Service Tax Penal Provisions FAQ
The Penal provisions for various contraventions of the Service Tax Law are as follows:-
- Non registration or delayed registration: An amount which may extend to Rs. 10000/- or Rs.200/- for every day during which such failure continues, whichever is higher could be imposed as penalty under sec 77(1)(a) of the Act.
- Non payment or delayed payment of service tax- A mandatory penalty, not less than Rs.100/- for every day during which such failure continues or @1% of such tax per month, whichever is higher, shall be imposed by the adjudicating authority. However, the penalty amount payable shall not exceed fifty percent of the service tax payable.[Section 76 of the Act]
- Non-filing / delayed filing of returns: A mandatory penalty has been prescribed under Rule 7C of the Service Tax Rules, 1994, as also an amount not exceeding TenThousand Rupees could be imposed as penalty under sec 77(1)(a) of the Act. (see para 4.11 of this Booklet)
- Contravention of any of the provisions of the Finance Act, 1994 (Chapter V) or the Rules made there-under for which no penalty is separately provided: An amount which may extend to Rs.10000/- shall be liable to be imposed as penalty under Sec.77(2) of the Act.
- Failure to keep, maintain or retain books of account and other documents as required in accordance with the provisions of the Finance Act, 1994 (Chapter V) or the Rules made there under: An amount which may extend to Ten thousand rupees shall be liable to be imposed as penalty. [Section 77(1)(b) of the Act]
- Failure to
- Furnish information called by an officer in accordance with the provisions of the Finance Act,1994 (Chapter V) or rules made thereunder; or
- Produce documents called for by a Central Excise Officer in accordance with the provisions of this Chapter or rules made thereunder; or
- Appear before the Central Excise Officer, when issued with a summon for appearance to give evidence or to produce a document in an inquiry,
during which such failure continues, whichever is higher, shall be liable to be imposed as
penalty. [Section 77(1)(c) of the Act]
- Person who is required to pay tax electronically, through internet banking, but fails to pay the tax electronically: An amount which may extend to Ten thousand rupees shall be liable to be imposed as penalty. [Section 77(1)(d) of the Act]
- Person who issues invoice in accordance with the provisions of the Act or rules made thereunder, with incorrect or incomplete details or fails to account for an invoice in his books of account: An amount which may extend to ten thousand rupees shall be liable to be imposed as penalty. [Section 77(1)(e) of the Act]
- where Service Tax was not levied or paid or erroneously refunded, by reason of fraud, collusion, willful mis-statement, suppression of facts; or contravention of any of the provisions of the Act or the rules made thereunder with an intent to evade payment of Service Tax, penalty shall be equal to the amount of Service Tax so not levied, paid or short-levied or short-paid or erroneously refunded. Such liability towards penalty shall be in addition to the Service Tax amount evaded or erroneously refunded and the interest thereon (Section 78 of the Act).
- Reduced Penalty in respect of Sl. No. (ix):
- Where true and complete details of the transactions are available in the specified records, penalty shall be reduced to 50%.
- If the Service Tax amount as determined by the competent authority is paid within 30 days from the date of communication of the order, along with interest, the amount of penalty liable to be paid shall only be 25% of the Service Tax amount so determined.
- The benefit of reduced penalty equivalent to 25% of the said Service Tax is available only if such lesser penalty amount is also paid within thirty days (First and second proviso to Section 78 of the Act).
- Launching of Criminal Prosecution :- A new Section 89, has been inserted to provide launching of criminal prosecution for Service Tax offence. In cases, where the amount involved exceeds Rs. 50 lakhs, there is a provision for imprisonment upto three years and in other cases it will be one year. For this prosecution, prior sanction of the Chief Commissioner will be required ( Section 89 of the Finance Act, 1994).
Is there any provision to waive the penalty under Service Tax law?
The penal provisions under Service Tax are provided under Sections 76, 77 and 78 of Finance Act, 1994. Although the penalty is liable to be imposed for the circumstances covered under the said provisions, the Section 80 of the Finance Act, 1994, provides provisions not to impose penalty, for any failure referred to in the said provisions, if the Service Tax assessee proves that there was sufficient cause for such failure.
When any amount is demanded as Service Tax or other dues from any person under the Finance Act, 1994 and rules made thereunder towards recovery of service tax or other dues which is not levied or paid or short levied or short paid by any person, or erroneously refunded to any person, and/or any person is liable to penalty under the said Act/Rules, notices are issued in the interest of natural justice to enable such person to understand the charges and defend his case before an adjudicating officer.
Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been made, may pay the amount of such service tax on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise/Service Tax Officer before service of notice on him and inform the Central Excise/Service Tax Officer of such payment in writing, in such a case show cause notice will not be issued. [Refer Section 73(3) of Finance Act, 1994]. However, sub- section (3) of Section 73 of Finance Act, 1994, is not applicable to the cases involving fraud or collusion or willful mis-statement or suppression of facts or contraventions of any of the provisions of Chapter V of the Finance Act,1994 and the rules made thereunder with intent to evade payment of Service Tax [Refer sub-section (4) of Section 73 of Finance Act, 1994].