1 / 74

Handling of Adjudication & Appellate Proceedings in Service Tax

Handling of Adjudication & Appellate Proceedings in Service Tax. By: A.Saiprasad B.Com, LL.B, ACA, (Grad CISA), DISA, AMIMA Advocate. Session Outline - I. Visits by Departmental Officers Service Tax Audit Search Seizure & Summons Adjudication Proceedings Issue of Show Cause Notice

colorado-massey
Download Presentation

Handling of Adjudication & Appellate Proceedings in Service Tax

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Handling of Adjudication & Appellate Proceedings in Service Tax By: A.Saiprasad B.Com, LL.B, ACA, (Grad CISA), DISA, AMIMA Advocate

  2. Session Outline - I • Visits by Departmental Officers • Service Tax Audit • Search Seizure & Summons • Adjudication Proceedings • Issue of Show Cause Notice • Reply to Show Cause Notice • Personal Hearing • Issue of Order in Original

  3. Session Outline - II • Recovery Proceedings • Reply to Coercive Letters • Appeals to Commissioner (Appeals) • Time Limit, SOF, GOA, Cross Objections • Appeals to CESTAT • Time Limit, SOF, GOA, Cross Objections • Practical Demonstration

  4. Visit by Departmental Officers • One Fine Day…. • Access to Regd. Premises – R.5A of STR, 94 • Officer authorised by Commissioner • Registered Premises • Scrutiny Verification & Checks • Madurai Trade Notice No.103/99 dt.1.10.99 • Routine Checks Barred • Prior Notice – 15 clear days + Doc. Reqd.

  5. Visit by Departmental Officers • Any Restriction for Evasion Cases ? • Specific Information, Intelligence • Reason to believe • No Restriction for Writing Letters • Records to be produced on demand • Immediate Reply • Board Circulars • No.137/26/2007-CX 4 dt.1.1.08 • 224/37/2005-CX 6 dt.24.12.08

  6. Audit Party • Authorised CEO/ C & AG deputed • Excise Audit 2000 norms followed • Gathering Information - Letters • Audit Frequency • Tax > 3 Crs – Every Yr • Tax 1 Cr – 3 Crs – Once in 2 Yrs • Tax 25 L – 1 Cr – Once in 5 Yrs • Tax < 25 L – 2% of tax payers

  7. Reply to Audit Note • Records to be provided & Time Limit • Audit Reply to Audit Paras • Example: Mgmt Con Services for EDP classes • Letter head of Auditee • Date of Reply • Concise extract of Audit para • General/ Background Info about Auditee • Facts of the case

  8. Reply to Audit Note • Audit Reply Contd… • Evidences to support facts of the case • Extract of Relevant Provision • Reliance on Case Laws if any • Furnishing of further info • Copies of docs supporting as evidences

  9. Search & Seizure • S. 82 of FA, 94 – SEARCH & SEIZURE • Document, Book or Thing • Useful or Relevant to any proceeding • Secreted • JC – Authorise – SI • SEARCH & SEIZE • Cr.P.C Code Applicable

  10. Summons • S. 83 of FA, 94 r/w S.14 of CEA, 44 • Summons – Person or Document • Board Circular No.137/39/2007-CX dt.26.2.07 • Usual Mode of Communication ineffective • Jeopardize interest of Revenue • To tender evidence, • To record statement • Prior written permission - DC

  11. Meaning of SCN • Formal Communication to • Show Cause why • Actions proposed therein • Must not be taken against the assessee • Opportunity to explain defence • Provides information about: • Computation of tax by department • Arrival at taxable value by the department • Department’s view of the provisions

  12. When SCN not issued • Service Tax + interest paid • On own accord • Before Department’s awareness – No fraud etc • Informs in writing to the department • ST + Int + Penalty paid • At the time of audit – Though fraud etc. • True & Correct information + Specified Records • Penalty 1% p.m. of default – max 25% • Informs in writing to the department

