The Service tax authorities have recently issued a spate of SCNs for the FY 2015-16 to June 2017. Most of these notices are worded same and seems to be a template issued by someone from the ministry. The said SCN are purportedly issued under section 73(1) of the Finance Act 1994 alleging “wilful attempt to evade taxes”.
While preparing the template of the SCN the concerned draftsman has totally ignored the settled law laid down by apex court, the consequent circular issued by the Board (now CBIC) in 2017 and the specific provisions of section 73(1).
The said notices are identically worded and have a common grouse that the person has not submitted details of taxable receipts. In most cases the SCN is issued in the same template even where actually detailed submissions are made by the person concerned.
It appears that SCNs have been issued under the diktats of the higher authorities in ministry and hence the officers issuing the said SCN have no option but to ignore all law and submissions of the persons to whom such SCN are issued.
In this article we have analysed the legality of such SCNs.
Page Contents
Section 73(1) inapplicable:
It is stated that the SCN issued u/s 73(1) is inapplicable to the said SCNs. The said section comes into play only if the person has underpaid / not paid service tax or received excess refund.
In most cases the person who has received the SCN are either:
a) exempt from collection and payment of service tax; or
b) the service tax is payable by the service recipient instead of service provider under the reverse charge mechanism (RCM).
For instance, as per notification nos. 25/2012-ST issued by Central Government under section 93(1) and notification no. 30/2012-ST issued under section 68(2) the advocates providing legal services are not liable either to collect and pay service tax or to register under the Service tax provisions.
Therefore, since the chargeable provisions under section 66B is not applicable in most cases and persons receiving notices don’t have obligations under the said Act, section 73(1) is inapplicable at the outset itself.
The SCN is barred by Limitation
Even if for argument’s sake it is held that section 73(1) is applicable by any stroke of luck then too the said SCN is barred by limitation. The said section lays down a time limit of 30 months from the relevant date.
The relevant date is separately provided under section 73(6) as the date when the return was due to be filed. Therefore, for the period FY 2015-16 to June 2017 the 30 months time period relevant date has expired before the said SCN have been served on the persons concerned.
| FY 2015-16 | Quarterly due date (relevant date) | 30 months from due date (30 months from relevant date) |
| Q 1 – April to June | 5th / 6th Of July, 2015 | 5th / 6th of December, 2017 |
| Q2 – July to September | 5th / 6th of October, 2015 | 5th / 6th of March, 2018 |
| Q3 – October to December | 5th / 6th of January, 2016 | 5th / 6th of June, 2018 |
| Q4 – January to March | 31st March, 2016 | 31st September, 2018 |
–
| FY 2016-17 | Quarterly due date (relevant date) | 30 months from due date (30 months from relevant date) |
| Q 1 – April to June | 5th / 6th Of July, 2016 | 5th / 6th of December, 2018 |
| Q2 – July to September | 5th / 6th of October, 2016 | 5th / 6th of March, 2019 |
| Q3 – October to December | 5th / 6th of January, 2017 | 5th / 6th of June, 2019 |
| Q4 – January to March | 31st March, 2017 | 31st September, 2019 |
–
| FY 2017-18 | Quarterly due date (relevant date) | 30 months from due date (30 months from relevant date) |
| Q 1 – April to June | 5th / 6th Of July, 2017 | 5th / 6th of December, 2019 |
The officers have issued the SCNs apparently on the basis of an extended period of 5 years from the relevant date. However, the said extended period of 5 years is applicable only in following situations:
(I) Fraud
(II) Collusion
(III) Misstatement
(IV) Concealing information with the wilful intent to defraud revenue
(V) Not following any provisions of law.
Burden on department to prove Fraud etc:
It is seen that the said SCNs are strangely silent on any instance or details citing any of the above elements. The SCNs merely cite the relevant provision of law but the fact of instance is totally absent.
The courts have repeatedly looked down upon such SCN as they lead to “inspector Raj”. Safeguards are provided in the process which are being ignored.
The apex court has in the case of M/s. Cosmic Dye chemical Vs Collector of Cen. Excise, Bombay [1995 (75) E.L.T. 721 (S.C.) held that
a) the burden is on the revenue to prove any of the above elements to uphold validity of an extended period of 5 years.
b) that detailed verification must be made prior to issuing SCN and complete details be provided to the person in the SCN.
However, in almost all cases the SCN is issued only for the reason that the turnover in income tax records do not match with the turnover in the service tax records. The reason for such mismatch is conveniently ignored by the officers even when pointed out citing the notifications of exemption and RCM. Hence, we believe that such SCNs will not pass the test of validity if and when challenged.
