 Interest & Penalties
 Audit
 Adjudication proceedings
 Appellate Proceedings
UNDER SERVICE TAX
By CA RAJIV LUTHIA
INTENSIVE STUDY
COURSE ON SERVICE TAX
Organised by
NASHIK BRANCH OF
WIRC OF ICAI
On
Saturday, the 15thNovember,2014
At
ICAI Bhavan, Off. Ashok Marg,
Wadala Shivar, Nashik
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INTEREST
Notification No.12/2014-ST w.e.f.1st October,2014
Change in Rate of Interest
 As per Section 75 of the Finance Act, 1994, simple interest at the prescribed rate is required
to be paid in case of delay in payment of service tax.

Following rates are prescribed for payment of interest
Period of Delay
Upto 6 months
More than 6 months
upto 1 year
More than 1 year
Rate of Interest
18%
18% for delay upto first 6 months & 24% for delay beyond 6
months
18% for delay upto first 6 months, 24% for delay beyond 6 months
upto 1 year & 30% for any delay beyond one year

Hitherto, simple interest @18% was payable irrespective of period of delay.

The said amendment is carried out to encourage prompt payment of service tax. (Refer Para
3.1 of DOF No.334/15/2014-TRU dated 10th July,2014)

W.e.f. 8th April,2011, the rate of interest U/s.73B & U/s.75 for delay in payment of tax to be
reduced by 3% in case the value of taxable services provided by service provider during the
preceding financial year or during any of the financial years covered by the Show Cause
Notice, as the case may be, does not exceed Rs.60 Lacs.

As specified in the proviso to section 75, concession of 3% on the applicable rate of interest
will continue to be available to the small service providers whose value of taxable service
provided in a financial year does not exceed Rs.60 Lacs during the last preceding financial
year.

No interest is payable where the amount becomes payable consequent to issue of an order,
instruction or direction by the Board U/s. 37B of the CE Act, 1944 and such amount is
voluntarily paid in full, without reserving right to appeal against such payment, within 45
days from date of issue of such order, instruction or direction.
RELEVANT DECESIONS

Hon’ble Kerala High Court in the case of CCE, Calicut Vs General Manager, Telecom, BSNL
(2009) 21 STT 404 has held that Interest U/s.75 for delayed payment of Service Tax is
mandatory. The Hon’ble HC reversed the decision of Hon’ble CESTAT which has cancelled
the demand for Interest presuming the same to be in the nature of penalty. The Hon’ble HC,
while reversing the decision of Hon’ble CESTAT, held that payment of Interest is irrespective
of the reason for delayed payment, which in the instant case was on account of delay in
allotting head of account for payment.

Hon’ble Kolkata Tribunal in case of BHOLANATH OBEROI & SONS. (2009) 15 STR 61 has
held that Levy of Interest u/s 75 of the Finance Act, 1994 is mandatory since interest is a
civil liability of the assessee dependent on withholding of payment of tax. Law provides for
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payment of tax by particular date in particular manner. There is no option in date of
payment of tax.

Hon’ble Mumbai HC in case of PADMASHRI V.V.PATIL S.S.K LTD.(2007) 215 E.L.T. 23 has
held that Levy of Interest u/s 75 of the Finance Act, 1994 is mandatory even if EVASION of
duty is not malafide or intentional. The words SHALL in the section indicates absence of the
option and that interest should be charged in cases of all non payment or short payment
PENALTIES
Nature of default
Whether
Maximum
quantum is
limit, if any
discretionary
Penalty for failure to pay
761
Higher of Rs.100/- per
Yes
50% of the
service tax
day or 1% of service tax
amount
of
p.m.
service tax
Late fees for delay in filing 70(1) &  Rs.500/- for delay
No
Rs.20,000/return
Rule 7C
upto 15 days
 Rs.1,000/- for delay
beyond 15 days upto
30 days
 Rs.1,000/plus
Rs.100/- per day for
delay beyond 30
days
 CEO empowered to
reduce or waive
penalty (late fees) for
delay in filing return
where gross amount
of
service
tax
payable is NIL.
77
At discretion of CEO,
Yes
Rs.10,000/ Failure to take service tax
up to Rs.10,000/-2
registration
 Failure
to
furnish
information called by
CEO, produce document
called by CEO or appear
before CEO in response
to Summons or produce
documents in an inquiry
77
Upto Rs.10,000/- for
Yes
Rs.10,000/ Failure
to
each default
maintain/retain books of
accounts
&
other
1
2
Section
Quantum
Amended w.e.f. from 8th April, 2011
Amended vide Finance Act,2013 w.e.f. 10th May,2013
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documents
 Failure to pay tax
electronically through
internet banking when
mandatory
 Incorrect
and
incomplete details on
the invoice or failure to
account invoice in the
books of accounts.
 Any contravention of
the provisions or rules
for which no separate
penalty is provided
Penalty for service tax not
levied/paid
or
short
levied/short
paid
or
erroneously refunded by
reason of :
78
100% of the service
tax sought to be
evaded
or
erroneously
refunded.
No
Not
Applicable
Yes
Rs.1 Lac





