we recently faced Excise Audit, in that Govt officer raised liability of service tax for our sister concern, we get registration and paid 2 yrs dues with interest.
now i am not getting whether we can file return for those period? is any problem of non filling of return??
18 October 2013
The Audit Party under EA Rules 2000 or CERA (various courts have held CERA has no power to audit private sector concerns) can only scrutinize and audit the auditee. In case of the services received by the auditee, in case a service provider has not charged or paid any service tax for which he is liable, only the Divisional Assistant / Deputy Commissioner of Service Tax (not even the Assistant / Deputy Commissioner of Service Tax Audit)can issue notices to a party regarding failure to collect and pay service tax. Therefore the demand for service tax raised by the Superintendent of Service Tax (Audit) on a sister concern not being an auditee is beyond the scope of his powers and illegal. His duty was to inform the Divisonal Assistant / Deputy Commissioner of Service Tax through his Assistant / Deputy Commissioner of Service Tax about the leakage of revenue. As per the audit letter the authorities claim that payment of tax and interest due will protect the assessee from penalty and Show Cause Notice proceedings. The power to grant this immunity on those terms is restricted only to the auditee, not its associate/sister concerns.
Be that as it may, having registered and paid the tax alongwith interest the new assessee is a defaulter since no ST-3 Returns have been filed. The Divisional AC will now issue a SCN demanding tax for the past five years along with interest and penalty for supression of tax due to the extent of tax payable. This matter will in most cases ultimately be decided in the assessee's favour at the CESTAT level, but 7 to 8 years will elapse before this favourable decision comes.
The Department has powers to go back for five years, hence a SCN issued before 25th October 2013 can demand details from 1st October 2007.
There is a penalty for late filing of ST-3 @ Rs.100/- per day subject to a maximum of Rs.20,000/- per ST-3 Return. Additionally there is a penalty for non-filing of returns. The time arring for filing ST-3 Returns is five years.
The best course of action is to file all the ST-3 Returns for the past two years alongwith the penalty for late filing.
Then await the Department's reaction which may be just to ignore the returns filed unless there is a reasonably high claim of Input CENVAT credit in the tax payment more than 25%.
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