Verification by the Tax Department

• Yes, service tax returns were subject to verification by the department.
  
• The verification ensured that the correct tax was paid and returns were accurately filed.
  
• It was part of routine compliance monitoring under the Finance Act, 1994.
  
• Returns were matched with payment records, invoices, and financial statements.
  
• Discrepancies found during verification could lead to further inquiries.
  

Legal Authority for Scrutiny

• The power to scrutinize returns was derived from Section 71 and 72 of the Finance Act, 1994.
  
• Officers were authorized to call for documents, inspect premises, and verify records.
  
• Rule 5A of the Service Tax Rules, 1994 empowered officers to conduct verification visits.
  
• Detailed scrutiny was allowed even without prior audit in high-risk cases.
  
• Records were required to be maintained for a minimum of five years for verification.
  

Types of Verification Conducted

• Preliminary verification involved checking return data for arithmetical or logical errors.
  
• Desk review matched filed returns with challans, CENVAT credit, and past filings.
  
• Field verification was done at the premises based on turnover, refund claims, or risk assessment.
  
• High-value taxpayers and inconsistent filers were prioritized for verification.
  
• Special drives and scrutiny notices were also issued in targeted cases.
  

Documents Required for Verification

• Copies of ST-3 returns, GAR-7 challans, and invoices.
  
• Trial balance, ledger extracts, and agreement copies for taxable services.
  
• Proof of CENVAT credit utilization and eligibility.
  
• Records of exemptions, abatements, or reverse charge payments.
  
• Any clarifications submitted during previous audits or inquiries.
  

Consequences of Verification Findings

• If discrepancies were found, show cause notices could be issued.
  
• Non-compliance could lead to demand of tax, interest, and penalties.
  
• Verified records were used to detect underreporting or misuse of exemptions.
  
• In some cases, past returns were reopened and re-assessed.
  
• Proper and accurate return filing helped avoid legal consequences.