Adjudication Proceedings under Service Tax

Adjudication Proceedings under Service Tax C.A. Surender Gupta, FCA, LL.B, Advocate 313 Chanakya Complex, B-10-11 SubhashChowk VikasMarg, Laxmi Nagar, Delhi -110092 Ph. 22451509, 22451508 Mob. 9810476895 E-mail: - 1998gupta@gmail.com www.taxmanagementindia.com

Provisions at a Glance • Section 14 of CEA, 1944 - Power to summon persons to give evidence and produce documents in inquiries under this Act • Section 73 of FA, 1994 - Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded • Section 73A of FA, 1994 - Service Tax Collected from any person to be deposited with Central Government • Section 73B of FA, 1994 - Interest on amount collected in excess • Section 73C of FA, 1994 - Provisional attachment to protect revenue in certain cases C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

..Provisions at a Glance • Section 73D of FA, 1994 - Publication of information in respect of persons in certain cases • Section 74 of FA, 1994 - Rectification of mistake • Section 75 of FA, 1994 - Interest on delayed payment of service tax • Section 83A of FA, 1994 – Power of Adjudication • Section 87 of FA, 1994 - Recovery of any amount due to Central Government C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Power to summon persons to give evidence and produce documents in inquiries • Sub section (1) of Section 14 of CEA, 1944 • Any Central Excise Officer duly empowered by the Central Government in this behalf, shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry which such officer is making for any of the purposes of this Act. A summons to produce documents or other things may be for the production of certain specified documents or things or for the production of all documents or things of a certain description in the possession or under the control of the persons summoned. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Inquiry before Show Cause Notice • F.No 137/39/2007-CX-4 dated 26-2-2007 and F.No. 137/39/2007-CX-4 dated 21-1-2008 • At first instance: For calling for information/documents normally the mode of communication should be either in the form of a telephone call or by way of sending a simple letter. • Second instance: Issuance of summons should be resorted to, only when the above mentioned modes of communications are found to be ineffective or are likely to jeopardize revenue interest or when it is essential to ensure personal presence of the person concerned to tender evidence or record statement in connection with a service tax evasion case; C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

….Inquiry • Simple Notices are not summons • Simple notices are not summons but, it should be an endeavor that no notice should left unattended / unreplied. • Even if some notices are wrong, must be replied politely. • Precautions during inquiry proceedings • Inquiry before issuance of show cause notice is very critical stage and therefore, must be handled carefully. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

…..Inquiry • Making statement in the course of inquiry • Statement must be given carefully. It is difficult to rebut the statement later. • Statement can be used against the person making such statement. • Where statement is to be retracted, it should be retracted as soon as possible. • Collected cheques under force during inquiry: • There is power with the department to collect / recover amount during inquiry. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

…Forced recovery during investigation • In NARESH KUMAR & COMPANY Versus UOI [2010 -TMI - 77634 – CALCUTTA - HC] has held that, The authority concerned has no jurisdiction or authority to collect any amount at the time of raid simply it is not empowered legally to do so. • Also see: ABHISHEK FASHIONS PVT. LTD. versus UOI [2006 -TMI - 701 - HIGH COURT OF GUJARAT] - In absence of any statutory provision on the basis of which any such recovery can be made, the action of the respondent authorities in collecting the cheques from the petitioner cannot be sustained in law C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Power of Adjudication – S. 83A Not. 30/2005 dt. 10/8/2005 and 48/2010 dt. 8/9/2010 • Superintendent of Central Excise • Not exceeding Rs. one lakh (excluding the cases relating to taxability of services or valuation of services and cases involving extended period of limitation.) • Assistant Commissioner of Central Excise or Deputy Commissioner of Central Excise • Not exceeding Rs. five lakhs (except cases where Superintendents are empowered to adjudicate.) C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

…Power of Adjudication – S. 83A • Joint Commissioner of Central Excise • Above Rs. five lakhs but not exceeding Rs. fifty lakhs • Additional Commissioner of Central Excise • Above Rs. twenty lakhs but not exceeding Rs. fifty lakhs • Commissioner of Central Excise • Without limit C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Show Cause Notice – Section 73 Normal Period of Limitation • (1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the 2[Central Excise Officer] may, within one year from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice: C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

….SCN - Section 73 Extended Period of Limitation • PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of— (a) fraud; or (b) collusion; or (c) wilful misstatement; or (d) suppression of facts; or (e) contravention of any of the provisions of this Chapter or of the rules made thereunderwith intent to evade paymentof service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words "one year", the words "five years" had been substituted. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

SCN – Period of limitation • Explanation: Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of one year or five years, as the case may be. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

