SERVICE TAX PROVISIONS

Mail from CA.Thomas Kenny 

 

 

Last Saturday we  attended a CPE seminar at Ekm.The first session was the ICDS ie the accounting standards notified for Income Tax purposes. 

The second session dealt with service tax audit.

 

Please find some points   for the benefit of partners who could not attend .Please correct any errors .This email is only for the purpose of facilitating further discussion in our partners meeting on Saturday.

Some of the important points are 

 

1 There is a limitation period for serving  Show Cause Notice (SCN)  by the department ie 5 years from the relevant date if the assessee is involved in fraud, suppression of facts, misrepresentation ,collusion, contravention of the provisions of the rules  etc. ( ie if there is  mala fide intention on assesses part)  .In other cases its 18 months from the relevant date. Note: Previously the ordinary time period was 12 months which was extended to 18 months by Finance Act 2012 dated 28.05.2012.

 

It is important to keep the envelope cover of the show cause notice to establish the date of receipt of the Show Cause Notice ie date stamped on the envelope

 

Relevant date is the due date for filing ST return or the actual date of filing the return whichever is later. 

The period of 5 years or 18 months has to be worked backwards ie from the date of receipt of show cause notice work backwards towards the relevant date. See if this period so worked out exceeds the limitation period of 5 years or 18 months as the case maybe

 

2 When the assesse receives the summons the auditor should not go along with assessed  as in that case auditor cannot later make representation later on behalf of the assesse. 
3 The reply to the show cause notice should cover all possible points .Otherwise it will be difficult for the assessee at the appeals stage to include additional points or to frame new reasoning.
4 When the audit party from service tax dept.  comes for audit the assessee should make all information and documents available to them including accounts. If not so done the audit party can treat all credits as income. The assessee will have no standing if the the information is not so furnished, as at the  appeal stage  the appellate  authority is likely to reject the same 
5 It there is a genuine mistake in not paying service tax admit the same before the service tax authorities ,for example due to ignorance of provisions of law.
6 Before the service of notice by service tax authorities, if its discovered that there is a default in payment, pay the same at the earliest. Paying after the service of notice can attract full penalties 
7 Look for any flaws in the SCN and reply based on the facts of the case 
8 When the assesses is before the service tax authorities  after being summoned and requested to sign any document be sure that the information contained therein is correct 
9 If you sign the above document and discover it was incorrect, the facility of forwarding a retraction letter is available 
10 In case the assessee admits in the ST 3 that service tax is payable ,then recovery proceedings can be initiated. So be careful that any arithmetic errors are not there in the ST 3 return 

 

11 ST 3 return can be revised only once ,within a period of  90 days 

 

12 On taking a new registration, the assessee may send a letter to the department explaining in detail the nature of business, services offered, abatements to be availed and other relevant information .This letter will be helpful if later on if any suppression is alleged.

 

Regards