fraud; or
collusion; or
willful mis statement; or
suppression of facts; or
contravention of any
other provisions of this
chapter or rules made
there under with intent
to evade payment of
service tax
Penalty on Director, Manager
Secretary or other officer of
company
for
following
contraventions :
(a) Evasion of service
tax; or
78A 3
Rs. 1 Lac
(b) Issuance of invoice,
bill or challan without
provision of taxable
service in violation of
the rules made under
the provisions of
Chapter V of the
Finance Act, 1994; or
3
Amended vide Finance Act,2013 w.e.f. 10th May,2013
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(c) Availment
&
utilization of CENVAT
Credit without actual
receipt of taxable
service or excisable
goods either fully or
partially in violation
of the rules made
under the provisions
of Chapter V of the
Finance Act, 1994; or
(d) Failure to pay any
amount collected as
service tax to the
credit of the Central
Government beyond
a period of 6 months
from the date on
which such payment
becomes due
1 : If penalty is levied u/s. 78, no penalty can be levied u/s.76. (6th Proviso to Section 78)
2 : Section 80 provides that no penalty shall be imposed U/s.76, 77 or 1 st proviso to Section
78(1) 4if the assessee proves that there was reasonable cause for the relevant failure.
3: Where true & complete details of the transactions are available in the specified records,
penalty shall be reduced to 50% of service tax. (1st Proviso to Section 78)
4: Such penalty is restricted to 25% of service tax, if the amount of service tax, interest and such
penalty is paid within 30 days of the date of communication of the adjudicating order. (2nd
Proviso to Section 78)
5: In case the value of taxable services provided by service provider during the preceding
financial year or during any of the financial years covered by the Show Cause Notice, as the case
may be, does not exceed Rs.60 Lacs, the period of 30 days for such payment is extended to 90
days. (4th Proviso to Section 78)
RELEVANT DECESIONS
 Hon’ble Mumbai CESTAT in the case of CCE, Aurangabad Vs. Pendharkar Constructions
(2011) 23 STR 75 held that since the show cause notice has been issued when the
5thproviso to section 78 was in force, penalty U/s 76 is not imposable when penalty U/s 78
has been imposed even if the show cause notice is for the period prior to 10 th May, 2008.
Hence the penalty should not be leviable U/s.76 if the same is levied U/s.78.
4
Omitted vide Finance Act,2014 w.e.f. 6th August,2014
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 WEST MINISTER INTERNATIONAL (P) LTD. Vs COMMISSIONER OF C. EX., NEW DELHI
(2002) 140 ELT 244 Penalty imposable only under the provisions in existence at the time of
issuing the Show Cause Notice “Section 77 was amended by Section 138 of the Finance Act,
1999 and as a result of this amendment the maximum penalty imposable under Section 77
is only Rs.2,000/- that the show cause notice in the present matter has been issued to them
on 21-10-99 and as such penalty of more than Rs. 2,000/- cannot be imposed on them
Show Cause Notice having been issued on 21-10-1999 i.e. after the provisions of Section 77
of the Finance Act, 1994 have been amended, the maximum penalty imposable is Rs.
2,000/- hence penalty reduced to Rs. 2,000/-.
SERVICE TAX AUDIT

Audit of selected services (telephone, non life insurance and stock brokers) was started in
the year 1996in accordance with the CBEC Circular No.. 19/13/96 dt.21/11/1996

From the year 2002, the service tax audit was extended to cover selected service providers
in four metropolitan cities.

The directorate of service tax has issued guidelines for implementation of audit of service
tax (Circular No.38/01/2002-CX dated 7th February,2002).

The audit is confined to the accounts for the year 1999-2000 and subsequent years.

Audit is required to be completed within 10 working days.

The Audit would be conducted as per proforma Annexure –II (as provided in the Circular
No.38/01/2002). The said proforma is based on the EA-2000 Audit being carried out on the
Central Excise side.

The Central Excise department have brought service tax audit manual (CBEC Circular
No.742/58/2003-CX dated 3rd September,2003) which,inter alia,provides detailed guidelines
'of audit of Service Tax assessee.