  13. Show Cause Notice • Date of Service of SCN • Back Dating Receipt • Body of SCN • Example: CTCC issued to Edn Orgn. • Details of Assessee • Registration Details • Facts of the case – whether twisted ? • Incidental & Ancillary Information

  14. Show Cause Notice • Body of SCN • Period of Demand • Ordinary Period – 18 M from RD • Extended Period – 5 Yrs from RD • Computation of Value of Taxable Service • P&L – All items on the Credit Side • B/S – Debtors Incremental Value • Computation of Tax

  15. Show Cause Notice • Body of SCN • Inferences drawn from facts • Extract of Relevant Provision • Whether any amendment/ additions/ deletions • Reference to Service Tax Return • Not filed • Value not included • Listing of Omission or Commission • For Extended period of limitation

  16. Show Cause Notice • Body of SCN • Interest Provisions • Penalty Provisions • Operative Part of SCN – Calling upon to show cause why: • ST, Int, Penalty must not be demanded • Service not a taxable service • Classification under a particular service • Valuation method to be adopted/ not adopted • Abatement available/ not available

  17. Reply to SCN • Letterhead of Counsel/ Assessee • Reply Addressed to whom • Details of SCN No. & Date • Name of the Assessee • Address of the Assessee • Reference to POA, Vakalat • Desire for Personal Hearing

  18. Reply to SCN • Summary of Allegations in SCN • Succinct, Brief, Most important points • Defence Contentions • On Limitation • On Merits • On Interest • On Penalty • On Refund & • On Such other specific issues

  19. Reply to SCN • Preliminary Contentions…. • SCN issued merely based on audit objection • No independent investigation by Department • Swastik Tin Works v. CCE, 1986 (25) ELT 798 (Special Bench-Tribunal), • Indian Plastics Ltd. v. CCE, 1988 (35) ELT 434 (T), • CIT v. Lucas TVS Ltd., 2001 (249) ITR 306 (SC), • Indian and Eastern Newspaper Society v. CIT, 1979 (119) ITR 996 (SC)

  20. Reply to SCN • Preliminary Contentions…. • SCN – made up mind/ pre-deciding issues • Evidences from the SCN – Reference • Madurai Metal Industries Vs UOI, 1991 (52) ELT 495 (Mad.)., • Siemens Ltd Vs.State of Maharashtra 2007 (207) ELT 168 (SC),

  21. Reply to SCN • On Limitation – S. 73 • Ordinary Period – S. 73(1) • Extended Period – Proviso to S.73(1) • Relevant Date – S. 73(6) • Filed Returns • Not Filed Returns • Date of payment/ refund of service tax

  22. Reply to SCN • On Limitation – Extended Period • Fraud • Collusion • Wilful Mis-statement • Suppression of facts • Contravention of provision of act • With an intention to evade payment of tax

  23. Reply to SCN - On Limitation • Correspondence with Department • Attach as evidences to reply • Proves department aware • Inter-departmental correspondence • No clarity on levy • Case Laws • Ugam Chand Bhandari Vs. CCE, 2004 (167) ELT 491 (SC); • Anand Nishikawa Co. Ltd V. CCE, 2005 (188) ELT 149 (SC).

  24. Reply to SCN - On Limitation • Prove Dept aware of primary facts • No Duty to bring in legal inferences • Calcutta Discount Co. Vs. ITO, (1961) 41 ITR 191 (SC), • Parashuram Pottery Works Co. Ltd. v. ITO, (1977) 106 ITR 1 (SC),

  25. Reply to SCN - On Limitation • Undue delay in issuance of SCN • Delay > 18 M from Date of Knowledge(DOK) • DOK = Audit Report, Mahazar, Summons • DOK = Stmt of A’ee/ Dept, Letter/ Return filed with dept. • Rivaa Textile Industries Ltd. Vs. CCE & C, 2006 (197) ELT 555 (T) • Dolphin Detective Agency Vs. CCE, 2006 (4) STR 217 (T), • Bajaj Auto Ltd. Vs. CCE, 2006 (195) ELT 277 (T),