Inspired by the decision of SC in the case of M/s. Cosmic Dye chemical Vs Collector of Cen. Excise, Bombay (supra), the board issued a Circular no. 1053/02/2017-CX, F.No. 96/1/2017-CX.I dated 10th March, 2017 laying down guidelines for issuance of SCN. In principle it laid down that such SCN cannot be issued for making roving and fishing inquiry. The burden is on the department to prove with evidence and details as to which transaction falls in the above category. The officers are mandated to carry out proper verification before issuing such SCN.
The authors believe that the burden cannot be laid on the party to prove no fraud etc. Otherwise, there will be no difference between 30 months period and 5 years period if roving and fishing inquiry is allowed to be made for SCN of 5 years.
It is also stated that in absence of any instance of fraud or collusion being pointed out there is nothing for rebuttal by the person receiving such notice. How is the person required to prove that he is not liable for service tax other than relying upon government notifications. A person can offer rebuttal with evidence only where the department provides the details of the transactions which they consider to have led to underpayment / non payment of service tax. Merely comparing the income tax returns with service tax returns will not be an instance especially where it has been repeatedly pointed out that there was no liability on the party to collect and pay service tax. The department has not rebutted this contention while issuing the standard format SCNs.
The allegations of fraud and collusion etc are allegations of serious nature and they cannot be just thrown at a party lightly and in a vague manner. These allegations lead to serious consequences and such light mannered, routine allegations if upheld will give unbridled and arbitrary powers to the department to just allege and leave the party receiving notice scurrying to somehow prove his innocence and bona fide which is not the mandate of law.
Statutory Exemption from payment of Service Tax
The SCN claiming difference between IT return and ST return is merely a roving and fishing inquiry without even bothering to find that the persons are not liable to either register under service tax nor collect and pay service tax as per various notifications issued by Central Government.
As stated earlier, the department cannot use extended 5 year period to make a roving and fishing inquiry whether all transactions carried out by us fall within the above notifications. It should have been done within 30 months of relevant date.
In other words, So for SCN to be valid both the following conditions must be fulfilled:
1. Service tax should have been underpaid / not paid / excess refund
AND
2. It should have happened due to fraud, collusion by the party.
If only condition 1 is satisfied then 30 months is limitation period.
If both 1 and 2 both are satisfied only then the 5 years period is applicable
In the instant SCNs, in fact none of the above conditions are satisfied. There is no underpayment or excess refund due to specific exemption or RCM notifications as mentioned above. Hence there cannot be possibly a valid SCN under section 73(1).
SCN do not meet requirement of a valid notice:
The SCN issued merely states that details be submitted within 30 days of receipt of the SCN. The said SCN does not mention the date and time of compliance or the mode of compliance i.e whether by personal appearance or through email etc. It is clear from various representations and newspaper reports that thousands of such illegal notices have been issued by the department. How and when will these proceedings come to an end is not known.
As we pen this article, we are informed that the Mumbai High Court has already stayed one such SCN. We are also told that many other writs have been filed by various other persons or are in the process of being filed. Unfortunately, the ministry is looking on the other side while dealing (rather, not dealing) with this issue. Welcome to ease of doing business in India. Let the courts and litigation flourish.
Author Bio
I had registered for service tax in 2015 September and got service tax registration in October 2015.
I started providing services since August 3,2015 but at that time I had no service tax number.
I was told by my CA that you have to register fro service tax just before income touches 10 Lakhs and pay service tax only on the income excess over 10 lakhs in the year of registration. So, I did accordingly as per his instructions. Now after 7 years, I have received SCN and summons which have been backdated to April 2021 and never ever received by me thenThey are basically saying that I have not paid my service tax for 3 months in the beginning.But I never had any Service tax number then and also did not get this amount from the company where I provided my services.
Please advice.
There was no mala fide intention to evade taxes at all.
Please help
I was issued SCN for non payment of service Tax for period 2015-16,2016-17 &3months from Apr2017 to June 2017 in respect of Partnership LLP companies .As per corporate definition which allows 100% tax payable by Body Corporate .It was ruled out stating that Though it is a Body corporate by Act of 2008 but tax is not payable by LLP ,Funny Remedy please .
Need to know what happened after PH for the years 2015-16 to 2017-18 (up to June 17) about service tax SCN, whether they were valid in terms of time-barred as mentioned in this article.