CBEC vide Letter F.No.381/145/2005 dated 6th June,2006 has revised the norms for Service
Tax Audit
Quantum of annual total duty payment in Cash + CENVAT
Credit
Taxpayers paying more than Rs.50 Lakhs
Taxpayers paying between Rs.25 Lakhs & Rs.50 Lakhs
Taxpayers paying between Rs.10 Lakhs & Rs.25 Lakhs
Taxpayers paying below Rs.10 Lakhs

5
Frequency of Audit
Every year
Once in two years
Once in five years
2% of total number every
year
Section 72A inserted w.e.f. 28th May,2012 whereby powers are granted to the 5Principal
Commissioner of Central Excise or Commissioner of Central Excise to direct any person
Inserted w.e.f. 6th August, 2014
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liable to pay service tax to get his accounts audited by a CA or CWA nominated by him if he
has reasons to believe that such personi) has failed to declare or determine the value of a taxable service correctly; or
ii) has availed & utilized CENVAT Credit
a) which is not within the normal limits having regard to the nature of taxable service
provided, the extent of capital goods used or the type of inputs or input services
used, or any other relevant factors as he may deem appropriate; or
b) by means of fraud, collusion, or any willful misstatement or suppression of facts; or
iii) has operations spread out in multiple locations and it is not possible or practicable to
obtain a true and complete picture of his accounts from the registered premises falling
under the jurisdiction of the said commissioner.

Such CA or CWA shall submit a report duly signed & certified to the said Commissioner
within a specified period mentioning therein specified particulars.

The Commissioner is empowered to order for such audit irrespective of the facts that the
accounts of such person have been audited under any other law for the time being in force.

The Commissioner shall give an opportunity of being heard to such person in respect of any
material gathered on the basis of the audit and proposed to be utilized in any proceedings
under the provisions of the Act.
 Hon’ble Kolkata High Court in the case of SKP Securities Ltd Vs. Deputy Director (RA-IDT)
&ORS ,2013 TIOL 38 HC KOL…..held there is no provision in Chapter V of the Finance Act,
1994 or for that matter in the CAG Act which empowers the CAG to audit the accounts of an
assessee which is a non-government company, not in receipt of aid or assistance from any
government or government entity. Sub-section (2) of Section 94 also does not empower the
Central Government to frame rules for audit of the accounts of an assessee by any audit
team under the Comptroller and Auditor General of India. There can be no doubt that
statutory rules, framed in exercise of power conferred by statute cannot introduce
something not contemplated in the statute, from which it derives its rule making power.
Held, that CAG has no power to conduct Service Tax Audit for a private assessee. This case if
referred to Divisional bench in view of conflicting decision by Hon’ble Kolkata High Court
in the case of Berger Paints Ltd (2006) TIOL 466 HC KOLKATA.
ADJUDICATION PROCEDURES
SUMMONS

Vide section 83 of the Finance Act, 1994, Section 14 of The Central Excise Act, 1944 is made
applicable to Service tax proceedings. Thereby, CEO has power to summon any person
whose attendance he considers necessary either to give evidence or to produce a document
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or any other thing in any inquiry which such officer is making for any of the purposes of this
Act.
 all persons so summoned shall be bound to state the truth upon any subject respecting
which they are examined or make statements and to produce such documents and other
things as may be required
 Every such inquiry shall be deemed to be a “judicial proceeding” within the meaning of
Section 193 and Section 228 of the Indian Penal Code, 1860 (45 of 1860).
 Section 228 Intentional insult or interruption to public servant sitting in judicial
proceeding…….Whoever intentionally offers any insult, or causes any interruption to any
public servant, while such public servant is sitting in any stage of a judicial proceeding,
shall be punished with simple imprisonment for a term which may extend to six months,
or with fine which may extend to one thousand rupees, or with both.
 Section 193 Punishment for false evidence….. Whoever intentionally gives false
evidence in any stage of a judicial proceeding, or fabricates false evidence for the
purpose of being used in any stage of a judicial proceeding, shall be punished with
imprisonment of either description for a term which may extend to seven years, and
shall also be liable to fine; and whoever intentionally gives or fabricates false evidence in
any other case, shall be punished with imprisonment of either description for a term
which may extend to three years, and shall also be liable to fine.

Summons can be issued for
 either to give evidence;
 to produce documents in the possession and control of person summoned; or
 other things in the possession and control of person summoned in inquiry made by CEO
under this Act.

As per Section 174 of IPC, non attendance in response to summons is an offence punishable
with imprisonment up to 6 months and fine up to Rs.1,000/-

Documents required to be produced must be specifically stated in the summons.

CBEC vide letter bearing no. F.NO. 137/39/2007-CX-4 dated 26th February, 2007 as
amended on 21st November, 2008, issued instructions to be followed by CEO before issuing
summons.
 The mode of communication should be either in the form of telephone call or by way of
sending a simple letter.
 If the above mentioned mode fails or found to be ineffective, only then CEO shall issue
summons for personal presence of the concerned person.
 Summon can be issued only after obtaining prior written permission from the officer not
below the rank of Assistant Commissioner. The reasons for issuance of summon to be
recorded.
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 The officer authorizing issuance of summons must satisfy himself that no harassment
has been caused during the visit of the person summoned to the office.

