Streamlined and Harsh Penal Provisions under Service Tax

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.