Time limitation Service tax SCN

[Asked by Guest]

Dear Sir,I have following query:My Statement recorded on 20/11/2012. I submitted all the documents as asked by Service Tax authorities. They issued SCN on 07/04/2015 i.e. after 27 months from the date of recording of statement for the recovery of tax against services provided by me during FY 2009-10.Is SCN time barred ?Please Guide.Thanksand regards.Vijesh Jaiswal

[DR.MARIAPPAN GOVINDARAJAN]

The time limit for issue for show cause notice is 18 months from the relevant date. If there is fraud, misrepresentation involved the time limit is extended to 5 years. The demand details for the period shown in the show cause notice may be informed so as to reply your query whether SCN is issued within the time limit or not.

[Rajagopalan Ranganathan]

Sir,

If fraud, willful misstatement, suppression of facts with intent to evade payment of service tax etc; is not invoked then the SCN has to be issued within 18 months from the date of knowledge of the department of the violations committed by the tax payer.

If fraud, willful misstatement, suppression of facts with intent to evade payment of service tax etc is invoked then the SCN has to be issued within 5 years from the date of knowledge of the department of the violations committed by the tax payer.

In your case date of knowledge of the department is to be reckoned from 20.11.2012, the date on which you statement was recorded.

After 20.11.2012 the department cannot invoke suppression of fact for issuing SCN invoking the extended period of five years. for the period after 20.11.2012 the department has to issue SCN within 18 months.

Dear Sir,

Thanks for the replies. A letter for investigation was served to me on date 12/09/2012 for a work contract I executed during FY 2009-10. Subsequently my statement recorded on date 20/11/2012. I submitted all the related documents as asked by authorities.

After my statement on date 20/11/2012, they sent me letters and asked details of FY 2012-13 and FY 2013-14 on dates 10/03/2014 and on date 27/11/2014 respectively.

I replied their both letters and supplied all documents well within stipulated period.

The authorities could not establish any disparity between statement-documents submitted by me and the information they had about my profile.

Now on 07/04/2012, ST authorities served me the SCN against the same particular work contract I had executed during FY 2009-10.

Kindly advice me in view of above circumstances.

Thanks for the precious time spent by both of you for replying my query.

Vijesh Jaiswal

[MUKUND THAKKAR]

Sir,

you had done any communication with the service tax dept regarding to your liability of service tax on works contract? if yes than 18 months period is counting for issue SCN. if no than dept will considering the period of 5 years...

[Rajagopalan Ranganathan]

Sir,

Normally no time limit is stipulated in finance Act, 1994 or Service Tax Rules, 1994 for issuing show cause notice. Some High Courts have held that the SCN should be issued as soon as possible on completion of investigation. Since there is no hard and fast rules for issue of SCN the Department will take its own time to issue the SCN. As far my knowledge goes in one case the department took ten years to issue SCN but the same was set aside by the court on the ground of latches. However demand can be made as already indicated by me.

[SR AGRAWAL]

In the circumstances, the department must have necessarily alleged Fraud, Collusion, Willful Misstatement or suppression of facts or violation of provisions of law with intent to evade payment of Service Tax.

"Relevant Date" has been defined in Section 73 of the Finance Act, 1994 it self. There is no provision relating to date of Knowledge in the Act or Rules. The ld. Experts who have opined about the date of knowledge may have expressed their opinion based on certain decisions by Courts, but there are contradictory decisions on this point.

As per definition of "Relevant date" SCN is to be served either within 18 Months or within 5 years, as the case may be, from the date of filing of ST-3 return or if no such return has been filed, the last date of filing of such return. The date of filing of ST-3 return from April to Sep'09 was 25th October. Thus the demand for this period is in any case time-barred. Regarding the rest of the demand, it will depend on the facts involved.

Regards,

S R AGRAWAL.

AI Summary

Time-bar for service tax SCN: 18 months generally, extended to five years for fraud or suppression.
Service tax SCNs are governed by the relevant date: generally an 18 month limitation, extended to five years where fraud, willful misstatement or suppression of facts is alleged. The key issues are whether the department's "knowledge" is to be fixed at the date of recorded statement or at the return filing deadline, whether the five year exception has been invoked, and whether any particular period falls outside the limitation window; courts have on occasion set aside late SCNs on laches grounds.