As per departmental instructions, a person whose statement is recorded during the inquiry
has no right to have a copy of his statement on the spot. However, he is entitled to get the
copy of statement at the time of issue of SCN or otherwise in case where the statement is
proposed to be used against such person.

Statement made in pursuance of summons is valid even if retracted subsequently and can
be used as evidence in the proceedings hence due precautions to be taken.
FEW IMPORTANT DECISIONS:
 Hon’ble Delhi High Court in the case of K. T. Advani Vs. State (1987) 30 ELT 390
(Delhi)…..The person has no right to get copies of his statement at the stage of
investigation. However, he can keep note of his statement.
 Hon’ble Supreme Court in the case of Poolpan Division Superintendent of CE (1992) 60 ELT
24…..Person being interrogated is not an accused, nor can he plead that there is possibility
of his being made an accused in future; hence he has no right to ask for presence of lawyer
during inquiry. However, interrogating officer may permit, if he deems fit.
 Hon’ble Mumbai CESTAT in the case of Dodsal Pvt. Ltd. Vs. CCE (2006) 193 ELT
518….Disclosure of facts and information given while recording the statement and admitting
liability can also be challenged at later date by the assessee. There cannot be estoppels in
the matters of taxation
 Hon’ble Allahabad High Court in the case of Mirzapur Electrical Industries Ltd Vs. CCE
(2013) 35 taxmann.com 15….held that service of any decisions, order, summons, notice, etc
through “Speed Post” is a valid compliance with section 37C of the Central Excise Act,1944
since the object of sending post by registered post is to keep a record, which is also served
by sending through speed post of same agency.
 CONTRARY to above Hon’ble Mumbai High Court in the case of Amidev Agro Care Pvt Ltd
Vs. UOI 2012 TIOL 395 HC –MUM- CX….held that service of order by speed post is not a
valid service, in view of section 37C of the CE Act as it is mandatory for revenue to serve a
copy of the CCE(A) by registered post.
 Section 37C of the CE Act,1994 is amended vide Finance Act,2013 w.e.f. 10th May,2013 to
include speed post with proof of delivery or courier approved by CBEC as valid document
for service of decisions, orders, summons etc.
RULE 5A OF SERVICE TAX RULES,1994: ACCESS TO REGISTERED PREMISES
 Any officer as authorized by the Commissioner shall have access to any registered
premises for the purpose of carrying out scrutiny, verification and checks as may be
necessary to safeguard the interest of revenue. Such officer or any audit party deputed by
the Commissioner or CAG can call for the following records which every assessee is bound
to submit within reasonable time not exceeding fifteen days or as may be allowed by such
officer:
(a). The records as mentioned in sub-rule 2 of Rule 5
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(b). Trail balance or its equivalent, and
(c). The income tax audit report, if any u/s 44AB of the IT Act,1961, for the scrutiny of
the audit party or the authorized officer as the case may be.
SECTION 72- BEST JUDGMENT ASSESSMENT…
The CEO may require any person who is liable to pay service tax , but has failed to furnish
return or having furnished not assessed the tax in accordance with the provisions of the
Chapter V or rules made there under, to produce such accounts, documents or other
evidence as he may deem necessary. After taking into account all the relevant material he
shall pass an order in writing after giving opportunity of being heard and make the
assessment of the value of taxable service to the best of his judgment and determine the
sum payable /refundable to the assessee.
SHOW CAUSE NOTICE

Section 73(1)-CEO may serve show cause notice on a person chargeable with service tax
within 18 months6from the “relevant date”, where any service tax:
a) has not been levied or paid; or
b) has been short levied or short paid; or
c) has been erroneously refunded
and thereafter determine the amount of service tax due and payable.

The period for issuing such show cause notice shall be five years from the “relevant date”,
where any service tax has not been levied or paid or has been short levied or short paid or
erroneously refunded (hereinafter collectively referred to as “specified events”) by reason
ofa) fraud; or
b) collusion; or
c) willful misstatement; or
d) suppression of facts; or
e) Contravention of any of the provisions of Chapter V of the Act or of the rules made there
under with intent to evade payment of service tax.
The “relevant date” to be determined as under (Section 73(6)):
Circumstance
Relevant date
A. In the case of taxable service for which service tax
has not been levied or paid or has been short
levied or short paid:
i) if the assessee is liable to file the return, and
a) return is filed
Date on which return filed
b) return is not filed
Last date on which the return is to be filed
ii) in other cases
Date on which tax is to be paid
B. Where service tax is provisionally assessed
Date of adjustment of service tax after final
assessment
C. Where any sum has been erroneously refunded
Date of refund
6
Substituted for 1 year by Finance Act, 2012 w.e.f. 28th May,2012
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
7Section

8

Section 73(3) provides that the person chargeable with the service tax or the person to
whom such tax refund has erroneously been made, may pay the amount of such service tax,
chargeable or erroneously refunded, on the basis of his own ascertainment or on the basis
of tax ascertained by CEO before service of notice on him U/s.73(1)in respect of service tax
and inform CEO of such payment in writing, who on receipt of such information shall not
serve notice U/s.73(1).

