Periodical show cause notice not issued :
CAG observed, "As per Section 73 of Finance Act, 1994, in normal course show cause notice is to be issued within one year (with effect from 28th May 2012, '18 months') and in case of fraud, Collusion, Wilful misstatement, suppression of facts etc. with intent to evade duty, within a period of five years from the relevant date. Further as per Section 73(6)(b) of the Act, 'relevant date' inter alia means where no periodical returns as aforesaid filed, the last date on which such returns to be filed under the said rules. The Supreme Court in the case Nizam Sugar Ltd. Vs Commissioner of Central Excise - has held that the extended period of five years was not available to the department for the subsequent show cause notice which was issued based on the same set of facts of the earlier show cause notice as the full facts were known to the Department and hence suppression cannot be alleged."
Audit noticed that a Commissioner issued a Show Cause Notice in October 2010 for non payment of Service Tax under reverse charge basis, for the period 2005-06 to 2008-09. The show cause notice was adjudicated vide Order In Original dated 30th March 2012. However, the Commissionerate had neither covered the period of 2009-10 in the first show cause notice nor had issued a periodical show cause notice for the period 2009-10 within the stipulated period of one year.
When Audit pointed this out to the Department, the Commissionerate replied that a draft show cause cum demand notice amounting Rs. 63.13 lakh for non-payment of Service Tax for the period of April 2009 to March 2011 was submitted to the Adjudication Section in June 2013 for issue. The last date for issuance of SCN was stated to be 24 October 2014.
CAG observes, However, the process of issuance of periodic show cause notice for 2009-11 period applying provisions for extended period after a lapse of four years is irregular in view of the decision of Supreme Court in the case of M/s Nizam Sugar Ltd. Vs Commissioner of Central Excise. Thus, an amount of Rs. 63.13 lakh has got time-barred due to improper monitoring of the need for issue of periodic show cause notices.
Now that no less authority than the CAG of India has confirmed that the demand is time barred, what will be the view of the adjudicating authority?