LIMITATION FOR ADJUDICATION UNDER SERVICE TAX

[THYAGARAJAN KALYANASUNDARAM]

Dear experts,

One of my client who got the order from the service tax department for the FY 2015-16 on 27/09/2022 against which the SCN was issued on 22/04/2021 but it was not delivered due to the proprietor was deceased and hospitalised since 19th April 2021.  Now, can I challenge the order for the reason of limitation also the adjudication order was issued after the period of one year u/s 73(4B) of service tax.  Please advice me on this issue to come out with any cited case laws.                   

Thanks in advance.

[Shilpi Jain]

If the proprietor is no more, on whom has the SCN been issued?

[THYAGARAJAN KALYANASUNDARAM]

The SCN has been issued in the name of the proprietor itself. 

[KASTURI SETHI]

The wording, "Where it is possible to do so" mentioned in Section 73 (4B) is a hurdle. 

[KASTURI SETHI]

"proprietor was deceased and hospitalised".

The querist has wrongly mentioned the word, "deceased". It should be "diseased". So no issue of death of the proprietor is involved.

[Sadanand Bulbule]

Dear Sir ji

I endorse your smart reply to correct the query.

[THYAGARAJAN KALYANASUNDARAM]

Dear Experts,

the Proprietor was hospitalised since 19.04.2021 and subsequently he died on 05th May,2021. So, the legal heir did not come to the know the proceedings.  further, can i challenge the adjudication order which is passed after the time stipulated under section 73 (4B) of the Act under the limitation grounds. 

similarly, another case which was issued after the expiry of 5 years but due date of filing got extended by 5 days  during covid-19.  do we need to calculate 5 years from the original date of return filing or from the extended period.

thanks in advance

[THYAGARAJAN KALYANASUNDARAM]

Dear Experts,

the extention was some administrative reasons not covid-19.  do we need to calculate 5 years from statutory due date of filing or from the extended time?  Kindly support me, its very urgent and need to represent before the court,

[Sadanand Bulbule]

Section 73(4B) of Act  reads as under:

(4B) The Central Excise Officer shall determine the amount of service tax due under sub-section (2)-

     (a) within six months from the date of notice where it is possible to do so, in respect of cases 18[falling under] sub-section (1);

     (b) within one year from the date of notice, where it is possible to do so, in respect of cases falling under the proviso to sub-section (1) or the proviso to sub-section (4A).

In view of the legal position [supra] the upper time limit to pass an order within one year from the date of SCN is directory in nature and not mandatory. Similar privsion is there under Section 107 [13] of the CGST Act. And this matter has well been settled by the courts. Therefore  order  passed beyonf one year of SCN cannot be construed as time-barred on this count alone.

[Padmanathan KV]

Recently Delhi High Court in L.R. SHARMA AND CO. Versus UNION OF INDIA - 2024 (12) TMI 1145 - DELHI HIGH COURT has held 

28. Therefore, what manifests from the above-noted decisions is that a statute or the language of a statute / provision cannot be read to go against its very intent. The intent of Section 73(4B) of the Finance Act was also made clear by the instructions dated 18-11-2021 (Instruction F. No. CBIC-90206/1/2021-CX-IV Section-CBEC) issued by the Ministry of Finance (Department of Revenue), Central Board of Indirect Taxes & Customs, New Delhi, wherein the paragraph 4.2 provided as under:

"4.2 Attention is invited to sub-section (11) of section 11A of Central Excise Act, 1944 read with sub-section (4B) of section 73 of the Finance Act, 1994 which stipulates that SCNs issued in normal cases should be adjudicated within six months in respect of Central Excise (CE) & Service Tax (ST), and SCNs issued involving extended period should be adjudicated within two years relating to CE and one year relating to ST where it is possible to do so. Board desires that the time limits mentioned in relevant Acts must be adhered to."

29. This Court is of the view that Section 73(4B) was framed and introduced in the Finance Act to ensure effective administration of taxation. While there cannot be denying that the taxation forms the backbone of a nations economy, any inordinate delay by the Revenue itself in prosecuting its own cases cannot be construed in their favour by stretching the period of limitation to nine years especially when the provision requires the proceedings to be concluded within six months / one year.

[KASTURI SETHI]

 Dear Querist,

Can you elaborate how extension of 5 days was allowed ? By way of circular or notification or Order by any authority  or any other way. Can you post copy of extension order here ?

The above information will make convenient for the experts to trace out case law in favour of your client.

 

 

[THYAGARAJAN KALYANASUNDARAM]

Dear sir,

The due date for filing the return was extended vide Order No. 1/2017-ST dated 25.04.2017. I have an additional submission on this matter: The Show Cause Notice (SCN) was served at the residential address of my client based on details obtained from the Income Tax Department. However, at the time of passing the adjudication order, my client had already migrated to the Goods and Services Tax (GST) regime, and the Service Tax Department was in possession of the updated registered office address as per the GST records. Despite this, the Department failed to serve the SCN at the registered office and instead served it at the residential address, which is improper and contrary to the principles of natural justice.  Is there any case law to defend the case and take the limitation grounds, since it was not served at the proper address?

[THYAGARAJAN KALYANASUNDARAM]

can we also seek to contend that the invocation of the extended period of five years under the proviso to Section 73(1) of the Finance Act, 1994 is not sustainable in the present case. Although the assessee was registered under the Service Tax law, the non-filing of ST-3 returns during the relevant period, in itself, does not amount to suppression of facts with intent to evade payment of tax, especially when the registration was active and the Department was well aware of the existence of the assessee. Hence, the extended period cannot be invoked mechanically without establishing willful suppression or fraud?

[KASTURI SETHI]

 W.r.t. serial no. 8, the non-filing of ST-3 return is very serious offence. It includes the elements of mens rea with an intent to evade ST, especially, in the event of the fact that the information was obtained from Income Tax department.

[KASTURI SETHI]

With reference to serial no. 7.1, the SCN stands served upon the party. You cannot deny it. There is no legal force in the plea that the SCN was delivered at wrong address.

Emphasis is laid on the word, "delivered/served". The department is concerned with the service of the SCN. Even pasting the SCN/Order on the door of residence of the assessee is as per ST law.

When registration application is filed, residential address of the applicant is got from the applicant for so many purposes including recovery proceedings of Govt. dues.

            

[KASTURI SETHI]

You can contest the present case on the legal heir issue. SCN/Adjudication Order cannot be issued against a person who is no more. There are case laws in favour of your client..

[THYAGARAJAN KALYANASUNDARAM]

Dear Experts,

Whether the Assessee can challenge the extension of time for filing Service Tax returns granted under Order No. 1/2017-ST dated 25.04.2017?

AI Summary

Limitation in service tax adjudication: late orders and defective service can form grounds for challenge to proceedings.
Limitation and serviceability of adjudication under service tax arise where an SCN was not delivered due to the proprietor's hospitalization and death and the adjudication order was passed after prescribed statutory timelines. Core issues include whether post-timeframe orders are time-barred, whether extensions to return-filing deadlines alter computation of extended limitation periods, whether service at an outdated address defeats proceedings, and whether invocation of extended limitation requires proof of willful suppression or fraud.