CA Keshav Garg, Chandigarh
Finance Act 2015 has drastically amended the penalty provisions under the Finance Act 1994 (Service Tax law) in order to ensure non-discriminatory form of penalties. Earlier penalties u/s 76 (for short payment of S/Tax) and u/s 78(Suppression of facts) used to be at Rs 100/- per day or 1% per month whichever is higher. This lead to the number of litigation upon the calculation of penalty. Finance Act 2015 has amended the same and the new provisions have been laid down. Summary chart of the new provisions is as follows:
| Particulars | Old Provisions | New Provisions w.e.f 14.05.2015 | |
| u/s 76 (No Fraud) | u/s 78 (Fraud) | ||
| Penalty | 100 Rs per day or 1 % per month from the date of default. | Non discretionary Minimum Penalty of 10% of Service Tax Liability. | Non discretionary Minimum Penalty of 100% of Service Tax Liability. |
| Maximum ceiling | 50% of the tax liability | No maximum ceiling, implied 10%. | No maximum ceiling. |
| Waiver of Penalty | No Waiver – Penalty could be dropped on grounds of reasonable cause u/s 80. | Complete waiver if service tax + Interest is paid within 30 days of date of service of notice. | Waiver of 85%, if Service Tax + Interest + 15% Penalty is deposited within 30 days of service of notice. |
| Relaxation in Penalty after the order. | No relaxation | 75% penalty is waived if Service Tax + Interest is paid within 30 days of the order. | 75% penalty is waived if Service Tax + Interest + 25% Penalty is paid within 30 days of the order. |
It should be noticed that section 80 which provided for waiver of penalty under reasonable causes was first introduced in Finance Act 2012 and the same has been withdrawn by Finance Act 2015 with the introduction of new provisions u/s 76 & & 78 of Finance Act 1994.
It is well established fact under Service Tax Law that penalty cannot be levied without the issue of Show Cause Notice (SCN) to the assessee. Since the Finance Act 2015 has been enforced from 14.05.2015, there are three different scenarios possible under which the penalty provisions can be enforced, the details of which are as follows:
| Situation | Applicable Provisions |
| SCN issued after 14.05.2015 | New Sections 76 & 78 shall apply |
| SCN issued before 14.05.2015 but order passed after 14.05.2015 | New Sections 76 & 78 shall apply as per the transitory provisions of Section 78B introduced by Finance Act 2015 |
| Order in original issued before 14.05.2015 | Old Sections 76 & 78 shall apply subject to reasonable cause u/s 80. |
(Author can be reached at +91 9888-090-008 or on mail-Mygst.mytax@gmail.com)
Author Bio
In the year 2015-16 works contract f 63.5
lakhs, for construction of seeds godown at University of Agricultural Science.SCN issued by Asst Comm. on December 2020 to pay Service tax, penalties, interest etc.
As per order he exemted 55 lahs for godown works as per14d of notification 25/2012. But Principal Commissioner rejected the exemption on the reason that seed is not an Agriculture produce.and filed appeal to Commissioner appeals.
2) can hire charges received by renting my JCB for agricultural activities can be claimed for exemption.
please guide.
Very very help ful and removed all the confusion
Yes the benefit will be available.
Thank you Vinod Mittal..
Dear sir,
Would u mind make a tabular chart for penalties under central excise on the above lines?
GOOD INFORMATION
what about the cases decided by cestat post 14/05/15 but pertaining to the year 2004-05 where the matter was first adjudicated by the commr. in sept. 2011. Will section 80 will still be available?
New Provisions w.e.f 14.05.2015 : In the case of Extended period u/s 78
Waiver of 85%, if Service Tax + Interest + 15% Penalty is deposited within 30 days of service of notice. –
What is the treatment of penalty if the Audit find it an objection which is More than 18 months ( i.e Audit visited after 18 months ) , Service provider wants to pay the amount with out SCN
Whether the following instruction is having legal backing, Even before issuing SCN if an assessee pays tax + Interest , how penalty is applicable
Instruction F. No. 137/46/2015-S.T., dated 18-8-2015
Doubt : Does a SCN have to be issued in a case involving the extended period of limitation, where the assessee pays the tax/duty, interest and 15% penalty as prescribed?
2.1 In a case involving the extended period of limitation, if an assessee pays the Service Tax/Central Excise duty, interest and penalty equal to 15% of the tax/duty and makes a request in writing that a written SCN may not be issued to them, then in such cases the SCN can be oral and the representation (if he desires) against it also oral. In other words, an assessee can request for an informed waiver of a written SCN. The Supreme Court in the case of Commissioner of Customs, Mumbai v. Virgo Steels reported in 2002 (141) E.L.T 598 (S.C.) has held that :