By S Sivakumar, LL.B, FCA, FCS, ACSI, MBA, Advocate
IN what could be termed as an attempt largely aimed at protecting an otherwise totally inefficient tax bureaucracy, the Government has proposed changes in Section 11A of the Central Excise Act, 1944 and Section 73 of the Finance Act, 1994. The normal period for issue of Show Cause Notices in cases where there is no suppression of facts etc. is proposed to be amended, to substitute “one year” in Section 11A with “two years” and “eighteen months” in Section 73 of the Finance Act, 1994
with “thirty months”. TIOL reports that, in the last Central Excise Tariff Conference, the Vizag zone
had suggested that the Board should consider proposing amendment in law to the effect that in case of audit the normal period of limitation would be much longer say three years or five years and that the Board seems to have accepted this partially . A parallel hike is also seen in section 28 of the
Customs Act, 1962 where the normal period is also raised to two years.
What is important to see here is, as to, the impact this proposal would have on the tax payers,
especially, in terms of the increase in the normal period, to 30 months, as regards service tax. It is
common knowledge that both the Departmental officers and the assessees have serious issues in
interpreting the service tax law and the result isthe inevitable confusion that prevails. With most show cause notices getting confirmed at the adjudication level, the benefit of a lower normal period would have come to the rescue of the hapless taxpayer, at the appellate level. While one could have
understood the need for the normal period to be increased from one year to 18 months, the current
proposal to further increase it to 30 months comes as a rude shock, considering especially the fact
that, the filing of the ST-3 returns has been automated and the jurisdictional officer can have all the
information that he requires, at the press of a button. If the Babus are so busy that they cannot look
into the returns and other information filed with them and issue show cause notices for a period of
up to 30 months from the date of the filing of such returns, what else are they doing? This is a very
pertinent question that the Government has to answer, given the fact that, over the last two years,
one has seen a significant increase in the number of Commissioners, Principal Commissioners, etc. at the service tax Commissionerates.
Extending the normal period would send a wrong signal to investors, to whom, the Government is
repeatedly trying to sell the concept of ‘ease of doing business in India’. This step, by itself, would
result in the increase in service tax related litigation, as the Babus now know that, they have 30
months’ time from the end of the relevant half year, to issue SCNs to cover the normal period. The
proposal is a direct acknowledgement of the fact that our tax bureaucracy is inefficient and incapable.
As far as the hapless taxpayer is concerned…this move would increase the risks associated in dealing with the service tax law, as tax can be demanded under the normal period for a period of 30 months from the end of the half year (effectively, 36 months from the tax month).
In the coming years, there is every possibility that there will not be anything called normal period as in any case the department ropes in the extended period while making any demand from the poor tax payer.
Only the Almighty can save the hapless lesser mortals!