QUESTION

Whether the demand in service tax period calculated under Section 72 of Finance Act, 1994 can again be raised under Section 73(1) (extended period)? So far as I know, the demand of service tax was to be raised either under section 72 or under section 73(1).

ANSWER

Facts of the case: Whether the demand in service tax period calculated under Section 72 of Finance Act, 1994 can again be raised under Section 73(1) (extended period)? 

Law Applicable: Section 72. Best judgment assessment.- 

If any person, liable to pay service tax,'

(a) fails to furnish the return under section 70;

(b) having made a return, fails to assess the tax in accordance with the provisions of this Chapter or rules made thereunder, the Central Excise Officer, may require the person to produce such accounts, documents or other evidence as he may deem necessary and after taking into account all the relevant material which is available or which he has gathered, shall by an order in writing, after giving the person an opportunity of being heard, make the assessment of the value of taxable service to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment.

Section 73: - Recovery of Service tax not levied or paid or short-levied or short-paid or erroneously refunded.-

 (1) where any service tax has not been levied or paid or short -levied or short-paid or erroneously refunded, the Central Excise Officer may, within thirty months from the relevant date  serve notice on the person chargeable with the service tax which has not been levied or paid or which has been short-levied or short-paid or the persons to whom such tax refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice;

Provided that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of- 
(a)     fraud; or
(b)     collusion; or---------------------------------

Interpretation: Section 72 is related to assessment and covers Best Judgement Assessment on the other hand Section 73 deals with demand which is left to be assessed.

There may be two reasons for it: First because of the wrong calculation of tax without intention of fraud and second is with the intention to avoid tax or with the intention of fraud.

Thus in the second case an extended period of 5 years may be invoked.

Conclusion: Section 72  and section 73 are independent of each other. The invocation of the extended period depends upon the facts of the case. (Reply dt. 08/02/2021)