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  • Service Tax - FAQs On Adjudication, Appellate Remedies And Determination Of Tax

    1. What does ‘Adjudication’ refer to?

      As per the provisions laid out in the Finance Act, 1994, when a show cause notice is sent out to an individual who has been charged with the violation of any of the provisions, rules or guidelines outlined in the Finance Act, and against whom punitive measures have been recommended, the relevant competent officials or officers of the Tax Department scrutinize the particulars of that particular case and give out orders based on the details presented to them. This procedure is known as ‘Adjudication’. In simpler terms, when any show cause notices are sent out as per the provisions of Section 73 of the Finance Act, 1994, in order to determine tax, and if the case is arbitrated by a qualified official, then this process is deemed to be the process of adjudication.

    2. When carrying out the process of adjudication, who is deemed to be a competent official or officer?

      In accordance with the guidelines laid out by the Central Board of Excise and Customs, the provisions of Section 83A and Section 73 of the Act states that each adjudicating officer or authority is designated based on a certain service tax amount or CENVAT credit amount that has been determined for the intention of carrying out the process of adjudication. This can be seen as below:

      As per Section 83A:

      Service Tax or CENVAT Credit Amount Type of Central Excise Officer
      Below Rs. 1 lakh Central Excise Superintendent
      Less Than Rs. 5 Lakhs Central Excise Assistant Commissioner Central Excise Deputy Commissioner
      More Than Rs. 5 Lakhs But Less Than Rs. 50 Lakhs Central Excise Joint Commissioner
      More Than Rs. 20 Lakhs But Less Than Rs. 50 Lakhs Central Excise Additional Commissioner
      No Limit Central Excise Commissioner

      As per Section 73:

      Service Tax or CENVAT Credit Amount Type of Central Excise Officer
      Less Than Rs. 5 Lakhs Central Excise Assistant Commissioner Central Excise Deputy Commissioner
      More Than Rs. 5 Lakhs But Less Than Rs. 50 Lakhs Central Excise Joint Commissioner
      More Than Rs. 20 Lakhs But Less Than Rs. 50 Lakhs Central Excise Additional Commissioner
      No Limit Central Excise Commissioner
    3. During the process of adjudication, is it mandatory for a lawyer or a qualified chartered accountant to be physically present?

      The presence of a qualified chartered accountant or lawyer is not compulsory, since the individual towards whom the show cause notice was issued to can choose to defend his or her case. However, should they opt to do so, the individual may utilise the services of any other authorised party to come to their defence when pleading a case in the presence of a competent adjudicating official or officer.

    4. In the event an assessee feels that he is being charged wrongfully, or would like to challenge the decisions handed out by any adjudicating officer who is deemed to be below the designation of Central Excise Commissioner or Service Tax Commissioner, who must the assessee in question approach and what is the process for launching an appeal?

      In such an event, the assessee in question must follow the procedure outlined below:

      • The assessee can file or launch an appeal with the Appeals Commissioner using Form ST-4. This form must be furnished in duplicate
      • The assessee must ensure that a copy of the notice or order that the assessee is appealing against is enclosed with the ST-4 form
      • The assessee must file the appeal within a time frame of three months from the time he or she received the order or notice
      • As per the provisions laid out in Section 85 of the Finance Act, 1994, as well as Rule 8 of the Service Tax Rules, 1994, no assessee is liable to pay a fee or charge when launching an appeal with the Appeals Commissioner
    5. Can an extension be provided to the 3 month time frame that the assessee is given for filing or launching an appeal with the Appeals Commissioner?

      An extension of an extra 3 months in addition to the initial time frame of 3 months may be granted to the assessee by the Appeals Commissioner only if he or she is content with the evidence presented, which shows that the assessee had suitable reason to not present his or her case within the prescribed time period. However, as per the provisions laid out in Section 85(3) of the Finance Act, 1994, no more extensions beyond this will be granted.

    6. Is it possible for an assessee to launch an appeal challenging the decision taken by the Appeals Commissioner, and what is the process for launching such an appeal?

      An assessee can challenge a decision taken by the Appeals Commissioner by following the procedure below:

      • The assessee can file an appeal with CESTAT (Customs, Excise and Service Tax Appellate Tribunal) to challenge the order issued by the Appeals Commissioner. This appeal is required to be filed by the assessee within a time frame of 3 months from the time he or she has received the order or decision that is being filed against
      • The assessee must file the appeal by using Form ST-5. This form must be furnished in quadruplicate
      • The assessee must ensure that a copy of the notice or order that the assessee is appealing against is enclosed
      • The assessee should also enclose the fee that is required to be paid along with the appeal, As per Rule 9 of the Service Tax Rules, 1994, this fee is determined as follows:
        • If the service tax amount is less than or equivalent to Rs. 5 lakhs, then the fee charged will be Rs. 1,000
        • If the service tax amount is above Rs. 5 lakhs but less than Rs. 50 lakhs, then the fee charged will be Rs. 5,000
        • If the service tax amount is above Rs. 50 lakhs, then the fee charged will be Rs. 10,000
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