• Aug
  • 10
  • 2013

Nil Service tax Return / VCES / Penalty for Late Filing when no service is rendered?

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No Need to file Service Tax return (ST-3) when no service is rendered during the relevant period and even not required to opt for VCES

We are sharing with you an important judgement of the Hon’ble Kolkata Tribunal  in the case of M/s Suchak Marketing Pvt Ltd Vs. Comm. of Service Tax, Kolkata [2013 (6) TMI 641] and detailed analysis on following issue:

Issue:

Whether Service provider is required to file Service Tax Return when no service is rendered during the relevant period?

Facts of the case:

M/s Suchak Marketing Pvt Ltd (“the Assessee“ or “Suchak”) is registered under the taxable service category of constructions in respect of commercial or industrial building and civil structure services under Chapter V of the Finance Act, 1994 (“the Finance Act”).

During the period April, 2005 to March, 2008 the Assessee has not provided any service and also has not filed Service Tax Return. However the Assessee filed six “Nil” belated Service tax return for the period September, 2005 to March, 2008 on November 18, 2008.

Thereafter the Department issued a show cause notice proposing to impose penalty under Rule 7C of the Service Tax Rules, 1994 (“the STR”) and Section 77 of the Finance Act.  The Adjudicating Authority vide the Order-in-Original ordered the Assessee to pay Rs. 12,000/-for each ST-3 Return under Rule 7C of STR for late filing of Service Tax Return and also imposed penalty of Rs. 2,000/- under Section 77 of the Finance Act.

Subsequently, the Assessee against the Order-in-Original filed an appeal before the Commissioner (Appeals). The Commissioner (Appeals) confirmed the late fee of Rs.12, 000/- under Rule 7C of STR and dropped penalty under Section77 of the Finance Act.

Hence the Assessee filed the present appeal before the Hon’ble Tribunal challenging levy of late fee on the ground that it had not provided any services during impugned period and thus was not required to file service tax return.

Held:

The Hon’ble Tribunal waived penalty under Rule 7C of the STR and set aside order of the Commissioner (Appeals) relying on the Central Board of Excise and Customs (“the CBEC”) Circular No.97/8/07-ST dated August 23, 2007 and judgment of the Tribunal in the case of Amrapali Barter (P.) Ltd. Vs. CST [2013-TIOL-32-CESTAT-KOL] (“Amrapali Barter Case”).

The Hon’ble Tribunal observed that even in terms of Rule 7C of the STR in case of filing of NIL returns, the Assessing Officer has discretion to waive late fees for filing of ST-3 returns. Further the Tribunal observed that this is a fit case to invoke proviso to Rule 7C of the STR and waived late fees, relevant proviso of Rule 7C of the STR is as under:

“Provided also that where the gross amount of service tax payable is nil, the Central Excise officer may, on being satisfied that there is sufficient reason for not filing the return, reduce or waive the penalty.”

 The relevant extract of the Circular and Amrapali Barter Case are as under for the ease of your reference:

The Circular:

“6. ….Persons who are not liable to pay service tax (because of an exemption including turnover based exemption), are not required to file ST-3 return.” 

In Amrapali Barter Case, the Service provider is registered with the Service Tax Authorities and has not provided any services during a particular return cycle and was also not liable to pay any service tax during that return cycle. The Hon’ble Tribunal has held that the service provider is not required to file the Service Tax Return (even nil return) for that period as per the CBEC Circular No 97/8/07-ST dated August 23, 2007.  Further the Hon’ble Tribunal held that in case the Service Provider files the nil return after considerable delay, then also no penalty under Section 77 of Finance Act or fees under Rule 7C of the STR imposable on him. Hence such case is fit for invocation of the proviso to Rule7C and grant waiver of late filing fees.

Related open Query in the light of Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES):

The TRU (CBEC) has issued a recent Circular No. 170/5 /2013 – ST dated. 08-08-2013 to provide clarification on stated query:

Query:             Whether a person, who has paid service tax for a particular period but failed to file return, can take the benefit of VCES Scheme so as to avoid payment of penalty for non- filing of return?

