Accounts Notes: Service Tax on Penalties

Indian Service Tax
Penalties

Q.1 Under what situations, penalty may be imposed by the Department on the assessee?

Ans. Penalty may be imposed by the Department on the assessee if he,

fails to pay service tax to the government in time or,

fails to file half-yearly return with the department in time or;

willfully suppresses or conceals the value of taxable service or furnishes inaccurate value of such taxable service or,

fails to comply with a notice requiring him to produce within the specified time limit, such accounts, documents or other evidence as considered necessary by the Central Excise officer for assessment.

Q.2. What is the penalty in case of .delay in paying the Service Tax to the Government within the prescribed time limit?

Ans. For failure to pay the Service Tax, the assessee would be required to pay a minimum penalty of Rs.lOO/- to Rs.200/-, per day as decided by Central Excise Officer. This amount is subject to a ceiling of the amount equivalent to Service Tax not paid. Interest is also payable at the rate of one and a half percent for every month or part of a month by which the payment of tax or any part thereof is delayed.

Q.3. What is the penalty for non filing or delayed filing of Half -yearly returns?

Ans. An assessee failing to file half-yearly returns or failing to file them on time, could be penalised for Rs. 2000/- maximum.

Q.4. What would be the penalty when the assessee willfully suppresses or conceals the value of the taxable service or furnishes inaccurate value of such taxable service with an intention to evade payment of service tax?

Ans. In such cases, the assessee will have to pay, in addition to service tax and interest if any, a penalty not less than the amount of service tax, intended to be evaded, but not exceeding twice that amount.

Q.5. Is there any provision in law for prosecution of assessees for any failure?

Ans. Originally, provisions had been made in the law for prosecution for violations of requirements of Service Tax. The same, however, have been deleted by the Govt. by the Finance Act, 1998, as a measure of goodwill to the new assessees.

Q.6. Whether any penalty could be imposed for the delayed submission of ST-3 returns in the assessment memorandum itself or should a separate notice to be issued?

Ans. Penalty could be imposed for the delayed submission of ST-3 returns under Sec.77 of the Act. However, Show Cause Notice has to be issued before the penalty is imposed.

Q.7. Many Government departments/undertakings like MHADA, BH & AD Board, CIDCO etc. are not paying service tax to the empanelled consultant Architects,Engineers. Whether the service tax is payable by the departments to empanelled consultant? If yes, has any clarification letter cum guidelines been issued by Tax Department to all such service receiver departments?

Ans. Service Tax is correctly payable on the value of the taxable. services received and there is no exemption to any Central/State Govt. agencies or organisations in this regard. Instructions have also been issued by the Govt. of India in this regard.
Exemption from penalty

Section 80 of the Finance Act, 1994 provides that no penalty shall be imposable for failure to comply with the notice under Section 71, for failure to submit ST-3 return in time, for failure to pay taxes in time or even for suppressing the value of taxable service, if the assessee proves that there was reasonable cause for the said failure. However, penalty for delay in taking up the registration in not possible to be waived.
Actnal date of crediting

[TN No. 132/96, dated 26/11/1996 of the Cochin Commissionerate]

Sub:- Service Tax - Actual date of crediting of Service Tax to the Book account of the Central Government to be taken for calculation of interest and penalty.

Under Sections 75 and 76 of the Act an interest has to be charged at the rate of 1.5% of every month or part of the month by which crediting of tax is delayed and penalty for failure to collect or pay Service Tax can also be imposed. In order to arrive at the calculation of interest and penalty under the Service Tax on telephones it has been decided that the first date on which book transfer is made in the cash section of Secondary Switching Area.(SSA) as the date of crediting to the Central Government. Accordingly the proforma ST 3 and ST 3A prescribed under Rule 7 of Service Tax is revised which is enclosed alongwith this trade Notice. Hereafter all Secondary Switching Areas who are paying the service Tax on telephones by book transfer has to file the return prescribed under Rule 7 of Service Tax in the revised proforma.
Difficulties - Clarification
Cir.No. 76/6/2004-ST

Date 3/3/2004

Sub:- Clarification sought by PHD Chamber of Commerce and Industry on various difficulties being faced by Service Tax assessees - Regarding.

The Board has received representation from PHD Chamber of Commerce and Industry with regard to' general difficulties being faced by Service tax assessees.

The following points are, therefore, further clarified :

Penalty for each service under section 75A for delay in taking single registration for more than one taxable service &

Penalty for each service under section 77 for delay in filing of return by assessee providing more than one taxable service

Clarification

As per statutory provisions only one penalty as prescribed can be imposed.

3. Delay in issue of PAN based 15 digit STC/STP Code and difficulties faced by asses sees for seeking STC/STP.
Clarification

The forms for registration for issue of 15 digit STC/STP code are very simple and do not create any ambiguity. If the allotment has not been done within three working days in terms of Circular 35/3/2001-CX-4, dated 27/8/2001 the assessees may bring the same to the notice of the jurisdictional Assistant Commissioner/Deputy Commissioner/Commissioner of Central Excise who shall immediately issue necessary directions.

4. Insisting on payment of penalty before registration.
Clarification

The Circular No. 72/2/2004-S.T, dated 2nd January, 2004 provides that jurisdictional officer shall accept the declaration given by the assessee and as per the Rule 4(5) of the Service Tax Rules, 1994 grant the registration within seven days.

5. Issue of Show Cause Notice for petty amounts.
Clarification

The matter has been considered by the Board and it has been decided that for an amount of Rs. One thousand and below towards short payment/non-payment of service tax, the jurisdictional officer should give an opportunity and allow the assessee to deposit the amount of service tax not paid along with interest, if any. Incase the service provider pays the service tax along with interest within period of one month of the default in payment being pointed out, recourse should be made to section 80 of Finance Act, 1994 as amended provided the assessee fulfils the conditions therein. However, in other cases of failure on behalf of Service provider to pay the service tax and interest, if any,normal procedure shall be followed.