Top Stories Self-Assessment by Taxpayer cannot be treated as Dilution of Central Excise Officer’s Statutory Responsibility: CESTAT [Read Order] It was held that unless the Central Excise officer calls for documents, etc., it is not required to provide them or disclose anything else By Yogitha S. Yogesh – On November 11, 2024 3:44 pm – 3 mins read The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that self-assessment by taxpayers  cannot be treated as dilution of central excise officers’ statutory responsibility. Haamid Real Estate Pvt Ltd, the respondent/assessee is registered with the service tax department and has been providing taxable services of construction of residential complexes and has been paying service tax and filing its returns.

On audit , it was found that the appellant had considered sale of development rights as non-taxable and had not paid service tax on the consideration received for transfer of development rights. The department felt that the transfer of development rights became a ‘service’ with effect from 1.7.2012 as per section 65B (44) of the Finance Act, 1994 and therefore, it was taxable. As per Rule 5 of the Point of Taxation Rules, 2011, tax was payable. Master GST Notice Replies – Drafting 20 Notices, Including Appeals – Register Now A show cause notice was issued by the department proposing demand of Rs. 7,11,91,036 as service tax along with interest under section 75 and penalties under sections 76,77 and 78 of the Finance Act. The proposals in the SCN were dropped by the Commissioner and held that in case of transfer of development rights, the liability arises on the date of signing of the agreement since it actually arises on the date of providing the service. The department has filed an appeal challenging the order of the commissioner. It was argued by the department  that the date of rendition of service is after the date of the agreement which is the relevant date to be considered to determine if the service was taxable.

The date of rendition of service is the date of invoice or the date of receipt of payment. It was contended that the Commissioner erred in considering the date of agreement as the date of rendition of services and dropping the demand. Master GST Notice Replies – Drafting 20 Notices, Including Appeals – Register Now On the other hand , the assessee contended that the service was rendered prior to the introduction of negative list, i.e., 1.7.2012 when the service was not taxable, whereas the demand has been proposed under the provisions after 1.7.2012 under Section 65B (44). No invoice was ever issued and the payments for transfer of development rights were received in terms of the agreements which were entered into prior to 1.7.2012. The demand cannot be sustained and has been correctly dropped by the Commissioner. The CESTAT held that ‘the central excise officer’ has an obligation to make his best judgement if either the assessee fails to furnish the returns or, having filed the return, fails to assess tax in accordance with the Act and Rules.

Thus, although all assessees self-assess tax, the responsibility of taking action if they do not assess and pay the tax correctly squarely rests on the central excise officer, i.e., the officer with whom the Returns are filed. The Tribunal viewed that the officer may require the assessee to produce accounts, documents and other evidence he may deem necessary. Thus, in the scheme of the Finance Act, 1994, the officer has been given wide powers to call for information and has been entrusted with the responsibility of making the correct assessment as per his best judgement. Master GST Notice Replies – Drafting 20 Notices, Including Appeals – Register Now The two member bench of Justice Dilip Gupta, (President) and P. V. Subba Rao, (Technical Member) has observed that the assessee was required to file the ST 3 Returns which it did.

Further held that unless the Central Excise officer calls for documents, etc., it is not required to provide them or disclose anything else. While upholding the commissioner’s order, the tribunal dismissed the appeal of department and held that the primary responsibility for ensuring that correct amount of service tax is paid rests on the officer even in a regime of self-assessment was clarified by the Central Board of Excise and Customs in its Manual for Scrutiny of Service Tax Returns To Read the full text of the Order CLICK HER