Dr. V. Balachandran &
Dr. M. Govindarajan
Filing of returns
Section 70(1) of the Finance Act, 1994 (‘Act’ for short) provides that every person liable to pay service tax shall himself assess the tax due on the services provided by him. Besides, this section requires the assessee to furnish return to the Superintendent of Central Excise in the prescribed form and at such frequency. If the return is not filed within the due date, the return may be filed by paying late fee which may not exceed Rs.20,000/- Section 70(2) of the Act provides that the persons notified by the Central Government under Section 69(2) are also to file returns in such form and in such manner at such frequencies as may be prescribed.
Rule 7(1) of Service Tax Rules, 1994 provides that every assessee shall submit a half-yearly return in Form `ST-3′ or `ST-3A’, as the case may be, along with a copy of the Form TR-6, in triplicate for the months covered in the half-yearly return. ST -3 is meant for regular form for the assessees to be filed. ST – 3A is to be filed in case the assessee paid service tax provisionally, in addition to ST-3. In the earlier days the service tax returns were filed manually in triplicate. Separate return was to be filed for each service provided. The form was also simple. The service tax returns should be filed on half yearly basis. Rule 7(2) provides that every assessee shall submit the half year return by the 25th of the following particular half year. The return for the first half year (April to September) is to be filed on or before 25th October and the return for the second half year (October to March) is to be filed on or before 25th April.
Service Tax Credit Rules, 2002 requires the assessee to file return for credit taken and utilized by service provider along with ST – 3 returns. Later the return is streamlined and includes containing the details of all services rendered and the CENVAT credit taken and utilized after the introduction of CENVAT Credit Rules, 2004.
In addition to regular returns of ST-3, the assessee is to file Annual return. Vide Notification No. 19/2016-ST, dated 01.03.2016 Rule 7(3A), (3B) was inserted. According to this new Rule every assessee shall submit an Annual Return for the financial year to which the return relates by the 30th day of November of the succeeding financial year. The required form will be specified in the Notification in the Official Gazette by the CBE&C. Rule 7(3B) provides that the Central Government may specify by notification an assessee or class of assessees who may not be required to submit the annual return. This exemption is subject to such conditions or limitations.
Extension of time
Rule 7(4) gives powers to the CBE&C to extend the time of filing returns for ST-3 as well as Annual Return by an order by such period as deemed necessary under special circumstances of special nature specified in the order.
Rule 7(3) requires filing the returns electronically with effect from 25.08.2011. Rule 7(4) gives powers to the Board to extend the date of filing of the return by an order by such period as deemed necessary under special circumstances of special nature to be specified in such order. The format of service tax return had to be altered on the introduction of Point of Taxation with effect from 01.07.2012. The Board extended the date to file ‘ST-3’ by the 25th day of October, 2012 covering the period between 1st April to 30th June, 2012 only. Likewise the Board extended the date to file ST-3 for the period from 01.07.2012 to 30.09.2012 by 25.03.2013. The Board also extended the date of filing of returns to the assessees Tamil Nadu and Pondicherry suffered by flood situation
Rule 7(1) provides that an assessee may submit a revised return, in Form ST-3, to correct a mistake or omission, within a period of ninety days from the date of submission of the return under rule 7.
Rule 7(2) provides that an assessee who has filed the annual return by the due date may submit a revised return within a period of one month from the date of submission of the said annual return.
Rule 7C(1) provides that where the return prescribed under rule 7 is furnished after the date prescribed for submission of such return, the person liable to furnish the said return shall pay to the credit of the Central Government, for the period of delay of-
The total amount payable in terms of this rule, for delayed submission of return, shall not exceed the amount specified in section 70 of the Act i.e., Rs.20000/-
Rule 7C(2) provides that where the annual return is filed by the assessee after the due date, the assessee shall pay to the credit of the Central Government, an amount calculated at the rate of one hundred rupees per day for the period of delay in filing of such return, subject to a maximum of twenty thousand rupees.
In re ‘Tiruchengode Lorry Urimaiyalrghal Sangam’ -2016 (41) STR 343 (Sett. Comm) the Bench found that the applicant did not file the returns in the prescribed manner. They filed ST returns along with late fee as prescribed in Rule 7C of Service Tax Rules, 1944 read with Section 70 of Finance Act, 1994. The applicant was directed to explain the reasons for non filing of returns in the prescribed manner. The applicant stated that they were ignorant of the service tax laws but on their own declared the transactions to the Range Officer and taken registration and submitted themselves to the compliance of service tax law. Quoting from Rule 7C, the applicant stressed that once ST-3 returns were filed with late fees, the issue of filing of returns reached finality and the mandatory obligation was substantially fulfilled as compliance of Section 32E(1)(a) of the Central Excise Act, 1944. The Settlement Commission recorded the circumstances under which they filed the return with late fee is accepted as compliance of Section 32E(1)(a) of Central Excise Act, 1944 and therefore allow the appeal to be proceeded for settlement.
Section 77(2) of the Act provides that any person, who contravenes any of the provisions of this Chapter or any rules made there under for which no penalty is separately provided in this Chapter, shall be liable to a penalty which may extend to ten thousand rupees. This Section is applicable for non filing of service tax returns. Where the assessee has paid the amount for delayed submission of return if there is any proceedings in respect of such delayed submission of return then such proceedings in respect of such delayed submission of return shall be deemed to be concluded.
