Issue Of SCN after Introducation of GST Act,2017

[Rajesh Thakkar]

Service Tax has been omitted by Section 173 of the CGST Act, 2017, and no inquiry or investigation has been initiated before implementing the GST Act, 2017. Any notices issued under Service Tax after inquiry or assessment or on the basis of ITR-TDS is valid u/s 173 & 174 of GST Act, 2017

[Padmanathan KV]

There are a large number of Tribunal Decisions stating that Service Tax cannot be demanded merely on the basis of ITR-TDS such as:

1. M/s Ved Security Vs. CCE, Rachi -III 2019(6) TMI 383 CESTAT, Kolkata

2. Shresth Leasing & Finance Ltd Vs C.C.E. & S.T. (CESTAT Ahmedabad) - 2022 (7) TMI 768 - CESTAT AHMEDABAD

3. Forward Resources Pvt. Ltd. Vs C.C.E. - 2022 (7) TMI 716 - CESTAT AHMEDABAD

Further, one need to check for which period the notice is issued and whether the notice is within limitation period or not.

[Amit Agrawal]

Section clause (e) & (f) of 174 (2) reads as follows:

"The repeal of the said Acts and the amendment of the Finance Act, 1994 (32 of 1994.) (hereafter referred to as “such amendment” or “amended Act”, as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not-

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(e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed;

(f) affect any proceedings including that relating to an appeal, review or reference, instituted before on, or after the appointed day under the said amended Act or repealed Acts and such proceedings shall be continued under the said amended Act or repealed Acts as if this Act had not come into force and the said Acts had not been amended or repealed."

So, with regards to the query raised, Dept. has got "legal powers" to start investigation / inquiry and issue SCN under Finance Act, 1994 (32 of 1994)even after 01.07.2017 in my view.

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

[Rajesh Thakkar]

Thanks Amitji,

I am also on the view of the same, but SCN should be issued in form DRC-01 r/w Rule 142. Please correct me if I am wrong.

[KASTURI SETHI]

Sh.Rajesh Thakkar Ji,

SCN is valid under Section 174 (2) of CGST Act. The department's action to protect revenue is saved by virtue of Section 174 (2) of CGST Act. The burden of proof is cast upon the department.

So fight the case on merits taking shelter of the case laws mentioned at serial no. 1 above.

[KASTURI SETHI]

I think SCN has been issued under Section 73 (1) of the Finance Act and not under Section 74 of CGST Act.

Pl. check from the SCN.

[Amit Agrawal]

Dear Querist,

Form DRC-01u/r 142 does NOT come into picture while issuing SCN demanding service tax using Section 73 of the Finance Act, 1994 (32 of 1994).

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

[KASTURI SETHI]

Relevant extract of CESTAT judgement reported as in the case of FORWARD RESOURCES PVT. LTD. Versus COMMISSIONER OF C. EX. & S.T., SURAT-I - 2022 (7) TMI 716 - CESTAT AHMEDABAD

"Demand (Service Tax) - Income-tax statements, reliance on - Annual consolidated tax statement under Income-tax Act, 1961 - Service Tax demand cannot be based on such documents - Income-tax and Service Tax are two different/separate and independent special Acts and their provisions operate in two different fields - Section 73 of Finance Act, 1994. [paras 5.6, 5.7]."

Appeal allowed in favour of assessee.

[Larisa brownb]

Such officer shall issue show cause notice to the concerned person requiring him to show cause why he should not pay the amount specified in the notice. Normally time duration for issue of Show Cause Notice is 18 months from the relevant date, however it may be extended in certain cases up to 5 years. Powers of Central Tax Officers of Audit Commissionerates and Directorate General of GST Intelligence [DGGSTI]: The Central Tax Officers of Audit Commissionerates and DGGSTI shall exercise power only to issue Show Cause Notices

[KASTURI SETHI]

Any show cause notice which is issued without complete investigation is invalid.

AI Summary

Debate on Validity of Show Cause Notices Post-GST Act: Section 174(2) of CGST Act Sparks Differing Opinions A discussion on a forum addressed the validity of show cause notices (SCNs) issued after the introduction of the GST Act, 2017. The query raised concerns about the legitimacy of SCNs under the Finance Act, 1994, particularly when based solely on Income Tax Returns (ITR) and Tax Deducted at Source (TDS) data. Participants referenced tribunal decisions asserting that service tax demands cannot rely solely on ITR-TDS. Some argued that SCNs remain valid under Section 174(2) of the CGST Act, while others emphasized the need for complete investigations before issuing SCNs. The discussion highlighted differing views on procedural requirements and legal interpretations.