Service Tax :- Penal Provisions

 Penal Provisions
What are the penal provisions for various contraventions of the Service Tax Law?

The Penal provisions for various contraventions of the Service Tax Law are as follows:-

i. 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.

ii. 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]

iii. 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)

iv. 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.

v. 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]

vi. Failure to—
       (1) furnish information called by an officer in accordance with the provisions of the Finance Act,1994 (Chapter V) or rules made thereunder; or

         (2) produce documents called for by a Central Excise Officer in accordance with the provisions of this Chapter or rules made thereunder; or

       (3) appear before the Central Excise Officer, when issued with a summon for appearance to give evidence or to produce a document in an inquiry,
An amount which may extend to Ten thousand rupees or two hundred rupees for every day during which such failure continues, whichever is higher, shall be liable to be imposed as penalty. [Section 77(1)(c) of the Act]

vii. 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]

viii. 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]

ix. 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).

x. Reduced Penalty in respect of Sl. No. (ix):
(a) where true and complete details of the transactions are available in the specified records, penalty shall be reduced to 50%.
(b) 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.
(c) 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).

xi. 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).

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