Services Tax Matter 26 AS vs ST 3 Return Difference

Hi Manohar,

Regarding your client’s service tax show cause notice for FY 2013-14 and 2014-15, here’s a detailed explanation on the limitation period and how to handle the issue:

1. Limitation Period for Service Tax Assessments / Show Cause Notices

• Under Section 73 or 73A of the Finance Act, 1994 (Service Tax law), the limitation period for issuance of show cause notices for service tax demands is generally 3 years from the relevant date.

• However, in some cases like suppression of facts or fraud, the department can issue notice up to 5 years(extended period).

2. Relevant Date for Limitation

• The relevant date is usually the due date of filing of the return or payment of service tax.

• For example, for FY 2013-14, the last return filing and payment was likely by June or September 2014.

• So, the normal limitation period of 3 years would expire by around 2017.

• For extended 5 years, it would expire by 2019.

3. Status of Time Bar

• Since the notice was received in August 2019 for FY 13-14 and 14-15, it is likely that the 5-year extended limitation period is near expiry or just expired.

• But the department may allege suppression or fraud to keep the case alive beyond 5 years.

• Check if there are any proceedings initiated earlier or demand orders passed that can extend limitation.

4. Effect of Email Notice on Consultant’s Email

• Notice served on consultant’s email, not client’s email, is generally valid if the consultant is authorized representative.

• If no physical notice served, and client was unaware, the department can argue that service of notice is proper through electronic means.

• Client should verify whether consultant had authority and check communication trail.

5. Next Steps / Suggestions

• Review if any return was filed or payment made for those years.

• Check if the demand raised in notice is genuine and supported by records (like mismatch in 26AS and ST3).

• Consider filing reply and documents promptly to avoid ex parte order.

• Client can also file request for condonation of delay if time-barred and explain closure of office.

• If truly time-barred, client can raise limitation defense during hearings or in reply.

6. Summary