Limitations to LIMITATION

[Amutha Balasubramanian]

LIMITATION UNDER SERVICE TAX LAWS- LIMITATIONS of the Limitation period

The Levy: The levy of Service Tax in India happened for the First Time in the year 1994 with just three taxable services with a tax rate of 5%. This levy has a long journey wherein year after year the scope of taxable services as well as the tax rate itself have increased substantially. The levy has come to an end on 30/06/2017 consequent to the introduction of GST in India.

Issue of SCN: When the law was introduced, the period for issue of Show Cause Notice was kept as one year as provided under section 73(1) of the Finance Act. This NORMAL PERIOD remained ONE YEAR for a considerable time till 27/05/2012 as the period got enhanced to eighteen months with effect from 28/05/2012.

The Government had the patience at that time for EIGHT YEARS to keep the period live as ONE YEAR. Further, the period of ONE YEAR was first enhance to only EIGHTEEN MONTHS. It may be noted that the extended period remained FIVE YEARS throughout the journey of Service Tax.

Having found that the increase in NORMAL PERIOD helps the Department to increase the scope for proposing tax demands, extended the period to THIRTY MONTHS with effect from 14/05/2016 which was in force only up to 30/06/2017.

RELEVANT DATE: Relevant date refers to the date of filing of the Service Tax Return for the period for which it pertains. The returns were required to be filed half yearly as on 30^th September as well as 31^st March every year by October/April that follows. Consequent to introduction of GST, the last Service Tax Return was due on 15/08/2017 for the Quarter ended on 30/06/2017.

NORMAL Period:   Any SCN that is issued on and up to 31/03/2020 can go back only for a maximum period of THIRTY months ending on 31/03/2020. Thus no SCN under normal period can be issued for the period prior to 01/04/2015 beyond October 2017. Thus any SCN issued as on date for SERVICE TAX demand under normal period may go back only up to 01/04/2018 . However, Service Tax levy was in force only up to 30/06/2017 and accordingly no SCN could be issued under normal period with effect from 01/04/2020 onwards. Thus for all tax payers on whom suppression of facts can not be alleged are safe on Demand of Service Tax with effect from 01/04/2020 onwards.

NOVEL METHOD: Now that we have crossed even the time limit for filing the half yearly return of September 2020. Thus any SCN issued on or after 01/11/2020 can go back only up to a maximum period of FIVE YEARS ending on 30/09/2020. Accordingly, there is no scope for any SCN on Service Tax for the period covered up to 30/09/2015 as of now. Even this is possible only when the extended period is invoked. Hence, many SCNs are being issued now only with allegation of suppression of facts so as to take advantage on time.

The Real ISSUE: The Department is still issuing the Show Cause Notices for the period commencing from 01/04/2015 to 30/06/2017 under the pretext of SUPPRESSION OF FACTS.

The following situations are not applicable for proposing suppression of facts.

1. Disclosure of all relevant details in the periodical service tax return.
2. When the issue is debatable, it is better to seek clarification from the Service Tax Department. When the facts are within the knowledge of the Department, Suppression can not be alleged.
3. When the premises are audited by AUDIT people from Service Tax/DGCEI, and one SCN is issued covering extended period, the same issue can not be treated as suppression for subsequent periods.

The following table make the final deadline for issue of Show Cause Notice:

No	Period	ST 3 Filing Date	30 Months	60 Months
1	01/10/2014-31/03/2015	30/04/2015	31/10/2017	30/04/2020
2	01/04/2015-30/09/2015	31/10/2015	30/04/2018	31/10/2020
3	01/10/2015 to 31/03/2016	30/04/2016	31/10/2018	30/04/2021
4	01/04/2016- 30/09/2016	31/10/2016	30/04/2019	31/10/2021
5	01/10/2016-31/03/2017	30/04/2017	31/10/2019	30/04/2022
6	01/04/2017 to 30/06/2017	15/08/2017	15/02/2020	15/08/2022

(Return filing dates are assumed dates on which returns were filed)

The above Table makes it clear that SCN can not be issued in normal cases from March 2020 onwards. However, the SCN can be issued where there is suppression of facts up to 15/08/2022 as above.

THE DANGER: The Government of India, due to COVID 19 issue, extended certain time limits for the benefits of tax payers to enable them to file reply to SCN, file appeals wherever required etc. which fell due during 20/03/2020 to 30/12/2020 up to 31/12/2020. This was done mainly for the facilitation to the taxpayer to complete certain requirements by taking advantage of the amendments. However, The TAX DEPARTMENT has taken advantage of this notification and notices are being issued even now under the pretext of suppression of facts for the period covering from 01/10/2015 to 30/06/2017.

CONCLUSION: The department is going one step further and by invoking the limitation period, they are even extending the period which is permissible as per law. Unless the tax payer is aware of the above time limits, the department shall be getting unjustly enriched.

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Amutha Balasubramanian

Advocate

amuthabalu@gmail.com