Tax paid for period beyond 5 years SCN not issued is interest payable

[Parimal Kulkarni]

Dear Members,

An Individual was required to be registered for service tax but he was not aware of the same. Inquiry was initiated for FY 15-16 and tax was paid but no SCN was issued before 29.04.2021 (so time barred). Now the department officer is seeking interest to be paid and 15% penalty. Is interest/penalty payable in such a case? Section 73(6) (c) states "in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder."

In our view, Relevant date speaks of 5 years but that cannot be counted from the date of payment and hence SCN cannot be issued. Please do share your views

PS: For FY 16-17 onwards the individual has nil turnover and joined employment.

AI Summary

Limitation for service tax: relevant date from return due date can bar post limitation SCNs and demands absent adjudication.
Dispute whether interest and penalty can be demanded where service tax for a period beyond five years was paid without issuance of an SCN; primary contention is that the relevant date for limitation under Section 73 must be computed from the due date of filing the service tax return, making actual payment date irrelevant and potentially rendering an SCN time barred. It is also noted that demands cannot be made before adjudication and that voluntary payment of interest in time barred cases has been held nonrefundable in some tribunal decisions.