Service Tax collected but not deposited-SCN issued but wrong classification

[Sumeet Tholle]

Dear Sir,

My client registered with Service Tax department under Erection, Installation Service and collected Service Tax.

But since last 7 years he has not deposited Service Tax and not filed returns also.

Now, department issued SCN for recovery of Tax for 7 years and imposed penalties also. But department issued SCN under " Manpower Supply Service".

Our activity no where related with manpower.

Now my question is

1. Can department issue SCN for 7 years ?

2. Is SCN valid as classification is not correct ?

Again Pl. note, My client collected Service Tax but not paid.

Pl. reply.

Pl. quote case laws also.

Thanks.

Sumeet C. Tholle,

CA,

Aurangabad.

AI Summary

Unpaid collected service tax exposes the collector to recovery, penalties and enforcement despite classification disputes.
Collecting service tax without depositing it exposes the provider to recovery, penalties and prosecution; limitation for issuing demands is governed by statute and may restrict the period for which a show cause notice can be issued. Misclassification in a show cause notice affects the legal basis of the demand: it may be a substantive flaw that nullifies the notice if the service is not taxable under the alleged category, or it may be corrected by departmental corrigendum or statutory rectification before adjudication. Despite technical defences, retention of collected tax raises unjust enrichment concerns, and prompt compliance or use of settlement mechanisms is advised to limit exposure.