SCN – Relevant Date • (6) For the purposes of this section, "relevant date" means,— (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid— • (a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed; • (b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules; • (c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder; (ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof; (iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Contents of SCN • SCN should not be vague or ambiguous • SCN must be specific • RUD should be supplied with SCN • Corrigendum to SCN may be issued but no new ground be raised • No corrigendum after submission of reply to SCN C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Serving of SCN – Section 37C of CEA, 1944 (1) Any decision or order passed or any summons or notices issued under this Act or the rules made thereunder, shall be served,— • (a) by tendering the decision, order, summons or notice, or sending it by registered post with acknowledgement due, to the person for whom it is intended or his authorised agent, if any; • (b) if the decision, order, summons or notice cannot be served in the manner provided in clause (a), by affixing a copy thereof to some conspicuous part of the factory or warehouse or other place of business or usual place of residence of the person for whom such decision, order, summons or notice, as the case may be, is intended; …………. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

…Serving of SCN – Section 37C of CEA, 1944 • (c) if the decision, order, summons or notice cannot be served in the manner provided in clauses (a) and (b), by affixing a copy thereof on the notice board of the officer or authority who or which passed such decision or order or issued such summons or notice. (2) Every decision or order passed or any summons or notice issued under this Act or the rules made thereunder, shall be deemed to have been served on the date on which the decision, order, summons or notice is tendered or delivered by post or a copy thereof is affixed in the manner provided in sub-section (1). C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Serving of SCN • Mere issue of SCN is not sufficient, it has to be served on the person • Refusal to accept notice is due service of notice • In case of partnership firm, SCN can be issued to any partner • In case of company, SCN can be issued to any of director, secretary or principal officer • Notice to agent is valid. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Reply to SCN • Submission of Reply to SCN with 30 days or extended period as sought. • Assessee can take inconsistent and contrary stands • Assessee can raise dispute to demand on different grounds • If the statement of a third person relied upon by the department, assessee can demand cross-examination of such person and have statement by such person. • Personal hearing may be opted. In case the officer is changed, new officer should give personal hearing. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Challenge to invoking of extended period of limitation • Where extended period of limitation has been invoke, carefully examine the SCN to see: • Whether, allegation for invoking extended period is specific or general. • Which of the allegation has been invoked. • Calculate period before knowledge of facts to the department and after knowledge of facts to the department. • What evidences have been adduced by the department to prove its allegation. • Whether department has discharged its initial burden to prove the allegation. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Challenge to invoking of extended period of limitation • Mere non declaration is not sufficient but a positive mis declaration is necessary • See: circular no. 5/92 dated 13/10/192 CE • PADMINI PRODUCTS Versus CCE [2008 -TMI – 42519 – SC = mere failure or negligence on the part of the producer or manufacturer either not to take out a licence in case where there was scope for doubt as to whether licence was required to be taken out or where there was scope for doubt whether goods were dutiable or not, would not attract Section 11-A of the Act. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

…. Challenge to extended period of limitation • Suppression, miss declaration must be willful • Intention to evade duty is not mere failure to pay duty. It must be something more. • Mere inaction is not suppression • Mere ommission to give correct information is not supression it is willfull • No suppression if assessee was ignorant about legal provisions • No suppression if assessee had a bonafide belief. • If there is a confusion prevailing in field, no suppression C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

…. Challenge to extended period of limitation • If there is a clarificatory circular, it is a ground of banafide belief. • Contradictory judgments on of the tribuanl or courts are valid ground of no suppression. • No suppression if department is aware of facts • No suppression if SCN were issued on the same subject • If demand is based on return, no suppression • No suppression in case of PSU / govt. undertakings • No suppression if figures were disclosed in published balance sheets. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

…. Challenge to extended period of limitation • Revenue neutral position • Where assessee is able to take the cenvat credit of tax paid, suppression can not be held • But, mere availability of cenvat credit is no conclusive that there was no suppression of facts. Suppression of facts is a question of facts and must be challenged accordingly. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Others aspects of SCN and demand • Demand based on third party’s records without considering other parameters are not sustainable. • Demand based on mere presumption is not sustainable. • In case of normal period of limitation, if service tax with interest is deposited before issuance of SCN, no notice would be served and penalty be imposed. • In case of extended period of limitation, where service tax with interest and 25% penalty is deposited, no notice would be issued and penalty be imposed. C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Forced Recovery ST from third person – Section 87(b) • Section 87(b) empowered the central excise officers to recover the amount from the third person. • O.N.G.C. LTD. Versus DC. OF CCE [2010 -TMI - 77636 - ANDHRA PRADESH HIGH COURT] – recovery can not made from the third parties merely by issuing notice in the absence of assessment order. • . C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Swami Vivekananda said….. • The lamp is constantly burning out, and that is its life. If you want to have life, you have to die every moment for it. Life and death are only different expressions of the same thing looked at from different standpoints; they are the falling and the rising of the same wave, and the two form one whole. One looks at the "fall" side and becomes a pessimist another looks at the "rise" side and becomes an optimist. (KARMA-YOGA – Chapter VIII) C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Thanks C.A. Surender Gupta, FCA, LL.B, Advocate www.taxmanagementindia.com

Adjudication Proceedings under Service Tax