  26. Reply to SCN - On Limitation • Bonafide Belief/ Doubt • Clarification provided by Board • SC/ HC/ Tribunal Decisions • SNS (Minerals) Ltd. v. UOI, 2007 (210) ELT 3 (SC) • Periodical SCNs – cannot allege suppression • Reference to previous SCNs with No, Dt & Period • Nizam Sugar Factory Vs. UOI, 2006 (197) ELT 465 (SC), • ECE Industries Limited v. CCE, 2004(164) ELT 236 (SC),

  27. Reply to SCN - On Limitation • Burden of proof – Not Discharged • Something positive • Other than mere inaction • Deliberate with holding of information • Department’s knowledge of: • Facts • Manufacturer’s action/ inaction • CCE v. Chemphar Drug and Liniments, 1989 (40) ELT 276 (SC) & • CCE v. Pioneer Scientific Glass Works, 2006 (197) ELT 308 (SC).

  28. Reply to SCN - On Limitation • Shorn of proof • No Reason to believe • Absence of records/ materials • To prove omission & commissions • TN Dadha Pharmaceuticals v. CCE, 2003 (152) ELT 251 (SC) and • New Decent Footware Industries v. UOI, 2002 (150) ELT 71 (Del.)

  29. Reply to SCN - On Limitation • Meaning - Suppression • Not merely omission to give information • Deliberate non payment of duty • Continental Foundation Joint Venture v. CCE, 2007 (216) ELT 177 (SC), • Meaning – Intent to evade tax • Not merely failure to pay tax • Aware that duty payable – Deliberately avoid payment • Tamil Nadu Housing Board V. CCE, 1994 (74) ELT 9 (SC)

  30. Reply to SCN – On Merits • Extract Relevant Provision • Definition of the said service/ negative list • Definition of declared service • Amendment/ additions/ deletions/ substitutions • Net effect not covered by definition • Interpretational issue • Benefit of doubt to tax payer • Beyond scope and ambit of definition/ taxable service

  31. Reply to SCN – On Merits • Rely on Board Circulars/ Trade Notices • Dept bound by circulars • K. P. Varghese Vs. ITO, 1981 (131) ITR 597 (SC). • Ranadey Micronutrients Vs. CCE, 1997 (87) ELT 19 (SC). • Paper Products Limited Vs. CCE, 1999 (112) ELT 765 (SC).

  32. Reply to SCN – On Merits • Reliance on: • Interpretation of Statues • Construction of a term • Law Lexicons • To prove the legal understanding of a term • Agnate & Cognate Statues • Central Excise Act, 1944 • Customs Act, 1962

  33. Reply to SCN – On Merits • Reliance on • Certificates given to A’ee by Govt • Recognition granted by Govt Institutions • Documents founding the institution • Trust Deed, Partnership Deed • MOA & AOA of Society Regn Deed • Agreements entered into with customers

  34. Reply to SCN – On Merits • Reliance on • Constitution – legislative entries • Lack of power to tax certain area • Evidences on hand • To prove - Not a service – Client Agreements • To prove – Value of service – Invoices • To prove – Mistake in computation • To prove – Eligibility to exemption • To prove – Eligibility to abatement

  35. Reply to SCN – On Merits • Reliance on • Documents provided by clients • Product Details like brochures • Technical details of services provided/ not provided • Different products provided by client • Some of which taxable on which tax already remitted • Correspondences with chamber of commerce • Correspondences with Government/ Board

  36. Reply to SCN – On Merits • Reliance on • Case laws – Covered issues • Contradictory statements by SCN • Vague statements by SCN • Omission/ Commission not alleged by SCN • Fundamentally incorrect provisions in SCN • SCN not being signed

