Chapter V of Finance Act, 1994

73.  1Recovery of service tax not levied or paid or short-levied or short-paid or erroneously refunded

(1) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the 2[Central Excise Officer] may, within 11[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:

PROVIDED 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-

(a) fraud; or

(b) collusion; or

(c) wilful mis-statement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax,

by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words “11[eighteen months] , the words “five years” had been substituted.

Explanation: 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 11[eighteen months] or five years, as the case may be.

3[(1A) Notwithstanding anything contained in sub-section (1),  (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 that sub-section, 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. ]

15[(1B) Notwithstanding anything contained in sub-section (1), in a case where the amount of service tax payable has been self-assessed in the return furnished under sub-section (1) of section 70, 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 sub-section (1).]

(2) The 4[Central Excise Officer] shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from, or erroneously refunded to, such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.

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13[(2A) Where any appellate authority or tribunal or court concludes that the notice issued under the proviso to sub-section (1) is not sustainable for the reason that the charge of,-

     (a) fraud; or

     (b) collusion; or

     (c) wilful misstatement; or

     (d) suppression of facts; or

     (e) contravention of any of the provisions of this Chapter or the rules made thereunder with intent to evade payment of service tax,

     has not been established against the person chargeable with the service tax, to whom the notice was issued, the Central Excise Officer shall determine the service tax payable by such person for the period of eighteen months, as if the notice was issued for the offences for which limitation of eighteen months applies under sub-section (1).]

(3) 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 sub-section (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 sub-section (1) in respect of the amount so paid:

Provided that the 6[Central Excise Officer] may determine the amount of short payment of service tax or erroneously refunded service tax, if any, which in his opinion has not been paid by such person and, then, the 7[Central Excise Officer] shall proceed to recover such amount in the manner specified in this section, and the period of “11[eighteen months]” referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.

Explanation 1: For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the8[Central Excise Officer], but for this sub-section.

9[Explanation 2: For the removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of service-tax under this sub-section and interest thereon.]

(4) Nothing contained in sub-section (3) shall apply to a case where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of-

(a) fraud; or

(b) collusion; or

(c) wilful mis-statement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax.

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14[(4B) The Central Excise Officer shall determine the amount of service tax due under sub-section (2)-

(a) within six months from the date of notice where it is possible to do so, in respect of cases whose limitation is specified as eighteen months in sub-section (1);

(b) within one year from the date of notice, where it is possible to do so, in respect of cases falling under the proviso to sub-section (1) or the proviso to sub-section (4A).]

(5) The provisions of sub-section (3) shall not apply to any case where the service tax had become payable or ought to have been paid before the 14th day of May, 2003.

(6) For the purposes of this section, “relevant date” means,-

(i) 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-

(a) 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;

(b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;

(c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder;

(ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof;

(iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.

 

 

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Notes :

1. Substituted by the Finance (No. 2) Act, 2004, w.e.f. 10-9-2004. Prior to its substitution, section 73, as amended by the Finance Act, 2003, w.e.f. 14-5-2003, Finance Act, 2002, w.e.f. 16-8-2002, Finance Act, 2001, w.e.f. 16-7-2001, Finance Act, 1999, w.e.f. 11-5-1999 and Finance (No. 2) Act, 1998, w.e.f. 16-10-1998, read as under:

’73. Value of taxable services escaping assessment.-(1) If-

(a)  the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise has reason to believe that by reason of omission or failure on the part of the assessee, to make a return under section 70 for any prescribed period or to disclose wholly or truly all material facts required for verification of the assessment under section 71, the value of taxable service has escaped assessment or has been under-assessed or service tax has not been paid or has been short paid or any sum has erroneously been refunded, or

(b)  notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise has in consequence of information in his possession, reason to believe that the value of any taxable service assessable in any prescribed period has escaped assessment or has been under-assessed or service tax has not been paid or has been short-paid or any sum has erroneously been refunded,

he may, in cases falling under clause (a), at any time within five years, and in cases falling under clause (b), at any time within one year, from the relevant date, serve notice on the person chargeable with the service tax which has escaped assessment or has been under-assessed or has not been paid or has been short-paid, or to whom any sum has been erroneously refunded, requiring him to show cause why he should not pay the amount specified in the notice.

Explanation.-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 five years or one year, as the case may be.

(2) The Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.

(2A) Where any service tax has escaped assessment or has been under-assessed or service tax has not been paid or has been short-paid or erroneously refunded, the person chargeable with the service tax, may pay the amount of tax on the basis of his own ascertainment of such tax or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of service tax, and inform the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of service tax so paid:

Provided that the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise may determine the amount of short payment of service tax, if any, which in his opinion has not been paid by such person and, then, the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise shall proceed to recover such amount in the manner specified in this section, and the period of “one year” referred to in sub-section (1) shall be counted from the date of receipt of such information of payment.

Explanation 1.-Nothing contained in this sub-section shall apply to cases falling under clause (a) of sub-section (1).

