Summons, Investigation, Audit, Special Audit, Show cause Notice, Appeals. Bharat Raichandani Advocate

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1 Summons, Investigation, Audit, Special Audit, Show cause Notice, Appeals Bharat Raichandani Advocate

2 Section 14 of CEA, Power to summon persons to give evidence and produce documents in inquiries under this Act Rule 5 A of service tax Rules,1994-Access to registered premises Section 73 of FA, Recovery of service tax not levied or paid or short-levied or shortpaid or erroneously refunded Section 73A of FA, Service Tax Collected from any person to be deposited with Central Government Section 73B of FA, Interest on amount collected in excess Section 73C of FA, Provisional attachment to protect revenue in certain cases

3 Section 73D of FA, Publication of information in respect of persons in certain cases Section 74 of FA, Rectification of mistake Section 75 of FA, Interest on delayed payment of service tax Section 83A of FA, 1994 Power of Adjudication Section 87 of FA, Recovery of any amount due to Central Government

4 F.No 137/39/2007-CX-4 dated At first instance: For calling for information/documents normally the mode of communication should be either in the form of a telephone call or by way of sending a simple letter. Second instance: Issuance of summons should be resorted to, only when the above mentioned modes of communications are found to be ineffective or are likely to jeopardize revenue interest or when it is essential to ensure personal presence of the person concerned to tender evidence or record statement in connection with a service tax evasion case;

5 DGCEI Letters/Notices are not summons Must be replied Facts need to be put properly

6 Statement u/s 14 Facts only not law Can be used against person making such statement Retraction

7 Recovery of money No power Who has the power to issue Summon?

8 ISSUANCE OF SHOW CAUSE NOTICE Finance Act, 1994 Section 73 Recovery of service tax not levied, or not paid or short levied or short paid or erroneously refunded Central Excise Officer has to issue show cause notice within Eighteen Months from the relevant date Time period to issue Show Cause Notice is 5 years in case of fraud, collusion, willful mis-statement, suppression of facts and contravention of any of the provisions with an intent to evade payment of service tax by the assessee

9 MEANING OF RELEVANT DATE relevant date means (a) where service tax return is filed the date on which it is filed is the relevant date; (b) where no periodical return is filed, the last date to file such return under the said rules; (c) in any other case, the date on which the service tax is to be paid; (d) in case of provisional assessment the date of adjustment after the final assessment; (e) in case of erroneous refund the date of refund. 73(1)A-Demnad for subsequent period.

10 SOME ISSUES Normal period of limitationo Period April, 2005 to September, 2005 when should show cause notice be issued to be within normal period of time. Relevant date for export of service - date of payment OR date of receipt of payment OR date of payment of service tax OR date of raising invoice? Payment of service tax under section 66A relevant date for refund of service tax date of import or date of payment of service tax

11 SHOW CAUSE NOTICE Relied upon documents to be sought Counter each allegation separately General rebuttal not sufficient Cross examination Time bar

12 SERVING OF SCN SECTION 37C Mere issue not sufficient - to be served Refusal to accept notice is due service of notice. In case of partnership firm, SCN can be issued to any partner. In case of company, SCN can be issued to any of director, secretary or principal officer. Notice to agent is valid.

13 PROVISIONAL ATTACHMENT Section 73C: During the pendency of proceeding under section 73/ 73A, the Central Excise Officer can pass an order to provisionally attach the property of the assessee The Central Excise Officer has to take prior approval from the Commissioner of Central Excise Provisional attachment shall have effect for the period of 6 months from the date of order. Chief Commissioner of Central Excise have discretionary power to extend the attachment for the period upto 2 years. However, he must record reasons in writing.

14 Notification No.30/2008-ST dated has been issued under subsection (1) and sub-section (2) of Section 94 read with Section 73C of the Finance Act, 1994 notifying the Service Tax (Provisional Attachment of Property) Rules, The said rules provide for the conditions and procedure to be followed for provisional attachment of property.

15 Circular No. 103/6/2008-ST dated 1st July, The following types of offences committed by a service provider or an exporter may be considered for provisional attachment of property:- Provision of service w/o invoice and without payment of tax; Provision of service without declaring the correct value, where a portion of value in excess of invoice price, is received by him but not accounted for in books of account.

16 Circular No. 103/6/2008-ST dated 1st July, Taking of Cenvat credit without the receipt of goods/services Taking of Cenvat credit on non- genuine invoices Issue of service tax invoices, without providing or to be providing a taxable service, as specified in the said invoice, Claiming of refund or rebate in a fraudulent manner such as on non genuine invoice

17 RECTIFICATION OF MISTAKE Central Excise Officer under Section 74 of the Finance Act, 1994 can rectify a mistake apparent on record within a period of 2 year from the date of the order passed. Central Excise Officer can make an amendment on his own motion; or if any mistake is brought to his notice by the assessee or the Commissioner of Central Excise or the Commissioner of Central Excise (Appeals). Amendment to enhance the liability or reduce the refund can only be after giving a notice to the assessee and after giving a reasonable opportunity of being heard Where an amendment is made under this section, an order shall be passed in writing by the Central Excise Officer concerned.

