Limitation period for demand of Late Fee

[Shyam Naik]

Dear All,Whether the limitation period for demand of service tax shall apply to demand of fee for late filing of Service Tax return?

[Amit Agrawal]

'Late Fee' under Rule 7C of the Service Tax Rules, read with Section 70 of the Chapter V of Finance Act, 1994 was mandatory (except where the gross amount of service tax payable is nil).

So, Dept. can directly resort to recovering such an amount using any of the powers of Section 87. However, one needs to check the limitation act provisions and the applicability if Dept. indeed resorts directly Section 87.

If Dept. indeed issued SCN to demand such late fee, such demand needs to be issued in a 'reasonable period'.

As per Supreme Court, when under any law, there is no time limit prescribed to issue any such demand-notice, same needs to be issued in a reasonable time. And one can argue that the limitation period (u/s 73) can be taken as a 'reasonable period' to issue SCN demanding subject late fee (as both type of demands are under very same law)

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

AI Summary

Limitation for demand of late fee may be governed by the reasonable-period principle aligning with service tax limitation. Recovery of the Late Fee under the Service Tax Rules was mandatory except where gross tax payable was nil; the department may use statutory recovery powers but must consider limitation provisions. If a show cause notice is issued to demand the late fee, it must be issued within a 'reasonable period', and it is arguable that the limitation period applicable to service tax demands constitutes that reasonable period since both demands arise under the same legal framework.