refresher course on "indirect taxation and gearing for gst“ show cause/ reply to show cause/...

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The Institute of Cost Accountants of India

Refresher Course on"Indirect Taxation and gearing for GST“

Show Cause/ Reply to Show Cause/ Adjudication

Presented by B.Ganesh Prabhu

B.Ganesh Prabhu, Chennai - 98404 71139 2

Self Assessment of Service Tax • Section 68 of FA, 1994• Services Provider or Services

Receiver of taxable services to any person shall pay service tax at the rate specified in section 66B in the manner prescribed.

• Section 70 of FA, 1994• Service tax to be paid on Self

Assessment basis and return is to be filed on half yearly basis.


Situations of Initiation of Recovery Section 73 (1) of FA, 1994

Service Tax has not been levied;

Service Tax has not been paid by the service provider;

Service Tax has been short levied;

Service Tax has been short paid by the service provider;

Erroneous Refund of Service Tax.


Show Cause Notice (SCN) – Meaning Means of communication to an assessee to

Show Cause, why the actions proposed therein under should not be taken against him.

Requires the assessee to justify or prove his defense, to comply with principles of natural justice.

Word “Show Cause Notice” – Not Defined in Act

No Prescribed Format for issue of SCN.


Who can issue SCN? A Central Excise Officer Can issue SCN.

A Central Excise Officer means Principal Chief Commissioner of Central

Excise; Chief Commissioner of Central Excise; Principal Commissioner of Central Excise; Commissioner of Central Excise; Additional Commissioner of Central Excise; Joint Commissioner of Central Excise; Deputy Commissioner of Central Excise; Assistant Commissioner of Central Excise; Any Person including an officer of the State Government entrusted by CBEC;


Vital Points on SCN SCN should be in writing and not by oral;

SCN has be signed by a person with proper authority;

SCN should contain specific allegations;

SCN should specify relevant Sections should be quoted;

SCN should specify the proposal about imposing penalty under relevant section should be mentioned;

SCN should be issued for a particular period;


Monetary Limits – issuance of SCN?S.No

Central ExciseOfficer

Amount of Service Tax or Cenvat Credit specified in a notice for the purpose of

Adjudication

1 Sup. of CENot exceeding Rs. 1 Lakhs excluding the cases relating to taxability of Classifications or Valuation of services and cases where no extended period of limitation invoked.

2 AC or DC Not > Rs.5.00 Lakhs (Except where Sup. is empowered to Adjudicate)

3 Joint Commissioner > Rs.5.00 Lakhs but < Rs.50 Lakhs

4 Additional Commissioner > Rs. 20 lakhs but < Rs. 50 lakhs

5Principal Commissioner/ Commissioner

Without Limit


Time Limit – Issue of SCN Sec 73(1)If ST is not levied / short levied / not paid / short paid / erroneously refunded not for reasons stated below

ST can be demanded within a period of 18 months from the Relevant Date (Section 73(1) of FA, 1994)

Non-levy/short levy/Nonpayment/Short-payment bya. Fraud orb. Collusion orc. Wilful mis-statement ord. Suppression of factse. Contravention of provisions with an intent to evade payment of ST.

ST can be demanded for a period of 5 years from the Relevant Date. (Proviso to Section 73(1) of FA, 1994)


What is Relevant Date? RD for calculating limit of 18 months / 5 years for issue

of SCN is as follows; (Section 73(6) of FA, 1994)

Where periodical return is to be filed – Date on which such return was filed.Where no return was filed – the last date on which the

return should have been filed under ST RulesIn case of provisional assessment – Date on which

assessment is finalized.In any other case – Date on which service tax is to be paid.Refund of Service Tax – Date of such refund.


Contents of SCN - GeneralDetails of Assessee such as – STC – Name – Address

of SP/SR/ISDFacts of the case – (Incomplete Facts or Colored

Facts)Hidden Facts – having impact on ST liabilityEvidences based on which facts are taken.Date of Service of SCN Period of Demand

Normal Period – 18 Months from the Relevant Date Extended Period – 5 Years from the Relevant Date

Value of Taxable services computed by department.


Conclusions drawn from the given facts by the department.

Extract of relevant provision to see whether any amendment incorporated or not.

Reference to Service Tax Return - Compare the figures in SCN Vs ST-3 Return filed by SP.

Deviation by assessee to invoke extended period of limitation.

Tax liability arrived by Central Excise Officer.Interest under Section 75 of FA, 1994Penalty under Section 76/77/78 of FA, 1994

Contents of SCN – General (Contd…)


Serving of Statement of Demand –Deemed SCN

CEO may serve subsequent to any notice served U/s 73(1) of FA, 1994 a statement only containing details of service tax not levied or paid or short levied or short paid for the subsequent periods without issuing a detailed notice setting out all the points noted in earlier notice.

