The conditions and situations warranting recovery
In at least one of the following situations:

(a) The service tax has not been levied or short-levied.
(b) The service tax has not been paid or short-paid.
(c) The service tax has been erroneously refunded.

the department has to initiate recovery proceedings against the party concerned.

As per law the department cannot just ask the party to pay up. On the contrary they have to inform the party concerned in writing that as per their view so-and-so amount of tax is due from the party and why the demand of the same may not be confirmed on the party. Such a communication is called Show cause Notice.

In the Show Cause Notice the exact amount of tax due has to be mentioned. They have to give all the details of law and facts available with them based upon which they make such assessment. Also they have to give the party an opportunity to explain their stand on the same, supported by any evidence what so ever they wish to use in their support.

The officer concerned for issuing the same is called adjudicating authority (defined in section 2(b) of the Central Excise Act). If he is satisfied that one of the above factors is present, he may serve show-cause 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 erroneously refunded within one year from the relevant date requiring him to show-cause for recovery of the service tax

SHOW CAUSE NOTICE TO BE ISSUED WITHIN ONE YEAR FROM THE RELEVANT DATE IN USUAL CASES
However 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
(c) wilful mis-statement; 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, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words “one year”, the words “five years” had been substituted (Section 73)

SHOW CAUSE NOTICE TO BE ISSUED WITHIN FIVE YEAR FROM THE RELEVANT DATE IN CASES OF FRAUD, COLLUSION, WILLFUL MIS STATEMENT OR SUPPRESSION OF FACTS.

SUPPRESSION OF FACTS IS THE MOST COMMON REASON TAKE BY THE DEPARTMENT TO ISSUE SHOW CAUSE NOTICE TO DEMAND THE TAX UPTO 5 YEARS FROM THE DATE IT WAS DUE.

HENCE PROPER RECIEPT WITH STAMP IS NECESSARY FOR ALL SUBMISSIONS, INCLUDING RETURNS, DOCUMENTS, STATEMENTS ETC. MADE TO THE DEPARTMENT FROM TIME TO TIME.

 

Relevant date means, —
(i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid —
(a) where under the rules made under this Chapter, a periodical return, showing particulars of service tax paid during the period to which the said return relates, is to be filed by an assessee, the date on which such return is so filed;
(b) where no periodical return as aforesaid is filed, the last date on which such return is to be filed under the said rules;
(c) in any other case, the date on which the service tax is to be paid under this Chapter or the rules made thereunder;
(ii) in a case where the service tax is provisionally assessed under this Chapter or the rules made thereunder, the date of adjustment of the service tax after the final assessment thereof;
(iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.’;

However when the service tax is paid together with interest either on the basis of the assessee’s own ascertainment or on the basis of tax ascertained by the Central Excise officer before service of notice, no show cause notice should be issued (73 (3)/Section 73(2A) of the Finance Act)

The limitation period is not from the date of receipt of the show cause by the concerned person but the date of delivery of the show cause notice in one of the modes prescribed.