CA Manish Garg

CA Manish GargBudget 2015 came with many of the amendment covering the exempt field under tax net. With the implementation of the same the penalty under the service tax is streamlined along with some harsh measure. Section 80 has been deleted from the book of Finance Act, now even in the case of reasonable cause of mistake service providers has to pay the penalty. Further the relaxation provided earlier related to reduction in penalty, if true and complete details of transaction were available on specified records has been removed. It seems that department is trying to make a wall of harsh provisions around the mistakes done the service industry.

No demand notice is necessary for admitted liability

With the introduction of new sub-section (1B) as amendment in section 73, the self-assessed amount and disclosed in the return can now be recovered from the assessee without the issuance of show cause notice. Now if the amount involved is high, it is better to delay filing of ST-3 and pay late fee of Rs 20000.

Changes in Section 76 of the Finance Act, 1994:-

Section 76 has been amended to rationalize the provisions relating to penalties in cases not involving fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of Service tax, in the following manner:

  1. Ceiling of 10% of Service tax amount on penalty has been incorporated;
  2. No penalty leviable if Service tax and interest is paid within 30 days of issuance of SCN under Section 73(1);
  3. Reduced penalty equal to 25% leviable if the Service tax, interest and reduced penalty is paid within 30 days of receipt of Order of the Central Excise Officer; and
  4. If the Service tax amount gets reduced in any Appellate proceeding, then the penalty amount shall also stand modified accordingly, and benefit of reduced penalty (i.e. 25%) shall be admissible if Service tax, interest and reduced penalty is paid within 30 days of such Appellate Order.

Changes in Section 78 of the Finance Act, 1994:-

Section 78 has been amended to rationalize the provisions relating to penalties in cases involving fraud or collusion or wilful misstatement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of Service tax, in the following manner:

  1. Penalty shall be of 100% of Service tax amount;
  2. Reduced penalty equal to 15% shall be leviable if Service tax, interest and reduced penalty is paid within 30 days of issuance of SCN under Section 73(1);
  3. Reduced penalty equal to 25% leviable if the Service tax, interest and reduced penalty is paid within 30 days of receipt of Order of the Central Excise Officer; and
  4. If the Service tax amount gets reduced in any Appellate proceeding, then the penalty amount shall also stand modified accordingly, and benefit of reduced penalty (i.e. 25%) shall be admissible if Service tax, interest and reduced penalty is paid within 30 days of such Appellate Order.

The new provisions of penalty shall apply if adjudication order was not passed before the Financed Bill, 2015 is passed and assented by President of India. If true and complete details of transactions were available in specified records, penalty shall not exceed 50% amount – proposed section 78B of Finance Act, 1994.

No touch on the grey areas of litigations

Still the government has not given the clarification regarding the grey areas of service tax on which various issues has already risen; for example, the service tax on casual labour in case of manpower supply service, double taxation under VAT and service tax. Instead of clarifying the same government put the reimbursement expenses under service tax net, now the service provider once will pay service while availing the service as input and also pay the service tax when recover the same from the service receiver.

With all this government is trying to collect as much as possible from the pocket of the consumer but somewhere the harsh provision will somewhere force the assessee to deposit the tax on time and correct manner.

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Category : Service Tax (3278)
Type : Articles (13960)

0 responses to “Streamlined and Harsh Penal Provisions under Service Tax”

  1. Prateek Ray says:

    In cases of Collusion (cooperation to evade Service Tax), where the service was taxable, but the service provider was not levying service tax, and the service receiver was happy with the fact. Shall there be any liability on the Service Receiver as well ?

  2. mohit mittal says:

    If person is involved in fraud he pays 15 % penalty on receipt of order and amount paid within 30 days but however if the same is case with person not involved in fraud pays 25% ?
    Is it so?

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