The Budget, 2012 has brought many changes in the Service Tax provisions in an attempt to align the same with provisions of Central Excise Rules. This is clearly being done to pave the way for later when GST will be introduced. Lets see how far this is successful.
Changes in filing of Returns of Service tax and Central Excise:
In case of services, the Service Tax return is mandated to be filed half yearly i.e. in April and October of every financial year although payment of service tax is done by the service provider on monthly or quarterly basis.
On the other hand, under Central Excise Rules, 2002 an assessee registered with the department files return on monthly basis in case of a Non-SSI unit and on quarterly basis in case of an SSI unit. Even the format of returns is different in service tax and in excise.
Thus, payment of service tax and filing of return are different procedures and are not linked to each other.
Now, in the Budget, 2011 this is being changed. A new simplified one page common return with Central Excise is being introduced. It will be called as Rule 12 of the Central Excise Rules, 1944.
It is provided that an assessee whose service tax liability was Rs. 25 lakhs or more in the previous year and in case of a newly registered service provider other than individual or firms, will have to file return “Monthly”.
And in other cases i.e. Individuals and partnership firm or proprietary firms having paid service tax of less than Rs. 25 lakhs in previous year, will have to file return ‘Quarterly’.
Thus, the system of filing of returns under service tax is brought at par with the filing of returns in central excise. Now, payment of service tax will coincide with filing of service tax returns.
The filing of monthly returns by Service tax assesses will be very difficult. Small assessee will find it very difficult to cope up with this condition. It will consume the time and energy of assessee as well as that of the department.
And introduction of single return for both service tax and excise duty is one more step introduced by Government in their move towards implementing GST. However, there was hoped that there will be annual return in GST but the monthly return filing will be very tedious.
Format of new Excise & Service Tax Registration Form:
Government has also introduced a common simplified Registration format for both Central Excise and Service tax. But still there is some information which seems to be irrelevant for both the assessees. In the said Registration form, the details of Investment in land, plant and machinery has been asked to be furnished. The other information sought is about the details of bank account of the assessees. These set of information is irrelevant and have no bearing for grant of registration. Therefore, why these details have been incorporated in Registration format is not clear. This was asked in the earlier registration application. It seems that the cut and paste approach has been followed by the department and it is not seen whether these details are relevant or not?
Section 73 of the Finance Act, 1994 is proposed to be amended to increase the time limit for issuing of show cause notice from one year to 18 months. The reason given for this is to take care of the shorter period available due to the periodicity of the new return EST-1 which is monthly/quarterly.
This step does not appear to be a move towards aligning the service tax provisions with that of Central Excise Provisions. If that was so then, the period for issuing demand notice should have remained 1 year only instead of being increased. When the time limit of issue of show cause notice is one year then why it is increased to one and half year in service tax.
On the other side, the time for filing of appeal has been reduced from three months to two months to align the same with the Central Excise provisions. But the increasing of time limit of SCN is also not at par with this step.
Issue of Statement for Demand on same grounds for subsequent periods:
Another change made is that by virtue of sub-section (1A) in Section 73 of the Finance Act, 1994 the Central Excise officer has been empowered to give only a statement in case the grounds are same as for the previous period, and that statement will be deemed as service of notice on such person.
Moreover, no time limit has been prescribed within which this statement is to be filed. Therefore, they can give a statement at any time or after a considerable delay. This provision gives a lot of power to the Department which may remain unchecked and may be misused.
Also, no such provision exists in the counter provisions of the Central Excise Provisions. This is not in any way amounts to aligning the provisions of Service with that of Central Excise. And in the road towards GST, this will prove contrary to achieving the said goal.
It seems that the Government does not want to align the provisions of service tax with Central Excise but wants to do the things against the assessee. But when it wants to give more powers to the department officer then it ignores this objective. Nobody can question the Board.
CA Pradeep Jain
Sukhvinder Kaur, LLB [FYIC]