  37. Reply to SCN – On Interest • Not liable to tax • For reasons stated under limitation • For reasons stated under merits • Since not liable to tax • Not liable to interest • Since interest accessory to demand • Case Laws: • Pratibha Processors v. Union of India, 1996 (86) ELT 12 (SC) and • CC v. Jayathi Krishna & Co., 2000 (119) ELT 4 (SC)

  38. Reply to SCN – On Penalty • Penalty – 3 Sections • S. 76 – Mere non payment of ST • Rs.100/ day or 1% of Tax O/s for every month • Max Penalty – 50% of Tax • S. 77 – For about 7 types of default • For defaults not covered elsewhere • Eg: Not getting regd, Not filing returns etc.

  39. Reply to SCN – On Penalty • U/s 78 – Extended Period • Levied when omission/ commission commited • Max Penalty 100% of ST • True & Complete (T & C) – 50% of ST • T & C + 30/ 60 days of OIO– 25% • Transaction not recorded – No mitigation of 50% or 25%, though paid within time period

  40. Reply to SCN – On Penalty • When S.78 penalty can be imposed ? • Punishment • Act of Deliberate Deception • Intention to evade Duty – Proved • UOI v. Rajasthan Spinning & Weaving Mills, 2009 (238) ELT 3 (SC)

  41. Reply to SCN – On Penalty • No extended period – No 78 penalty • CCE V. Damnet Chemicals Pvt Ltd., 2007 (216) ELT 3 (SC) • Devans Modern Breweries Ltd. V. CCE, 2006 (202) ELT 744 (SC) • Strict Construction of Penal Provisions • CIT v. Sunderam Iyengar, AIR 1976 SC 255

  42. Penalty – Summary I

  43. Penalty – Summary II

  44. Penalty – Summary III

  45. Reply to SCN – On Penalty • Interpretation of Statue – No penalty • Since no intention to default • Differences in understanding the statues • UG Sugars & Industries Ltd. v. CCE, 2004 (167) ELT 465 (T). • Standard Industries Ltd. v. CCE, 2007 (207) ELT 676 (T). • Fibre Foils Ltd. v. CCE, 2005 (190) ELT 352 (T).

  46. Reply to SCN – On Penalty • S. 80 – Reasonable Cause • Non Obstante Clause • Over Rides S. 76, 77 & 78 • Cause for non payment must be genuine • Bonafide Belief/ Doubt • Based on Court Decisions • Ignorance of law – no excuse • Case Laws • CWT Vs. Sri Jagadish Prasad Choudhury, [1995] 211 ITR 472 (Pat.) • In Motilal Padampat Sugar Mills Co. Ltd. Vs. State of Uttar Pradesh, [1978] 118 ITR 326 (SC) , • Vedabai v. Shantaram, [2002] 253 ITR 798 (SC)

  47. Reply to SCN - Conclusion • Summary & Conclusion • Action sought for by the reply • Similar to prayer in appeals • Permission for further written submissions • Request for PH before adjudication • Permission for submission at PH • Request for drop of proceedings

  48. Adjudication Order • Called as Order in Original • Order based on SCN & Reply thereto • Order passed by: • AC, DC, JC, ADC • Appealable to Commissioner (Appeals) • Commissioner • Appealable to CESTAT

  49. Persons passing Orders • Tax < Rs. 1 Lakh – Superintendent • Tax Rs. 1 Lakh to 5 Lakhs – AC/DC • Tax Rs.5 Lakhs to 50 Lakhs – JC • Tax Rs. 20 Lakhs to 50 Lakhs – ADC • Tax without limit – Commissioner • Board Circular No.97/8/2007 ST dt.23.8.07

  50. Contents of OIO • Name of Assessee • Date of Order • Number of the Order • To whom the appeal must be filed • Where the appeal must be filed • The Commissionerate under which OIO passed

More Related