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"Life story of a Service Tax Assessee"

- a satire by CA Arvind Singh Chawla

 

Birth

A service tax assessee (Poor Guy) is generally born by choice. A person intending to provide service may immediately, or a service provider on reaching threshold exemption limit of Rs. 9.0 lacs may opt for registration.

PG may even be born by accident when he (1) imports certain service (2) sponsors an event (3) makes payment of freight in case of certain specified conditions.

Certificate

Generally only address proof and PAN proof are required for registration. But sometimes the department insists on bank statements, balance sheets, income tax returns “to assess” the liability beforehand. Knowing that same is against instructions given by CBEC, PG still complied with the same and finally got registration.

Payment

Once registered, PG deposited his service tax in the bank on last day (5th of the month)

Issue1: The department argued that as challan bears date of 7th( clearing date) he has not paid tax on time and is liable to “Penalty for late payment” and interest. PG was taken aback as he had read that tax is treated to be paid on date when deposited in the bank – subject to its clearing- as bank becomes a collecting agent of the government.

Issue 2: To end this ordeal PG decided to pay his taxes online. But wait, his bank does not allow service tax payment. And the other one does not have separate accounting code for education cess and higher education cess. But determined to go ahead, he made e-payment.

Issue3: PG deposited tax in wrong code. Now the department caught him on the wrong foot. No matter howsoever PG tried to convince them that tax is being paid, department insisted on making the payment once again and taking refund of the tax deposited wrongly. Even quoting an old CBEC circular - tax deposited in wrong code should not be demanded again- ended in vain as department said that all circulars are repealed by master circular Aug 2007. PG kept wondering that did all intelligence in earlier circulars also vanished with the master circular.

To end the issue he surrendered and deposited the tax (with interest) and claimed refund.

Issue 4: Department simply took a “U” turn and said that as service tax is an indirect tax no refund will be granted to him as he has collected it from his clients and is liable to be rejected on ground of “unjust enrichment” . With considerable pain, PG proved that the tax burden is borne by him only and thought the matter to be ended.

The department now simply stated that as the claim is time barred (filed after a year of deposit) refund cannot be granted as per current tax laws. PG now hired a CA to fight for him.

Issue 5: The CA scrutinized his computations and found that PG had deposited service tax payment in excess. He advised that various remedies available are (1) in case of tax paid without providing services- tax can be adjusted upto 1 lac in the due month/quarter (2) In case advance was accepted from service receiver and refunded along with tax; adjustment of tax such deposited can be done without any limit. PG asked his CA to take care of it as he wanted to spend his time in his business rather than service tax matters.

Returns

Meanwhile PG had started filing his due half yearly returns on time with his jurisdictional service tax Range. To attain certainty, he asked his CA to show the relevant records to department and get an “assessment order” – as in income tax and sales tax. The CA stated that there is no such procedure in service tax as service tax return is a “self- assessment” return. The CA took pains to explain that there is a procedure for scrutinizing filed returns filed on the basis of risk parameters, amount of tax paid and an assessee cannot approach the department for “assessment suo-moto”

PG did not believe this and himself walked to department and got his returns “assessed” with the seal affixed on his copy “Arithmetically checked” countersigned by a Superintendent and Inspector and handed the same to his CA.

Examination

Audit

PG received a letter from department Audit team that his unit has been chosen for audit and various documents, including balance sheet, income tax return, service tax return for past five years was demanded. The Audit team scrutinized the same, got reconciliations between service tax return vs. balance sheet, crossed checked with TDS and pointed that PG has not paid tax on material sold. Horrified PG consulted his CA, who stated that no service tax can be laid on sales and quoted an Apex court judgment in favour. However the Audit team issued a spot memo to PG on the issue

STTF

In parallel service tax task force (STTF) constituted by Assistant Commissioner- issued summons to PG that they have “reasons to believe” that PG has evaded tax and insisted on financial documents. PG rushed to his CA who suggested compliance.

CCO-STTF

Meanwhile one of PG’s clients was raided by Chief Commissioner Office Task force and they demanded 5 years balance sheets, agreements, bank statements, returns from PG as they apprehended that PG was not depositing tax collected. This time PG did not ask his CA and complied with the same.

Range

The audit spot memo was routed again by Range- which had “duly assessed PG’s returns”- and reply was demanded. PG convinced them again and matter was raised in audit monitoring committee meeting (MCM) headed by Commissioner. The audit para was confirmed and a show cause notice was issued.

CAG

It is only when PG got a call from Range, that he came to know that service tax has a unique provision wherein, Comptroller and Auditor General (CAG) can scrutinize records of a assessee. It left PG wondering whether he has really become a big man or is it a time to change business altogether.

CA also updated PG that apart from enquiries made by various teams till date, his case can even be enquired by department of revenue intelligence (DRI), Commissioner- Preventive team, Central government task force (CGTF) and further stated sheepishly that he may have skipped to name few more.

 

The question

PG simply asked, why so many enquiries? CA replied that the organization structure of the department allows multiple enquiries on assessee falling in their jurisdiction.

PG said, but why same records and submissions are required again and again. CA-No answer. PG asked, why there is no assessment order so that a person is assured that he has duly complied his service tax matters and a particular period is examined and closed. CA- No answer.PG further flared – is the department not trusting its own people that it undertakes scrutiny of scrutiny. CA-No Answer.

Finally PG asked- “Ye kab tak Chalega ?” This time CA’s had an answer- five years- as this is the maximum limit a show cause notice can be issued for a return in case of suppression of facts. PG had a point here- where did I had an intention to evade tax- CA said if we are able to prove this the period will be restricted to one year, but to prove that the matter will go to appeal at least.

Epilogue

PG migrated from India and is living happily in Singapore with his family and his refund claim is pending with CESTAT.