M/s Ernst and Young (P) Ltd, one of the world's leading consultancy firms, and its associate entities - M/s Ernst and Young, M/s S.R. Batliboi and Co., S.R. Batliboi and Associates, have been issued Show Cause Notices for the Service Tax evasion of Rs. 7.29 crores, Rs. 9.28 lakhs, Rs. 43.5 lakhs and Rs. 34 lakhs respectively by the Service Tax Commissionerate, New Delhi.

On the basis of information collected by the Commissionerate, investigations were initiated against M/s Ernst and Young to enquire into Service Tax evasion. After investigations M/s Ernst and  Young and its associate entities were found to be liable to pay service tax as recipient of services from outside India under Rule 2(1)(d)(iv) of Service Tax Rules, 1994; Section 65(105) explanation and Section 66A of the Finance Act, 1994. M/s Ernst and Young have already paid Rs. 2.20 crores approximately towards their Service Tax liability.

Service tax liability as recipient of foreign services triggers show cause proceedings and required compliance response. Show Cause Notices were issued to M/s Ernst and Young (P) Ltd and associates alleging Service Tax liability as recipient of services from outside India under Rule 2(1)(d)(iv) of the Service Tax Rules, 1994, the explanation to Section 65(105) and Section 66A of the Finance Act, 1994. Investigations by the Service Tax Commissionerate concluded liability and the principal firm has made an interim payment toward the asserted liability, with proceedings continuing under the statutory assessment and adjudication framework.