SERVICE TAX – WHO SHOULD ISSUE SHOW CAUSE NOTICE?
Prior to its amendment vide Finance Act 2005, as per Section 73 of the Finance Act 1994, where any service tax has not been levied or paid, or has been short levied or short paid, erroneously refunded, the Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise could serve a notice on the person chargeable with the service tax. The power to issue show cause notice was totally vested with only the Deputy/ Assistant Commissioners irrespective of the amount of tax liability. The Commissioners were empowered under Section 84 of the Finance Act 1994, only to review the orders passed by the Assistant Commissioners.
While things were sailing smoothly, vide Finance Act 2005, Sections 73 has been amended to replace the words Assistant / Deputy Commissioner with “any Central Excise Officer”. Corresponding replacements have been made in Sections 74, 78 and Section 84. This must have been done to grant powers to the proposed Deputy Assistant Commissioners to issue Show Cause Notices and adjudicate cases. If that was the intention, it could have been made clearer and unambiguous. But these are not traits that you can blame the government for.
Further a new section 83 A has been inserted which reads as under:
83 A: Power of Adjudication:
Where under this Chapter or the rules made thereunder any person liable to pay penalty, such penalty may be adjudged by the Central Excise Officer conferred with such powers as the Central Board of Excise and Customs constituted under the Central Board of revenue Act 1963, may, by notification in the Official Gazette specify.
But in the mega exercise of budget Notifications, the Board forgot to specify the powers of adjudication by a Notification under Section 83 A, with the result that there is no specified authority for issue of show cause notices and adjudicate them. Any Central Excise officer ranging from the Sepoy to the Chief Commissioner can serve a notice on the service tax assesses and also adjudicate.
Another interesting dimension is that there is a school of thought that the adjudication powers specified under Central Excise are applicable for Service tax also, but there is no authority to view so.
Since service tax is a new levy with mostly semi literate assesses, may be the Government thought that the Commissioners are too big for them to raise the demands. But with the recent amendments, there is the possibility of Commissioners passing orders thereby depriving the assesses of an appellate forum (of Commissioner Appeals). Actually under Section 84, the Commissioner is a revision authority and he can pass an order on any order passed by his subordinates.
There is an urgent need to clarify who has to do what. In any case as of now, there is no officer designated by the Board to adjudicate a case involving penalty, under Section 83 A. So even if tax can be demanded by any central excise officer, as of now there is no competent officer to adjudicate on penalty.