Generally, the time limit to issue SCN as mentioned above is 30 months for non-Fraud & 5 years for fraud cases, however, the time limit extended to 5 years which is not an application for a non-fraud case, yet the department issued a bundle of SCNs merely based on ITR without applicable of mind.
Therefore, my approach to complying with such types of SCNs are very simple reply to be filed with limited documentary evidence through register post. However, I personally present before concern authority on the 3rd PH only. Also, wait and watch to what action to be taken by the officer whether calling again or passing the order, or noting to do any thing.
Most of the cases, non of the adjudication orders have been received till date. That means “DAYA KUCHH TO GADBAD HAI” and lot more things…..
Jay Hind
Recently I appeared for a PH before the adjudicating authority on behalf of my client and despite my best efforts to convince him that such vague notices are note tenable, he had only one answer try your luck in appeal. Hope the learned appellate authority does justice.
They have again started sending personal hearing notices against these show cause notices which they had sent in 2020-2021. They are referring to some vague reply given on 26th May 2022 which looks like just a cover up and calling all to come and meet the assistant commissioner on the 31st August failing to which they pass an ex parte decision on the basis of the records available as per the submission dated 26th May 2022 which itself is incorrect!
Hey
can you please provide update, what happened after pH
what happened after PH
i have a job worker i have a textile processing unit, my client give me fabric and i doing embroidery on same fabric and back to same client. as per 66B in ST act we have exempted from service tax but department send me Show cause notice what is the reply i given him.
I had a standalone dance class business in bangalore and hired a professional CA to do my taxes. Back in 2016 i had submitted all my customer receipt books to my auditor. I left india in 2017 and had to shut down my business due to corona in 2020. Out of nowhere i have received an email from taxman seeking clarification on value difference between ITR & STR to be 11 lacs in 2016 returns. I do not have my receipt books with me now and never wilfully violated any rule. I intend to seek legal help to fight my case and not in a position to cough up lacs of rupees as penalty within a week. This is nothing but tax terrorism !
i am served a notice through email on 17th sep 2021 and on basis of my turnover asked to pay 1.50lacs within 7 days alongwith penalty. Please reply sir what to do.
Sir ,
I am a civil engineer cum advocate.I am registered as advocate .I am doing investigation jobs for genral insurance Co and also doing valuation jobs . I have receivved notice from deparetment. In my ITR my receipt from other jobs than legal services was less than 9 Lakhs . Can I avail the deence that my legal services were exempted from service tax
We are a small software company. We used to export software development services to our regular clients abroad and received payment from abroad. We received an Order in Original ( OIO not SCN) from central tax department demanding service tax and arrears to be paid amounting to 14 lakhs. This was for the year 2014-15 when we never dealt with any local business nor collected any service tax. They have directly sent us the OIO without any SCN, that too to our old address, where we are not operational now.
What should we do with such a demand Are we bound to make the payment since we didn’t collect any service tax as the services we provide were exempted. Also I understand from the web that there is a maximum limit of 5 years to raise such a demand which the department didn’t consider while sending this OIO.
Expert opinions will be highly appreciated.
OIO is a follow up of SCN, & time limit of 5 years is for SCN, this time limit was extended during corona pandemic, if already OIO is issued file an appeal with the Commissioner Appeals and during hearing submit that your services are exempted and SCN was not served to you. You may get relief
what happens if taxpayers is innocent agains service tax department’s issued notice but taxpayers fail to present truth before limitation of time given by department in notice and now department passed order but i have all relevant proofs that prove department’s claim is totally wrong?
I have received the same SCN for the f.y 2015-16 to June 2017 for one of my clients. Please guide me on what should I do? Whether reply or not?
I worked as freelance software consultant to foreign company during FY 2015-2016 . Received SCN saying I didn’t pay service tax , But my work comes export of foreign services and ST not applicable ,Can anybody guide me how to reply SCN
I got this notice last week demanding service tax arrers for Fy2016. I am an individual and had no idea till now that i had to pay service tax for consultation services.
I got the notice from Bangalore West 1 division. I don’t even stay in Bangalore now. How will I even give a reply.?
They are strict, i dont have money to pay service tax..before 5 years i dont even aware of this Tax and all..I didnt even collect the service tax how can i pay..Now they are asking me to pay..My buzz is completly gone.
I have received a service tax notice for the financial year 2015-16, all my transactions are sale of goods by charging Vat, my CA filled the turnover in sale of services kindly guide how to respond.
