Dr. Sanjiv Agarwal

Prior to Finance Act, 2014, Service Tax law does not provide for any provision which stipulates the time period within which adjudicating authority is bound to complete the adjudicating process and issue the demand order or adjudication order. The experience suggests that the officers take years together to complete the adjudication or even to issue orders after personal hearings are over, so much so that they continue to issue the subsequent or follow-on show cause notices without even bothering to look at the fate of earlier SCN’s. For the first time in the history of Service Tax, Finance Act, 2014 has inserted a new sub-section in section 73 of the Finance Act, 1994 to provide that adjudication shall have to be completed within stipulated time period of six months or one year, as the case may be.

Amendment made by Finance Act, 2014

Finance Act, 2014 has inserted new sub-section 4B in section 73 to provide for time limit for adjudication. The amendment has been made to specify a time limit for adjudication as either six months or one year, depending upon the nature of case, to be adhered to where it is possible.

The new sub-section 4B reads as follows:

“(4B) The Central Excise Officer shall determine the amount of service tax due under sub- section (2) –

(a) within six months from the date of notice where it is possible to do so, in respect of cases whose limitation is specified as eighteen months in sub-section(1);

(b) within one year from the date of notice, where it is possible to do so, in respect of cases falling under proviso to sub-section (1) or the proviso to sub-section (4A).

Accordingly, following time frame shall be applicable for determining the amount of Service Tax due by the Central Excise Officer:

  • in cases where limitation is 18 months :    Within 6 months from date of notice
  • in cases where extended limitation is invoked :  Within 1 year from date of notice

However, in both the cases, the provision has a rider i.e. ‘where it is possible to do so’. This would imply that wherever it may not be possible for the Central Excise Officer to do so, this provision may not apply. In such cases, it may be necessary for the officer to record the reasons as to why it not possible to adhere to the specified time lines.

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October 2021