notice to submit general requirements for unearthing tax evasion by comparing the income tax and excise records.

[Himanshu Gupta]

Recently excise department has issued notices to all local units of cloth dying sector with above mentioned subject, calling for b/s, P&L, cenvat ledgers, return copies and many other things.

But no relevant sections are quoted under which this power is used. And as per the provisions recently amended, dept. cant raise any query for period older than 30 months.

so i just wanted a clarification whether i can use this provision to provide details only for last 30 months and not older than that?

Thanx for sparing time to read this and providing your valuable opinion.

[KASTURI SETHI]

Under Section 14 of Central Excise Act as made applicable to Service Tax law, the department can summon and call for any record for scrutiny and issue SCN if found non-levy of ST.

[Rajagopalan Ranganathan]

Sir,

The proviso to Section 73 (1) of Finance Act, 1994 states that " PROVIDED that 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,

by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "eighteen months , the words "five years" had been substituted.

The words eighteen months is to be substituted by the words thirty months from the date when the Finance Bill 2016 receives President's assent. Where the service tax is not levied or short levied or not paid or short paid due to reasons enumerated under clauses (a) to (e) above the Department can ask you to produce the records for five years. Since the Finance Bill is yet to receive the assent of President, the Department has issued the notice without mentioning the relevant provisions of Finance Act, 1994.

[KASTURI SETHI]

I endorse the views of Sh.Rajagopalan Ranganathan, Sir. I think the querist has received notice in the form of letter and not SCN.

[Suryanarayana Sathineni]

In other words, if the department asks for any records for scrutiny/investigation purpose to find out any tax/ST evasion, obviously, you have no option but to provide the records. However, you can at the same time ask for some time to submit such information /records etc.

As sated by Shri. Rangarajan, Department has to necessarily comply with the provisions of 18 months or 5 years depending on the criteria specified in the relevant sections while issuing the notice or initiating any proceedings etc.,

Best Regards

Suryanarayana

[Ganeshan Kalyani]

Sir in addition to the views submitted by the experts above I would like to share my experience as under:-

I always suggest querists to make practice of reconciling the books of accounts before making service tax payments. The ledgers such as expense ledger in the debit side of P&L a/c, ST payable accounted under Current Liabilities in the B/S and clearing accounts, if any should be scrutinised before arriving at the ST payable amount.

The above exercise will make you worry free during any audit whether that is internal audit or departmental audit. This is because the Financial statements are audited and certified by qualified Chartered Accountants and Auditor rely on such reports. Hence it is always beneficial if assesse does reconciliation on timely basis to get through the audit with ease. Thanks.

[KASTURI SETHI]

Additional advice given by Sh.Ganeshan Kalyani Sir is worth following.

[Himanshu Gupta]

Thank you all experts for guiding me..! your opinions are very helpful.

AI Summary

Excise Department Requests Financial Records from Cloth Dyeing Units; Potential Tax Evasion Investigated Under Extended Five-Year Rule. A discussion on a forum addressed a notice issued by the excise department to local cloth dyeing units, requesting financial records to investigate potential tax evasion. The initial query questioned the legal basis for such a request, noting a provision limiting inquiries to the last 30 months. Responses highlighted that under certain conditions, such as fraud or misstatement, records could be requested for up to five years. Experts advised compliance with record requests while ensuring proper reconciliation of accounts to facilitate audits. The discussion emphasized the importance of understanding legal provisions and maintaining accurate financial records.