Explanation 2 to Section 73(3) provides that no penalty shall be imposed where service tax
along with interest has been paid before issuance of show cause notice.

Section 73(4) :The provisions of section 73(3) shall not apply to events occurring by reason
of :a) fraud; or
b) collusion; or
c) willful misstatement; or
d) suppression of facts; or
e) contravention of any of the provisions of this chapter or of the rules made there under
with intent to evade payment of service tax

9Section

Hon’ble Supreme Court in the case of Bhagsons Paint Industry (2003) 158 ELT 129 held that
there is No time limit for adjudication. Adjudication after lapse of 9 years from the issuance
of SCN was permissible.
73(1A) provides that in cases where the Central Excise Officer has served any
notice or notices U/s.73(1) for a particular period on the person chargeable to service tax,
then subsequent issuance of a statement containing the details of service tax not
levied/paid or short levied/paid or erroneously refunded for subsequent period shall be
deemed to be service of notice on such person subject to condition that the ground relied
upon for the subsequent period are same as are mentioned in the earlier notices.
Section 73(2A) is inserted to provide that where any appellate authority or tribunal or
court declares any SCN issued under proviso to Section 73(1) unsustainable for the reasons
that charge of fraud, collusion, willful misstatement, suppression of facts etc. are not
established against the person to whom the SCN is issued, the CEO shall determine the
service tax payable by such person for normal period of 18 months as if the notice was
issued for the offences for which the normal period of limitation applied.
73(4A) provides that where any service tax has not been levied/paid or has been
short levied/paid or erroneously refunded which is found during the course of any audit,
investigation or verification and true & complete details of transactions are available in the
specified records, the assessee may pay the service tax in full or in part, along with interest
U/s.75 & penalty equal to 1% of such tax for each month of default (subject to maximum
penalty of 25% of such tax) before service of notice on him. The CEO on intimation of such
payment, shall not serve any notice U/s.73(1) in respect of amount so paid and proceedings
in respect of such tax shall be deemed to have been concluded.
7
Inserted by Finance Act, 2012 w.e.f. 28th May,2012
Inserted by Finance Act, 2012 w.e.f. 10th May,2013
99
Inserted by Finance Act, 2011 w.e.f. 8th April,2011
8
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
10Section
73(4B) provides that the CEO shall determine the amount of service tax due u/s
73(2) within the following time limit :
Nature of Demand
Time limit for adjudication
Cases where normal limitation period of 18 Within 6 months from the date of notice,
month applies
where it is possible to do so
Cases where extended period is invoked or cases Within 1 year from the date of notice,
falling within proviso to Section 73(4A)
where it is possible to do so
The above time limit would need to be followed, as far as possible. (Para 5.2.1 of DOF
No.334/15/2014-TRU dated 10th July,2014)

“Specified records” means records including computerized data as are required to be
maintained by an assessee in accordance with any law for the time being in force or where
there is no such requirement; the invoices recorded by the assessee in the books of
accounts shall be considered as the specified records.

Opportunity of being heard given to the assessee if he so desires in any proceedings under
this Act.

Maximum three adjournments granted to assessee on his showing sufficient and reasonable
cause (Section 33A of the CE Act, 1944).

