Correct interpretation of limitation service tax

[Guest]

As per Section 73 of Finance Act there is normal limitation of one year and extended limitation of five years (In case of suppression of fact or fraud etc.) In case of short paid duty or erroneous refund Revenue is required to serve notice on assesse within limitation period from relevant date otherwise the case is time barred. Relevant date is further explained in sub-section (3) as date on which information regarding payment is received by revenue. and in sub-section 6 as (a) date of filing return (b) date on which return is required to be filed or (c) In all other cases date of payment of duty. However there appears to be effort from revenue to interpret the provision in such manner  that one year can be extended to 18 months and 5 years can be extended to 5 years and six months. Here is how it is done  Say the Assessee  files six monthly return for period April 05 to Sept 05 on 25 Oct 05. Revenue issues show cause notice for short payment on 24 Oct 2006. Now since the period of payment shown in the return is from April 05 therefore Revenue is demanding duty for period which is 18 months ago. Similarly if allegation of suppression of fact etc is there they may even demand duty for Apr 01 onwards as the return for period Apr 01 to Sep 01 is filed on 25 Oct 2001. Is it not a mockery of limitation which is laid down in Section 73 which is provision of Act by overriding it with interpretation of word 'relevant date'  as frequency of filing return is administrative provision made in rule 6 which is subordinate to Main Act. Tomorrow if return is prescribed for one year the limitation will become 2 years and 6 years automatically. Has any one filed case so far against this? beyond limitation of one year.

[Madhukar N Hiregange]

The IDT law in India is a mockery of democratic principles. The VAT laws are even worse. The IDT is a tax which is to be collected form the customer and therefore initially the period allowed was 6 motnhs. The collectors increased ti to 1 year and now 18 months.

Please see when the SCN is received as the receipt date is more relevant than the issue date. back dated SCNs are issued regularly. If proof not available write to post office and get the exact date.

AI Summary

Relevant date interpretation extends service tax limitation beyond statutory timeline, raising challenges to statutory limitation's intent. Revenue treats the return period shown in periodic service tax returns as the relevant date, causing show cause notices to reach back beyond the statutory normal and extended limitation periods; this administrative reliance on filing frequency effectively lengthens limitation exposure and can be contested by emphasizing the SCN receipt date and seeking postal proof to challenge backdating.