Show cause notice under Section 73(1)

Section 73(1)  of the Finance Act, 1994 (‘Act’ for short) provides that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the Central Excise Officer may, within eighteen months from the relevant date, serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.

The proviso to this section provides that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of-

• fraud; or
• collusion; or
• willful mis-statement; or
• suppression of facts; or
• contravention of any of the provisions of this Chapter or of the rules made there under with intent to evade payment of service tax,

the limitation of period eighteen months will be extended to five years from the relevant date.

Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of eighteen months or five years, as the case may be.

Deemed show cause notice

Section 73 (2) provides that except the period of eighteen months of serving the notice for recovery of service tax, the Central Excise Officer may serve, subsequent to any notice or notices served under Section 73(1), a statement, containing the details of service tax not levied or paid or short levied or short paid or erroneously refunded for the subsequent period, on the person chargeable to service tax, then, service of such statement shall be deemed to be service of notice on such person, subject to the condition that the grounds relied upon for the subsequent period are same as are mentioned in the earlier notices.

Relevant date

Section 73(6) provides what is the relevant date for the purpose of issuing show cause notice under Section 73(1).  The relevant date is-

•  in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid-

• where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed;
• where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
• in any other case, the date on which the service tax is to be paid under this Chapter or the rules made there under;

• in a case where the service tax is provisionally assessed under this Chapter or the rules made there under, the date of adjustment of the service tax after the final assessment thereof;
• in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.

Show cause notice under Section 73A

Section 73A (1) provides that any person who is liable to pay service tax under the provisions of this Chapter or the rules made there under, and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chapter or the rules made there under from the recipient of taxable service in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government.

Section 73A(2) provides that  Where any person who has collected any amount, which is not required to be collected, from any other person, in any manner as representing service tax, such person shall forthwith pay the amount so collected to the credit of the Central Government.

Section 73A(3) provides that Where any amount is required to be paid to the credit of the Central Government under Section 73A(1) or (2) and the same has not been so paid, the Central Excise Officer shall serve, on the person liable to pay such amount, a notice requiring him to show cause why the said amount, as specified in the notice, should not be paid by him to the credit of the Central Government.

Show cause notice under Section 87

Section 87(b)(i) provides that the Central Excise Officer may, by notice in writing, require any other person from whom money is due or may become due to such person, or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central Government either forthwith upon the money becoming due or being held or at or within the time specified in the notice, not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount.

Proper Officer to issue Show cause notice

The service tax provisions give powers to Central Excise Officers to issue show cause notice.  The term ‘Central Excise Officer’ has not been defined in the Finance Act.  Section 65B (55) provides that words and expressions used but not defined in this Chapter and defined in the Central Excise Act, 1944 or the rules made there under, shall apply, so far as may be, in relation to service tax as they apply in relation to a duty of excise.  Therefore we have to take definition for ‘Central Excise Officer’ from the Central Excise Act, 1944.

Section 2(b) of Central Excise Act, 1944 defines the term ‘Central Excise Officer’ as-

• Principal Chief Commissioner of Central Excise;
• Chief Commissioner of Central Excise;
• Principal Commissioner of Central Excise;
• Commissioner of Central Excise;
• Commissioner of Central Excise (Appeals);
• Additional Commissioner of Central Excise;
• Joint Commissioner of Central Excise;
• Assistant Commissioner of Central Excise; or
• Deputy Commissioner of Central Excise
• any other officer of the Central Excise Department, or any person (including an officer of the State Government) invested by the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 with any of the powers of a Central Excise Officer under this Act.

Show cause notice under Section 83A

Section 83A of the Act provides that any person is liable to a penalty, such penalty may be adjudged by the Central Excise Officer conferred with such power as the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963, may, by notification in the Official Gazette, specify.  Before adjudication of penalty, show cause notice is required to be issued.

Jurisdiction of Intelligence wing

In Notification No.2/2015-ST, dated 10.02.2015 the Central Board of Excise and Customs hereby specifies that the Principal Director General/ Director General of Central Excise Intelligence shall have jurisdiction over the Principal Commissioners of Service Tax or the Principal Commissioners of Central Excise or the Commissioners of Service Tax or the Commissioners of Central Excise, as the case may be, for the purpose of assigning show cause notices issued by the Directorate General of Central Excise Intelligence, for adjudication, by such Principal Commissioners of Service Tax or the Principal Commissioners of Central Excise or the Commissioners of Service Tax or the Commissioners of Central Excise, as the case may be.   Other Officers of DGCEI are given similar powers of Central Excise Officers and are entitled to issue show cause notice to the assessee directing to give reply to the jurisdictional Central Excise Officer for adjudication.

Jurisdiction of Audit Commissionerate

In 2008, the Central Board of Excise and Customs (CBEC) have created a separate wing in the department called Audit Commissionerate, to look into two key issues: integrated and risk-based audits.  The officers of Audit Commissionerate are also vested with the powers of Central Excise Officers.  The Officers of Audit Commissionerate are entitled to issue show cause notice to the assessee on the points detected in the course of audit with directions to reply to the show cause notice to the Central Excise Officer having jurisdiction for adjudication.

When Show cause notice may not be issued?

Section 73(1B) provides that in a case where the amount of service tax payable has been self-assessed in the return furnished under Section 70(1), but not paid either in full or in part, the same shall be recovered along with interest thereon in any of the modes specified in section 87, without service of notice under Section 73(1).

Section 73(3) provides that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under Section 73(1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under Section 73(1)  in respect of the amount so paid.

In ‘Valenia Construction Private Limited V. Commissioner of Central Excise, Customs & Service Tax, Nagpur’ – 2015 (11) TMI 658 - CESTAT MUMBAI the Tribunal held that Section73(3) made it clear that either by the assessee or by the Department service tax is ascertained and paid voluntarily without any contest and intimated to the Department, the department should not issue show cause notice, when the show cause notice itself should not have been issued, there is no question of imposing any penalty.

In ‘Gurlein Manchanda V. Commissioner of Service Tax, Mumbai’ – 2015 (4) TMI 658 - CESTAT MUMBAI the Tribunal held that the discharge of the service tax on being pointed out, by appellant, gets covered under the provisions of Section 73(3) of the Act.  The said section specifically provides that no show cause notice is required to be issued if the assessee discharges the service tax and interest on its own ascertainment or on being pointed out by the department.