Vide Notification No.48/2010-ST dated 8th September,2010, Central Government has
bestowed the Central Excise Officers with such powers for the purpose of adjudication
under Chapter V of the Finance Act, 1994 as specified in table here below:
Sr.No. Central Excise officer
Amount of service tax or CENVAT credit
specified in a notice for the purpose of
adjudication under section 83A
1.
Superintendent of Central Excise
Not exceeding Rs. 1 Lakh (excluding the
cases relating to taxability of services or
valuation of services and cases involving
extended period of limitation.)
2.
Assistant Commissioner of Central Not exceeding Rs. 5 Lakhs (except cases
Excise or Deputy Commissioner of where Superintendents are empowered to
Central Excise
adjudicate)
3.
Joint Commissioner of Central Above Rs. 5 Lakhs but not exceeding Rs. 50
Excise
Lakhs
4.
Additional
Commissioner
of Above Rs. 20 Lakhs but not exceeding Rs.50
Central Excise
Lakhs
5.
Commissioner of Central Excise
Without Limit.
FEW IMPORTANT DECISIONS:
 Hon’ble Supreme Court in the case of Amrit Foods V/s CCE 2005 (190) ELT 433……the
assessee has to be put on notice as to the exact nature of contravention for which he is
liable.
 Hon’ble Supreme Court in the case of Nizam Sugar Factory Vs. CCE, AP (2008) 9 STR
314…..there cannot be suppression of facts, when all relevant facts are in knowledge of
1010
Inserted by Finance Act, 2014 w.e.f. 6th August,2014
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authorities when first show cause notice issued. While issuing second and third show cause
notices on same/similar facts could not be construed as suppression of facts on part of
assessee as these facts were already in knowledge of authorities. No suppression of facts on
part of assessee/ appellant. Demands and penalty dropped.
 Mumbai CESTAT in the case of Gujarat Containers Ltd. Vs. CCE (2003) TIOL 257…..Tribunal
set aside demand, as CCE has merely directed the appellant to work out ST payable & pay
the same with interest. The SCN was not proper & was held null & void. Normally the SCN
should indicate
o The specific allegation against the assessee
o The quantum of service tax sought to be recovered
o The basis on which service tax is payable
o Must be served upon person chargeable to service tax
o Must be issued by officer empowered.
 Hon’ble Supreme Court in the case of Metal Forgings Vs. UOI (2002) 146 ELT 241……
issuance of show cause notice is a mandatory requirement for raising demand.
Communications, orders, suggestions or advices from department not to be deemed to be a
show cause notice. A specific show cause notice indicating the amount demanded and
calling upon the assessee to show cause if he has any objection to such demand is
necessary.
 Hon’ble Supreme Court in the case of CCE, Mangalore Vs. M/s. Pals Microsystems Ltd,
Mangalore (2011) TIOL 70 SC CX held that extended period of limitation cannot be invoked
when facts are known to the department in 1996 when the audit party visited the premises
of the assessee . The show cause notice is issued in 2000, and there is no finding to the
effect that there was a fraud or willful mis-statement or suppression of facts the demand
and SCN is barred by limitation.
 Hon’ble Karnataka High Court in the case of CCE (LTU), Bangalore Vs Adecco Flexione
Workforce Solutions Ltd. (2011) TIOL 635 has held that when tax with interest is paid under
Section 73(3), no notice is to be issued. Section 73(3) of the Finance Act, 1994 categorically
states that after the payment of service tax and interest is made and the said information is
furnished to the authorities, then the authorities shall not serve any notice under Sub
Section (1) in respect of the amount so paid. Therefore, authorities have no authority to
initiate proceedings for recovery of penalty under Section 76 of the Act.
 Hon’ble Ahmadabad CESTAT in the case of Aditya Birla Nuvo Ltd. Vs CCE, Vadodara (2011)
TIOL 353, has held that merely because the appellant did not approach the Revenue for
clarification and did not disclose the activities undertaken by them, by itself cannot be made
a reason for alleging any suppression or mis -statement to them.
 Hon’ble Delhi CESTAT in the case of WEST MINISTER INTERNATIONAL (P) LTD.Vs. CCE,
NEW DELHI (2002) 140 ELT 244 held that Penalty imposable only under the provisions in
existence at the time of issuing the Show Cause Notice. “Section 77 was amended by Section
138 of the Finance Act, 1999 and as a result of this amendment the maximum penalty
imposable under Section 77 is only Rs.2,000/- that the show cause notice in the present
matter has been issued to them on 21-10-99 and as such penalty of more than Rs. 2,000/cannot be imposed on them Show Cause Notice having been issued on 21-10-1999 i.e. after
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the provisions of Section 77 of the Finance Act, 1994 have been amended, the maximum
penalty imposable is Rs. 2,000/- hence penalty reduced to Rs. 2,000/-.
 Hon’ble Supreme Court in the case of Pushpam Pharmaceuticals Co. V/s. CCE (1995) 78 ELT
401…
 Extended period of 5 years not applicable just for any omission of assessee unless it is
deliberate to escape from payment of duty.

Where facts are known to both the parties, the omission by one to do what he might
have done and not that he must have done does not render it suppression of fact.

A perusal of proviso to Section 11A indicates that the expression “Suppression of fact”
has been used in company of such strong words as fraud, collusion or willful default. In
fact it is the mildest expression used in the proviso. Yet the surroundings in which it has
been used it has to be construed strictly. It does not mean any omission. The act must
be deliberate. In taxation, it can have only one meaning that the correct information was
not disclosed deliberately to escape from payment of duty.
 Hon’ble Supreme Court in the case of Continental Foundation Jt. Venture vs CCE,
Chandigarh-I (2007) 216 ELT 177…….since the expression "suppression" in proviso to Section
11A(1) is accompanied by very strong words such as "fraud" or "collusion", it has to be
construed strictly and mere omission to give correct information is not suppression of facts
unless it was deliberate act to evade the payment of duty and that suppression means
failure to disclose full information with intent to evade payment of duty. The view that the
word "suppression" gets its color from the words "fraud" and "collusion" preceding the
same, is in accordance with the well established principle of interpretation of statute
Noscitur - a sociis, according to which when two or more words susceptible of analogous
meaning are coupled together, they take, as it were, their color from each other and the
meaning of the more general gets restricted to a sense analogous to that of the less general.
 Hon’ble New Delhi CESTAT in the case of Nityanand Nirmal Vs CCE, Indore (1999) 109 ELT
522…..In case of partnership firm, SCN should be served on the firm and not in the name of
individual partner as partnership firm has a distinct identity. SCN issued in the name of
individual partner is not sustainable since demand can be raised against the firm & not
against it’s partners.
APPELLATE PROCEDURES
I. First appeal to Commissioner of Central Excise (Appeals) (Section 85)
 Assessee may file appeal against any decision or order passed by adjudicating authority
subordinate to 11The Principal CCE or CCE.