18 SOME ISSUES Applied for rectification of mistake under section 74 No appeal filed under section 85 What is the position? Appeal is time barred beyond condonable period What happens?

19 REVISION (BEFORE ) Section 84 of the Finance Act, 1994 Commissioner of Central Excise can revise any order passed by the adjudicating authority subordinate to him An opportunity of being heard must be given to the assessee. Revision cannot be done in case the appeal against the such issue is pending before the Commissioner of Central Excise (Appeals). Order cannot be passed after the expiry of two years from the date on which the order sought to be revised has been passed.

20 SECTION 84 (FROM ) Commissioner of Central Excise can on his own motion, call for & examine records of any order passed by the adjudicating authority subordinate to him, to ascertain the legality & propriety of such decision or order. An order under this Section shall be made within 3 months from the date of communication of the order of the adjudicating authority. Inserted by amendment in Budget

21 APPEAL AGAINST ORDER-IN- ORIGINAL Section 85 for an appeal against the order of an adjudicating authority subordinate to Commissioner Time period prior to and post month /2 months Revision mechanism as provided under section 35 EE of the Central Excise Act, made applicable to service tax cases by borrowing that section under Section 83 by Finance Act,2012

22 SOME ISSUES Mr. X received a SCN from the Assistant Commissioner (Service Tax) Can Mr. Y, Mr. X s friend, philosopher and guide appear before the authorities? Section 35Q authorized representative

23 SOME ISSUES Can commissioner (appeals) condone delay beyond period of 30 days? Singh enterprises 2008 (221) ELT 163 (SC)

24 SOME ISSUES Can department file appeal under section aggrieved person for the purpose of filing an appeal Narendra P Unrao 15 ELT 275 (T)

25 SOME ISSUES Power of commissioner (appeals) to remand matter back to the adjudicating authority MIL India Limited 2007 (210) ELT 188 (SC)

26 SOME ISSUES PRIOR TO D(1A) w.e.f. May 2008, applied to exempted goods also. No such provision under 73A to apply to exempted services. 11DD not borrowed. Hence no interest on 11DD not borrowed. Hence no interest on 11D amount Interest is a substantive provision - India Carbon (SC) and VVS Sugar (SC).

27 SOME ISSUES Section 18 not borrowed as such. Since it relates to power to search and arrest. However, Section 82 provides for search as no arrest can be made even in case evasion of service tax. Section 31 to 32P borrowed in Finance Act,2012. Hence, now settlement of cases provisions are also applicable in relation to service tax cases.

28 Audit and Special Audit in Service Tax

29 Special Cenvat Credit Audit Section 14 AA deleted under Section 83 by finance Act, 2012 w.e.f

30 Special Audit in service tax Inserted w.e.f by Finance Act, 2012 (1) If the Commissioner of Central Excise, has reasons to believe that any person liable to pay service tax (i) (ii) has failed to declare or determine the value of a taxable service correctly; or has availed and utilized credit of duty or tax paid (a) which is not within the normal limits having regard to the nature of taxable service provided, the extent of capital goods used or the type of inputs or input services used, or any other relevant factors as he may deem appropriate; or (b) by means of fraud, collusion, or any wilful mis-statement or suppression of facts; or

31 Special Audit in service tax (iii) has operations spread out in multiple locations and it is not possible or practicable to obtain a true and complete picture of his accounts from the registered premises failing under the jurisdiction of the said Commissioner, he may direct such person to get his accounts audited by a chartered accountant or cost accountant nominated by him, to the extent and for the period as may be specified by the Commissioner.

32 Special Audit in service tax (2) The chartered accountant or cost accountant referred to in sub-section (1) shall, within the period specified by the said Commissioner, submit a report duly signed and certified by him to the said Commissioner mentioning therein such other particulars as may be specified by him. (3) The provisions of sub-section (1) shall have effect notwithstanding that the accounts of such person have been audited under any other law for the time being in force.

33 Special Audit in service tax (4) The person liable to pay tax shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit under sub-section (1) and proposed to be utilized in any proceeding under the provisions of this Chapter or rules made there under. CA and CWA as meaning assigned to CA and CWA Act 1949 and 1959 respectively.

34 Thank You

Bharat Raichandani Advocate

Bharat Raichandani Advocate Section 14 of CEA, 1944 - Power to summon persons to give evidence and produce documents in inquiries under this Act Section 73 of FA, 1994 - Recovery of service tax not levied