Explanation 2.-For the removal of doubts, it is hereby declared that the interest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax, if any, as may be determined by the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise, but for this sub-section.

(2B) The provisions of sub-section (2A) shall not apply to any case where the service tax had become payable or ought to have been paid before the day on which the Finance Act, 2003 receives the assent of the President.

(3) For the purposes of this section, “relevant date” means,-

(i)  in the case of taxable service in respect of which service tax has escaped assessment or has been under-assessed or has not been paid or has been short-paid-

(a)  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;

(b)  where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;

(c)  in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder;

(ii)  in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof;

(iii)  in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.’

 

2. Substituted for “Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise” by the Finance Act, 2005, w.e.f. 13-5-2005.
3. Reinserted vide Finance Act, 2012, w.e.f. 28-5-2012, earlier it was Inserted by the Finance Act, 2006, w.e.f. 18-4-2006 and omitted vide Finance Act, 2011, w.e.f. 8-4-2011, before omission it was read as, “(1A) 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, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Chapter or the rules made thereunder, with intent to evade payment of service tax, by such person or his agent, to whom a notice is served under the proviso to sub-section (1) by the Central Excise Officer, such person or agent may pay service tax in full or in part as may be accepted by him, and the interest payable thereon under section 75 and penalty equal to twenty-five per cent. of the service tax specified in the notice or the service tax so accepted by such person within thirty days of the receipt of the notice.”
4. Substituted for “Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise” by the Finance Act, 2005, w.e.f. 13-5-2005
5. Inserted by the Finance Act, 2006, w.e.f. 18-4-2006. Further, omitted vide Finance Act, 2011, w.e.f. 8-4-2011, before omission it was read as,

Provided that where such person has paid the service tax in full together with interest and penalty under sub-section (1A), the proceedings in respect of such person and other persons to whom notices are served under sub-section (1) shall be deemed to be concluded:

          Provided further that where such person has paid service tax in part along with interest and penalty under sub-section (1A), the Central Excise Officer shall determine the amount of service tax or interest not being in excess of the amount partly due from such person”

 

6. Substituted for “Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise” by the Finance Act, 2005, w.e.f. 13-5-2005.
7. Substituted for “Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise” by the Finance Act, 2005, w.e.f. 13-5-2005.
8. Substituted for “Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise” by the Finance Act, 2005, w.e.f. 13-5-2005.
9. Explanation 2 in section 73, in sub-section (3), the Explanation has been inserted, vide Finance Act, 2010 w.e.f. 08-05-2010
10. Inserted vide Finance Act, 2011, w.e.f. 8-4-2011
11. Substituted vide Finance Act, 2012 w.e.f. 28-5-2012, before it was read as, “one year”
12. Substituted vide Finance Act, 2012 w.e.f. 28-5-2012, before it was read as, “sub-sections (3) and (4),”
13. Inserted vide Finance Act 2013, w.e.f. 10th May, 2013.
14. Inserted vide THE FINANCE (No. 2) ACT, 2014
15. Inserted vide THE FINANCE ACT, 2015 w.e.f. 14th May 2015
16. Omitted vide THE FINANCE ACT, 2015 w.e.f. 14th May 2015, before it was read as,

10[(4A) Notwithstanding anything contained in 12[sub-sections (4)], where during the course of any audit, investigation or verification, it is found that any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, but the true and complete details of transactions are available in the specified records, the person chargeable to service tax or to whom erroneous refund has been made, may pay the service tax in full or in part, as he may accept to be the amount of tax chargeable or erroneously refunded along with interest payable thereon under section 75 and penalty equal to one per cent of such tax, for each month, for the period during which the default continues, up to a maximum of twenty-five per cent of the tax amount, before service of notice on him and inform the Central Excise Officer of such payment in writing, who, on receipt of such information, shall not serve any notice under sub-section (1) in respect of the amount so paid and proceedings in respect of the said amount of service tax shall be deemed to have been concluded:

      Provided that the Central Excise Officer may determine the amount of service tax, if any, due from such person, which in his opinion remains to be paid by such person and shall proceed to recover such amount in the manner specified in sub-section (1).

      Explanation.-For the purposes of this sub-section and section 78, “specified records” means records including computerised data as are required to be maintained by an assessee in accordance with any law for the time being in force or where there is no such requirement, the invoices recorded by the assessee in the books of account shall be considered as the specified records.]

 

  • Plus+
  1. FAQ – Whether ignorance of law can be a factor for not to revoke extended period of limitation?
  2. FAQ – In what circumstances extended period of limitation is not enforceable? Whether SCN can be issued for period beyond 18 months even if assessee has bona fide belief regarding service tax liability?
  3. FAQ – Whether show cause notice related to period beyond 18 months or 5 years as the case may be, is valid in law ?
  4. FAQ – Whether it is mandatory to mention specific head / sub head of services in SCN in which demand of service tax has been raised?
  5. FAQ – Whether issuance of SCN under section 73 is mandatory to fix the liability of the assessee? Whether demand of service tax and interest is not sustainable in absence of SCN?