Appeal to be filed in Form ST-4 in duplicate within 2 months12 from receipt of order of such
adjudicating authority along with copy of decision or order. However, CCE(Appeals) may
11
Inserted w.e.f. from 6th August, 2014
Substituted for 3 months by Finance Act, 2012 w.e.f. 28th May,2012. The revised time limit would be applicable in
respect of decision or order passed on or after 28th May,2012
12
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condone the delay for further 1 month13 if he is satisfied that the assessee was prevented
from sufficient cause.

Before passing an order enhancing the liability, CCE (Appeals) shall give a person affected
thereby a reasonable opportunity of being heard.

No time limit is prescribed under service tax for passing an order by CCE (Appeal) in the
section unlike period of 6 months under Section 35A Central Excise Act, 1944 for Central
excise.
Points to be remembered while filing an appeal: Appeal to be filed in Form ST-4 along with statement of Facts & Grounds of Appeal in
duplicate.
 A copy of O-I-O to be certified by Adjudicating authority or alternatively, the copy of O-I-O
can be notarized by Public Notary.
 Copy of the appeal filed to be submitted with the office of adjudicating authority in view of
Board’s circular issued under F.No.275/12/2004-CX 8A dated 5th September, 2005 from
Member (L & J), CBEC, New Delhi
II. Second appeal to Appellate Tribunal (CESTAT) (Section 86)
 Assessee may file appeal against an order passed by 14The Principal Commissioner of
Central Excise or Commissioner of Central Excise U/s.73 or 83A or an order passed by
Commissioner of Central Excise (Appeals) U/s.85.

The board may by order constitute committee for the purpose of this Chapter (86(1A)).
Committee to consist of 2 Principal Chief CCE or Chief CCE or Principal CCE or CCE. The
Committee if objects to any order passed by Principal CCE or CCE under Section 73 or 83A
direct Principal CCE or CCE to appeal to CESTAT against the order.

Appeal to be filed in Form ST-5 in quadruplicate within 3 months of receipt of order.

The time limit for filing appeal with Appellate Tribunal by Revenue is increased to 4 months
w.e.f. 28th May,2012.

No monetary limit is prescribed for filing an appeal by the appellant for Service Tax. Section
35B of the CE Act,1944 laying down the limits for filing appeal to CESTAT is not applicable to
Service Tax

Section 35R of CE Act made applicable to Service Tax provides that CBEC may issue order or
instruction fixing monetary limits for regulating filing of appeals, revision etc. Vide
Instruction No. F. No./390/MISE/163/2010 –JC dated 17th August,2011 CBEC has laid down
following limits.No appeal will be permitted in case of :
Total duty / revenue involved
Forum
Rs. 1 Lakh or less
CESTAT
Rs.2 Lakhs or less
High Court
Rs. 5 Lakhs or less
Supreme Court
13
14
Substituted for 3 months by Finance Act, 2012 w.e.f. 28th May,2012
Inserted w.e.f. from 6th August, 2014
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
Filing fees for appeal to Appellate Tribunal:
Service tax, interest and penalty involved
Rs. 5 Lakh or less
Above Rs. 5lakh up to Rs. 50Lakh
In excess of Rs. 50Lakh
Every application made before CESTAT for restoration of an appeal or an
application
Filing Fees (Rs.)
1,000/5,000/10,000/500/-
Points to be remembered while filing an appeal to CESTAT: Appeal to be filed in Form ST-5 along with statement of Facts & Grounds of Appeal in
Quadruplicate.
 Payment of filing fee.
 A copy of O-I-O to be certified by Adjudicating authority
 Copy of the appeal filed to be submitted with the office of adjudicating authority.
 Cross Objections to be filed in case of appeal filed by Revenue.
 Paper book along with all the enclosures duly numbered and indexed.