Nature of ST- 3 return
The ST-3 return is a report of transactions that has taken place over a period covered by the returns. This is the basic document. The assessee pays the tax on self assessment basis. Therefore the Department only relies on the ST-3 returns. It is the bounden duty of the assessee to disclose all and correct information in the ST-3 returns. Otherwise it may lead to various consequences.
Suppression of facts
The Revenue can invoke the extended period of limitation if the assessee intends to evade payment of service tax by means of fraud, suppression etc., Non disclosure of full and correct information in returns would amount to suppression of facts. The following case laws will illustrate this:
In ‘ARTEFACT Infrastructure Limited V. Commissioner of Central Excise, Nagpur’ – 2016 (42) STR 34 (Tri. Mum) the Tribunal found that the appellants have not disclosed the facts related to their activities of services to their client before the Department. They have not declared the taxable value of services in their ST-3 returns. In these circumstances the Tribunal held that the department had no occasion to know the activity of the appellant and there is suppression of fact on the part of the appellant. The Tribunal further held that the department is correctly invoked the extended period of limitation. The Tribunal upheld the demand of service tax and interest.
In ‘Tarachand Chaudhary V. Commissioner of Central Excise, Jaipur’ – 2016 (42) STR 83 (Tri. Del) the Tribunal found that the appellant did not take service tax registration and did not file ST-3 returns pertaining to the impugned service. It did not also submit the details in spite of being asked and did not even respond to summons. Thus the appellant is clear guilty of suppression of facts.
In ‘Suresh Jaiswal V. Commissioner of Central Excise, Jaipur’ – 2016 (42) STR 97 (Tri. Del) the appellant failed to take registration and file ST-e returns. The details regarding service rendered have not been submitted. The appellant has not also responded to the summons issued. The Tribunal held that the appellant is clearly guilty of suppression of facts.
In ‘NGIL Infrastructure Limited V. Commissioner of Central Excise & Service Tax’ – 2016 (41) STR 299 (Tri. Del) the Tribunal found that the impugned order clearly noted that the alleged amount was not reflected in ST-3 returns which itself is sufficient to establish suppression of facts on the part of the appellant to evade service tax. The details about the alleged amount have been obtained only from the service recipient.
In ‘Sainik Security Services V. Commissioner of Central Excise, Allahabad’ – 2016 (41) STR 149 (Tri. All) the Tribunal found that the value of service declared in the periodical return Rs.83,27,454/- is more than the value shown in the show cause notice Rs.82,48,726/-. The appellant placed copies of ST-3 returns on record. There is no challenge by the Revenue to the facts that the ST-3 returns reflect the value of services provided. Revenue has not been able to establish that there was any fraud or suppression of facts or contravention of any of the provisions of service tax law with intent to evade payment of service tax. In the circumstances the genuine omission to pay tax @ 10% instead of 8% is to be construed as a bona fide act. Rather it is for Revenue to explain how the service tax returns were not assessed at the appropriate rate of duty. The Tribunal found no element to invoke the extended period under Section 73. The show cause notice issued is clearly time barred.
Intention to evade payment
In ‘Charanjeet Singh Khanuj V. Commissioner of Service Tax, Indore’ – 2016 (41) STR 213 (Tri. Del) the Tribunal held that merely because the assessees failed to apply for service tax registration or file ST-3 returns or declare activities to jurisdictional authorities, willful act with intent to evade the payment of service tax cannot be inferred.
In ‘Central Warehousing Corporation V. Commissioner of Service Tax, Ahmadabad’ – 2106 (41) STR 106 (Ahmd) the appellant contended that the correct service tax liability was indicate din the ST-3 returns filed with the department. Short payment of service tax, if any, was apparent from the figures in ST-3 returns. The Tribunal held that once correct calculations have been shown by the appellant, then there cannot be any intention to evade payment of service tax, therefore, extended period cannot be invoked and the show cause notice was time barred.
In ‘Pipavav Shipyard Limited V. Commissioner of Central Excise & Service Tax, Bhavnagar’ – 2016 (41) STR 151 (Tri. Ahmd) the CENVAT credit availed on input services was shown in ER-1 return instead of ST-3 return. The Tribunal held that the rules permit taking of credit under a common pool and use of credit from common pool for different purposes. There is no restriction placed to effect that credit accounts should be maintained for use of manufacture of goods and for providing services. The restrictions on utilization of CENVAT credit stipulated relates only for specific type of duties i.e., education cess on excisable goods or payment of education cess on input service. There is no restriction for utilization of common input credit availed on inputs and also on input service for payment of excise duty or service tax. The credit is not deniable on the ground that it was shown in ER-1 return.
In ‘Broadcon India Research Private Limited V. Commissioner of Service Tax, Bangalore’ – 2016 (42) STR 79 (Tri.Bang) the CENVAT credit shown in ST-3 returns does not tally with the amount claimed in the refund claims. The Tribunal was of the opinion that the refund claim is not based on ST-3 returns. ST-e return is nothing but a report of transaction that has taken place over a period covered by the returns. On the ground that the figures in ST-3 returns were cannot correct or there was a substantial difference the refund claim cannot be rejected. For the purposes of consideration of refund claim, the relevant documents on the basis of which credit was taken, nature of service and its nexus and utilization of the service for rendering output service are relevant. Merely because there was mistake in ST-3 return substantive right of assessee for refund cannot be rejected. Therefore the Tribunal did not consider it necessary to consider the issue as to whether the figures in ST-3 returns tallied with the amount claimed in the refund claims or not.