Maybe your service come under 75% abetment on total turnover which means maybe you should have to pay service tax only on 25% of total turnover.
For example if total yearly turnover is 1,00,000 then 75,000 is abetment (छूट) as per govt Guidelines so you have to pay service tax on only 25,000 as per service tax rate.
submit a reply to the notice issuing authority, submit them all the proofs that you had done trading of goods ,bills(both sale and purchase) corroborated with bank/cash transactions, vat returns, Form-26AS showing NIL credits, request for a personal hearing and submit the above you may get relief
same happened to myself and I don’t have any bills , we deal only in goods
Service tax department issued a notice that 2012-2013 one qrt return is not submitted and ask to deposit 40k as an penalty fees and the notice is issued just after the weavers scheme is over and ask to appeared with in 30 days.
Can service tax department ask the documents after 5 years?
How many days we have to kept information of service tax?
Plz guide.
Sir, i have received the (SCN : 2015 -2016) notice twice, February and in march 2021, but i have not met the officer, i have lost half of the vendors bills, i have few bills, will account to only 50% of bank inward turnover, most of the vendors have disappeared, i cant find them anymore, Please advice on what to do now, do i need to meet officer or just leave it, please let me know, what could be the next step or what would be the penalty or punishment for this, im asking you, as my auditor is not of much help to me.
Hi sir I’ve declared ST liability in my Bakance shee2015 16 ,t but not made the payment . subsequently as the company is struck off by ROC in 2017. Now inhale received notice and SCN from st dept. I am out of Business since 2017 since company is struck off and all.bank is freezer by the ROC. I could.not.collect.my dues from my Drs . HOW CAN I REMIT THE DUES ??CAN UNPL ADVISE SUITABLY IN MY CASE
This is to inform all that yesterday that the authors of the article have obtained stay on SCN in three cases from Mumbai High Court. We will share the order once it’s uploaded on the website.
As you mentioned that we have got the stay order on show cause notice. Can you please share some information on this disturb thanks
How can we create a group of impacted taxpayers and file the writ petitions? This is purely not acceptable as taxman and ministry is harassing honest taxpayer and distributing the subsidies on our cost …
I also get the notice and that too on my old address from where I have shifted long back. I am not even aware of if SCN is issued or not to me. I have got the email and no further communication on that anywhere … what I am supposed to do
Even if a Person is liable to pay and register under Service Tax , notice is barred by limltation.
I had completed the assessment of my client and paid relevant due with interest and penalty before the time, even after SCN fired on my client which I straightway neglected and not attend at all to date.
well said in last line : Welcome to ease of doing business in India. Let the courts and litigation flourish. I have seen many business being closed just because of this harrassments
Really good article
We received Ser Tax Notice by speed post on 28dec2020, asking us to present for a personal hearing at dept on 22dec2020. , how they expect to issue such past dated dictat, and when i reponded with my reply on 30th dec2020, still they issued SCN to me , saying I did not respond for their queries, which is totally a false claim, how to puch sense in theirm head , i have all the acknowledgements of my reply submitted
SCN served to street vendors. This is What happens when they don’t know what they are doing.
Actually SCN doesn’t means confirmation of demand . In most of cases wrong filing of ITR eg. Sale of goods shown as sale of service leads to these notices.SCN means natural justice given to the assessee to fight his case on legal grounds where normally justice delivered .
Officers in the ST department are making best use of this situation for self gratification and harassing the assesses. They have even gone to the extent of re opening settlements under SVLDR scheme without any authority.
I have been issued SCN to pay 31 lakhs and being pressure raised to pay within 30 days…even my CA is also favouring the same, how should I pay at Once..
The new trend of illegal SCN shows the mind of the department. It is the sheer mistrust of the department and the wrong thinking of the administration. Question is how long will this be sustained by the tax paying community.
Hello Prasad. I saw your reply to the service tax show cause notices on taxguru.
I too got a SCN for Fy2016, as I has in a professional consulting and got paid via 194J. I had no clue about service tax payment. Can you help me with next steps?
Have you found any solution ,please guide me
It is truly written in third paragraph that even though details submission made before Superintendent, show cause notice issued by Assistant Commissioner, It’s ridiculous
The officer also said we are also fed up with such type of SCN but UPAR SE AATA he tohame karna padtahai
service tax
The bureaucrats in the Finance Ministry never hesitate in contempt of the Honorable Supreme Court and various High Courts. Unfortunately the Courts also have failed to take befitting action against them. This has added to the arrogance and egotistical approach of bureaucrats in the Finance Ministry.