Section 35F of the CE Act,1994 read with section 83 of the Finance Act,1994 : Provisions
relating to stay & pre-deposit :15
Section 35F of the Central Excise Act, 1944 is amended to provide that the Tribunal or
Commissioner (Appeals) shall not entertain any appeal without mandatory payment of
minimum prescribed pre-deposit by the assessee. The minimum pre-deposit is 7.5% of the
duty demanded in case where duty or duty and penalty are in dispute, or penalty, where
such penalty is in dispute for filing of appeal before the Commissioner (Appeal) or the
Tribunal at the first stage, and 10% of the duty demanded or penalty imposed or both for
filing second stage appeal before the Tribunal, subject to maximum limit of Rs. 10 crores.
The amended provisions shall not apply to stay applications & appeals pending before any
appellate authority prior to the commencement of Finance (No.2) Act, 2014.
Explanation: For the purposes of this section “duty demanded” shall include,—
(i) Amount determined under section 11D;
(ii) Amount of erroneous Cenvat credit taken;
(iii) Amount payable under rule 6 of the Cenvat Credit Rules, 2001 or the
Cenvat Credit Rules, 2002 or the Cenvat Credit Rules, 2004.’.

Section 35F of the Central Excise Act, 1944 is amended to provide that the Tribunal or
Commissioner (Appeals) shall not entertain any appeal without mandatory payment of
minimum prescribed pre-deposit by the assessee.

With this amendment, payment of fixed pre-deposit of 7.5% of the duty demanded or
penalty imposed or both for filing of appeal before the Commissioner(Appeal) or the
Tribunal at the first stage, and 10% of the duty demanded or penalty imposed or both for
filing second stage appeal before the Tribunal is made mandatory.
15
Amended vide Finance Act,2014 w.e.f. 6th August,2014
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
However, the amount of pre-deposit payable is subject to maximum limit of Rs.10 Crores.

The amended provisions shall not apply to stay applications & appeals pending before any
appellate authority prior to the commencement of Finance (No.2) Act, 2014.

Hon’ble Finance Minister, in Para 252 of his budget speech, has mentioned that “to expedite
the process of disposal of appeals, amendments have been proposed in the Customs and
Central Excise Acts with a view to freeing appellate authorities from hearing stay
applications and to take up regular appeals for final disposal.”

It seems that the intention of this amendment is to dispense with filing of stay application
on payment of mandatory pre-deposit.

Section 86(6A)(a) amended as to No filing fees payable for application for grant of stay filed
before Appellate Tribunal .

Rule 6A of the CESTAT (PROCEDURE) RULES, 1982 provides that
RULE 6A: The number of appeals to be filed. Notwithstanding the number of show cause
notices, price lists, classification lists, bills of entry, shipping bills, refund claims / demands,
letters or declarations dealt with in the decision or order appeared against, it shall suffice
for purposes of these rules that the appellant filed one Memorandum of Appeal against
the order or decision of the authority below, along with such number of copies thereof as
provided in rule 9.
Explanation: (1) In a case where the impugned order-in-appeal has been passed with
reference to more than one orders-in-original, the Memoranda of Appeal filed as per Rule 6
shall be as many as the number of the orders-in-original to which the case related in so far
as the appellant is concerned.

(2) in case an impugned order is in respect of more than one persons, each aggrieved person
will be required to file a separate appeal (and common appeals or joint appeals shall not be
entertained).
FEW IMPORTANT DECISIONS:
 Larger Bench of Hon’ble Delhi CESTAT in the case of Eicher Motors Ltd. Vs CCE, Indore
(2002) TIOL 326 has held that there is no bar in the Act or in the Rules to the passing of
consolidated orders by the adjudicating authority or the first appellate authority. A single
appeal filed against such an order is not irregular only for the reason that the impugned
order had dealt with more than one SCN.
 Hon’ble Mumbai CESTAT in the case of Voith Paper Fabrics (I) Ltd Vs. Commissioner of
Customs, Mumbai (2013) TIOL 749held that when a common order is passed by
CCE(Appeals) giving five separate numbers, then five separate appeals are required to be
filed before CESTAT. One composite appeal filed before CESTAT against such common order
will not suffice. The Hon’ble CESTAT distinguished the cases wherein only single appeal was
filed against the order which was given only one number. It also distinguished the cases
wherein adjudicating authority disposed the various SCN’s by passing a single order-in original.
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APPEALS TO CCE (APPEALS) (SECTION 84)
 For the purpose of satisfying as to legality or propriety of any order/decision passed by
subordinated adjudicating authority, the 16Principal CCE or CCE may call for and examine the
records of any proceedings.
•
Within 3 months from the date of communication of such order, 17Principal CCE or CCE may
direct such subordinated adjudicating authority to apply to CCE (Appeals) for determination
of any point arising out of decision/order as may be specified.
•
The adjudicating authority or other authorized officer to make an application to CCE
(Appeals) within 1 month from the date of communication of order by CCE. Such application
by adjudicating authority or authorized officer shall deemed to be as appeal made against
order of adjudicating authority.
16
17
Inserted w.e.f from 6th August, 2014
Inserted w.e.f from 6th August, 2014
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