reply.

Sumeet C. Tholle, CA.

[Mahir S]

There are 2 points to be discussed in your query.

First is the Relevant datefor issuance of SCN and second point is whether the initial period of 18 months is to be counted from 28.05.2012.

1) Regarding first point. let me make it clear that the date of issuance of SCN is never counted from the date of knowledge to the department or the date of recording of statement. It is counted from the RELEVANT DATE.

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

So based on above, calculate the 18 months time limit for issuance of SCN.

2) Regarding second issue, the time limit from 12 to 18 months was substituted vide Finance Act, 2012 dated 28.05.2012. Hence the period of 18 months is required to be calculated from the said date only. i.e. 28.05.2012.

In your case, the SCN issued on 06.07.2013. So, if the relevant date in your case starts from 07.01.2012 onwards (i.e. 18 months back from the date of issuance of SCN), then department is correct in issuing of SCN. 

Also let me asure u that department generally never issues time barred SCNs.

In your query. the relevant date is not mentioned, however, calculate the same at your end based on above situations. Even otherwise, the relevant date ought to have been discussed/mentioned in the SCN.

Following point may also be taken into consideration :

Generally, 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.

(The above are my own personal views based on the understanding of the topic.)

[NEERAJ KUMAR, RANCHI]

Dear Mr Sumeet,

I believe authorities are correct in issuing Show Cause Notice in your case. What was the period on 6.3.12 is not important. The period prevalent on the date of issue of show cause notice is important and by this aspect SCN issued seems to be in time even if suppression has not been considered. 

AI Summary

Limitation period for show cause notices is measured from the relevant date, with fraud exceptions extending the period. Limitation for issuing show cause notices is measured from the relevant date set out in the statute (for example, date of filing of return, last date for filing where none filed, date of payment, date of adjustment after provisional assessment, or date of erroneous refund). The statutory amendment extending the initial period takes effect from its commencement date; allegations of fraud, collusion, willful misstatement, suppression of facts or contravention trigger a longer multi year limitation for demand.