Budget 2015-2016service tax Litigation & Safeguard in IndiaProposed Penal Provisions for Service Tax In Finance Bill 2015- Part -I

At par with the penal  provisions in proposed  Section 11AC for excise  , service tax penalty provisions have  also been proposed for substitution via Finance Bill 2015 .

Section 76 to deal with evasion of service tax without fraud or collusion or willful misstatement or suppression of facts . It is pertinent to refer to proposed Section 76 as below

“Section 76. (1) Where service tax has not been levied or paid, or has been short-levied or short-paid, or erroneously refunded, for any reason, other than the reason of fraud or collusion or wilful misstatement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made thereunder with the intent to evade payment of service tax, the person who has been served notice under sub-section (1) of section 73 shall, in addition to the service tax and interest specified in the notice, be also liable to pay a penalty not exceeding ten per cent. of the amount of such service tax:

Provided that where such service tax and interest is paid within a period of thirty days of––

(i) the date of service of notice under sub-section (1) of section 73, no penalty shall be payable;

(ii) the date of receipt of the order of the Central Excise Officer determining the amount of service tax under sub-section (2) of section 73, the penalty payable shall be twenty-five per cent. of the penalty imposed in that order, only if such reduced penalty is also paid within such period.

 (2) Where the Commissioner (Appeals), the Appellate Tribunal or, the court, as the case may be, modifies the service tax determined under sub-section (2) of section 73, then, the amount of penalty payable thereon, shall also stand modified accordingly, and the benefit of reduced penalty under the proviso to sub-section (1) shall be available if such service tax, interest and reduced penalty so payable, is paid within a period of thirty days from the date of receipt of the order by which such modification is made.”

Analysis

1. evasion of service tax is without fraud or collusion or willful misstatement or suppression of facts .

2. a penalty will be imposed but will not  exceed 10% of the service tax specified in show cause notice under sub-section (1) of section 73 provided that person pays such service tax and interest .

3.  NO penalty will be imposed if service tax ,specified in show cause notice under sub-section (1) of section 73, and interest is paid within 30 days of the date of service of notice .

4. 25% penalty , of the penalty imposed in the order determining service tax under sub-section (2) of Section 73, and service tax both are paid within 30 days of the date of receipt of the order .

5. If service tax determined  is reduced by way of an order of Commissioner(Appeals) , the Appellate Tribunal or Court then , amount of penalty shall reduce provided such service tax, interest and reduced penalty is paid within 30 days from the date of receipt of the order .