Clarification:  Under VCES a declaration can be made only in respect of “tax dues”. A case where no tax is pending, but return has not been filed, does not come under the ambit of the Scheme. However, Rule 7C of the Service Tax Rules provides for waiver of penalty in deserving cases where return has not been filed and, in such cases, the assessee may seek relief under Rule 7C.

Way forward:

Assessee, who has paid service tax for a particular period but failed to file service tax return, can be relieved on following ground:

  • Persons who are not liable to pay service tax (because of an exemption including turnover based exemption), are not required to file ST-3 return in terms of Circular No.97/8/07-ST dated August 23, 2007 and cited judgement.

 Even if service tax return is filed late/ failed to file return – No Penalty in terms of Rule 7C of the STR.

Something to cheer……..enjoy.  

—————————————-

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)

Mobile: +91 9810604563

E-mail: bimaljain@hotmail.com


12 Responses to “Nil Service tax Return / VCES / Penalty for Late Filing when no service is rendered?”

  1. chandra shekhar says:

    WHAT IS PENALTY FOR SERVICE TAX BELATED RETURN

  2. uday says:

    Dear Sir,

    My client has filed the service tax return semi-annually before 2 years. After that he has not provided any service and not filed the service tax return for two years. now he provides the same services. And will also file the return for current period. but for the two years should he file nil return? will he be liable for any penalties or any other amount?

    Please give me solution.

  3. Saurabh says:

    Sir,

    We do not have any service tax dues for the past 7 years and no taxable income in the company and have not filed any ST-3 for the same period. Would like to ask whether i am required to file all NIL ST – 3 or can they be ignored and the number be immediately surrendered without any penalty.

    Please advice.

  4. Joseph says:

    My cousin he did not file the nill return from date registered ( 19/09/2011 to till date) recently i think not mandatory to file nill return but what about previous year from 2011?

  5. Sumit Aggarwal says:

    Sir,
    you give the judgement which helps assessees who are harrased by ST Authority for non filling of return.
    Further also provide the procedure of surrendering service tax number as assessee does not provide taxable services
    and deptt says to issue show cause for surrendering ST Number

  6. ASHOK KUMAR says:

    Ok sir, but I have deposited some service tax for the year 2011-12 but return could not be uploaded till now, then Penalty would be payable/applicable ??

    regds

    ashok kumar

  7. CA.Kamlesh M Hirpara says:

    thx sir, sharing important circular and rule under ST for weaving way from penalty…. sugest if other way to reduce penalty other than VCES…
    professional regards from colleague,,,

  8. ASHOK KR says:

    Sir
    Actually, I have already deposited the service tax for year 11-12 and filed online return but the same could not be uploaded till now. Now I just want to know,any penalty would be payable if the same return uploaded by today or not??

    regards

    Ashok kr.

  9. PNV GIRI says:

    Sir,
    Under the Renting of Immovable services one of my friends was paying the Service tax for having let out his property on rent to one of the leading departmental stores.
    the tenant stopped paying the S. T . on Rent from 2011 or so, quoting the stay order . Now they wish to pay all the arrears . Can they make use of VCES ? The concerned Superintendent says ” NO ” . Any suggestion ?

  10. CA Narendra Parmar says:

    Dear Sir.

    Article is very nicely and to the point explained.

    Thanks

  11. CA PRADIP G. THAKKAR says:

    INDEED A CHEARFUL JUDGEMENT. NUMBER OF ASSESSES WILL BE HELPED BY THIS JUDGEMENT. THANKS FOR SHARING THE SAME.
    CA PRADIP G. THAKKAR.

  12. MOHIT says:

    the judgement will go to benefit thousands of assessees who are harrased by service tax authority for simply not filling “NIL” return/belated filling of ST3.

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