Amendment in 73(3) by Explanation 2 - Issuance of SCN when full tax deposited with interest

[JainPal Jain]

Please ref. to prepossed amendment in 73(3) by way of explanation 2. Does it mean that no show-cause notice can be issued,if full tax along with interest has been deposited before the issue of show cause notice.

[Rakesh Chitkara]

Yes. That is the new amendment. Primarily aimed at on the spot deposit made at the instance of Audit parites and Anti-evasion teams. But it is only for normal period of 1 year, that is the sad part.

[Rama Krishana]

Earlier there was specific provision that where service tax has been deposited alongwith interest, in such case no show cause notice (SCN) be issued. But there was no such clause that no penalty would be levied. Now, the provision has been amended to specify that no penalty shall be levied where service has been deposited with interest. Therefore, the exercise of issuance of show cause notice would become infructuous itself. But, as Mr. Rakesh Chitkara has pointed out it is for the normal period of one year only. In case u accept, admit and deposit the demand of service tax for a period which is beyond the normal period of limitation of one year, it means, you are inviting the show cause notice

AI Summary

Deposit of full tax with interest prevents penalty and renders show cause notices infructuous within the normal limitation period. Where full service tax is deposited with interest before a show cause notice is issued, penalty is barred and a show cause notice becomes infructuous for the period covered by the normal limitation; this protection chiefly covers on the spot or audit prompted deposits but does not extend to tax admitted and deposited for periods beyond the normal limitation, which may still invite a show cause notice.