Statement issued as per Section 73(1A) of FA, 1994 – Shall be Deemed SCN


Issues raised in SCN - Generally A SCN is issued by the Adjudicating Authority as

to calling the assessee to show cause why;Proposed Service Tax, Interest & Penalty should not

be demanded on Reimbursement?Service in question is not taxable?Classification by the assessee is not according to provisions of law?Valuation method adopted by the assessee is not according to provisions of law?Cenvat Credit is ineligible as per provisions of law

or time bared ?Abatement is not available?


NO SCN by Department? Voluntary Payment – Before SCN (Sec. 73(3)

of FA, 1994)Service Tax U/s 66B of FA, 1994 + Interest U/s

75 of FA,1994 is paidIntimation to department in writing regarding

such payment. Applicable for cases not involving fraud,

suppression, etc.,As per Exp 2 to Section 73(3) of FA, 1994 – No

Penalty under any provisions of the Act. Section 73(3) of FA, 1994 is NOT applicable

to Fraud, suppression, etc.,


Adjudication Procedure

Issue of Show Cause Notice

Reply to Show Cause Notice

Personal Hearing (If Opted)

Passing of Order (Optional Time limit specified as per Section 73(4B) of FA,1994)


Prerequisite for Reply to SCN ?Letter head of Assessee or Legal Counsel or AR

Properly Addressed

Reference to SCN No and date of SCN

Assessee Details – Name & Address – STC –

Nature of services provided & Business Model

Reference to PoA / Vakalat

Request for Personal Hearing


Brief summary of allegations put forth in SCN.

Defensive points on the issue Fundamental items Merits of the case Limitation of Extended period (If Invoked) Interest Penalty

Prayer

Prerequisite for Reply to SCN ?


Validity of SCN on Fundamental? Simple Letter to pay tax is not a notice

Violation of principal of Natural Justice.SCN to be under specific provision of law.Notice must indicate the amount demanded and

call upon the assessee to show cause. Any demand without SCN is violation of statutory

provision.

Metal Forgings V UOI 2003 146 ELT 241 (SC)JK Synthetics Vs UOI 2009 234 ELT 417 DEL


Vague SCN shall not sustain - If SCN is not specific to particular issue and vague, lack details and unintelligible – notice is not given reasonable opportunity to meet allegations in the SCN. CCE Vs Brindavan Beverages (2007) 213 ELT 487 (SC)

Invoking provision not specified in SCN is not valid - If there is no invocation of a rule (Valuation rule) in this case it would not be open to adjudicating authority to invoke that rule. CCE Vs Ballarpur Industries Ltd 2007 215 ELT 489 SC

Adjudicating authority can not go beyond what is canvassed in SCN. Saci Allied Products Vs CCE (2005) 216 ELT 662 (SC)


Proper Serving of SCN? Proper Serving of SCN (Sec 37C(1) of CEA, 1944 Service by

Tendering the same Send by RPAD If not possible by above two modes then, affix a copy

at noticeable space in a factory or warehouse If point 3 is also not possible affix at the notice board

of authority who issued the notice. Notice posted one day prior to last date received

by assessee after last date is not validly served on time.Sewing Systems P Ltd Vs CC – 1992 (62) ELT 725

CEGAT – (Affirmed by SC)


Understand the change given – Read and Read again till nature of charge is clearly understood.

If still not understood – ask for explanations – call for evidence relied by issuer for issue of SCN.

Explain the facts clearly – Examine whether fact is twisted in SCN

Produce evidence in support of facts explained in reply invoices raised on clients, agreements entered with the clients.

Application of law to the facts stated.

Fact FIRST Law Next

Flow of Reply to SCN on Merits!!!


Definition of service

Negative List

Mega Exemption Notification

POPS Rules, 2012

POT Rules, 2011

NO Clarity on correct Interpretation of Law?

Application of Law to the facts!!!


Points Interest & Penalty!!!

When extended period is not invokable and Service Tax is not payable.

When Tax is not payable Interest & Penalty is also not payable.


ConclusionTime limit for further written submission if not

added in the present reply.Request for copy of evidences based on which

charge is made in SCN. Request for Personal Hearing before

Adjudication. Permission of further submissions at the time

of PH Prayer for dropping the proceedings

considering the submissions made in the reply.

Doubts / Questions ?

Thank You !!!

B.Ganesh PrabhuMobile No.: 9840471139E-Mail ID: [email protected]

refresher course on "indirect taxation and gearing for gst“ show cause/ reply to show cause/...

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