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  • Penalties Under Service Tax

    Any assessee who has been found to contravene or violate any of the provisions laid out by the service tax rules and regulations is likely to be liable to pay additional fees or charges in the form of penalties. These penalties are levied if the assessee in question has intentionally decided to act against the provisions outlined by the Act. However, if an assessee can provide evidence showing legitimate reasons for the non-payment of service tax, then as per Section 80 if the Finance Act 1994, no penalty can be levied against him or her.

    Types of Penalties Under Service Tax

    Penalties levied with regards to service tax differ depending on the violation caused by the assessee. These penalties and charges are as follows:

    Penalty For Late Filing Of Service Tax Return:

    Section 70(1) of the Finance Act, 1994 states that if an assessee files his or her half-yearly service tax return following the expiry of the specified deadline, then the assessee in question will be liable to pay additional fees based on the duration of delay. These charges could rise to Rs 20,000. However, this is the maximum charge that could be applicable in the case of late filing of service tax returns. The late payment charges for different periods are as follows:

    • If an assessee has not filed his or her service tax return, then a late payment fee of Rs 500 will be charged for the initial 15 days of delay
    • If an assessee has not filed his or her service tax return, then a late payment fee of Rs 1,000 will be charged for delays ranging from 15 to 30 days
    • If an assessee has not filed his or her service tax return for more than 30 days following the expiry of the prescribed deadline, then a late payment fee of Rs 1,000, along with an extra charge of Rs 100 for every additional day of delay in excess of the initial 30 days, will be charged

    Penalty For Non-Payment Of Service Tax:

    Section 76 of the Finance Act, 1994 deals with penalties that are levied on those assessees who have failed to make service tax payment over the course of the financial year. Penalties under this section are levied in the following instances if it can be proved that the assessee was not intentionally trying to avoid the payment of service tax:

    • If service tax has not been charged
    • If service tax has not been paid by the assessee
    • If a lower amount of service tax has been charged that what was intended
    • If an amount lower than the actual amount of service tax has been paid by the assessee
    • If service tax has been refunded to the assessee in error

    If the assessee believes he or she has been wrongly charged, then proof or evidence will be required to be provided by him or her showing that the non-payment or evasion of service tax was done so without any malevolency.

    Penalty For Contravention Or Violation Of Provisions Of The Act:

    Section 77 of the Finance Act 1994, deals with penalties that are levied on those assessees who are found to have contravened or violated any of the provisions or rules laid down by the Act. This section outlines penalty charges that are not mentioned in other sections of the Act. Penalties under Section 77 are levied in the following cases:

    • Any assessee who is required to make service tax payments or who is required to undertake service tax registration, but who does not undertake such registration in compliance with the rules and provisions outlined in Section 69 of the Act, will be levied with a penalty that could rise to a maximum of Rs 10,000
    • Any assessee who has not maintained, retained or kept any documentation or books of account as prescribed in the rules and provisions outlined under this Chapter of the Act, will be levied with a penalty that could rise to a maximum of Rs 10,000
    • Any assessee who does not provide the relevant information or data that is required by a service tax officer in order to comply with the rules and provisions outlined under this Chapter of the Act will be levied with a penalty that could rise to a maximum of Rs 10,000 or Rs 200 for each day of non-compliance, depending on which is higher
    • Any assessee who does not provide documentation required by a Central Excise Officer in order to comply with the rules and provisions outlined under this Chapter of the Act will be levied with a penalty that could rise to a maximum of Rs 10,000 or Rs 200 for each day of non-compliance, depending on which is higher
    • Any assessee who does not present himself or herself when a Central Excise Officer has issued a notice wherein the assessee is required to furnish any kind of proof or documentation with regards to an investigation will be levied with a penalty that could rise to a maximum of Rs 10,000 or Rs 200 for each day of non-compliance, depending on which is higher
    • Any assessee who does not make his or her service tax payment via electronic means, such as web portals, when he or she has been explicitly required to do so, will be levied with a penalty that could rise to a maximum of Rs 10,000
    • Any assessee who furnishes invoices that are found to be erroneous or incomplete as per the rules and provisions stated under the Act will be levied with a penalty that could rise to a maximum of Rs 10,000
    • Any assessee who is unable to provide any information with regards to any invoice found in his or her books of accounts is also likely to be levied with a penalty that could rise to a maximum of Rs 10,000
    • Any assessee who goes against or violates any of the provisions or rules laid out under this Chapter or who violates any other provisions under this Chapter wherein no penalties have been specified, will be charged with a penalty that could rise to a maximum of Rs 10,000

    Penalty For Non-Payment Of Service Tax Due To Malafide Intentions:

    Section 78 of the Finance Act 1994, outlines the penalties that are levied on assessees who have been found guilty of non-payment or short payment of service tax due to illegitimate reasons. Penalties under this section are also levied if service tax has been refunded in error or if less service tax has been charged as compared to the actual amount, provided the reasons are mala fide in nature. The reasons specified in this section are:

    • Suppression or concealment of evidence
    • Fraudulent activity
    • Intentional misstatement
    • Violation of the rules, regulations and provisions laid out by the Act
    • Illegal agreement

    Any assessee who has been notified as per Section 73, sub section (1), with regards to any of the reasons mentioned above, will be required to pay a penalty that will be equivalent to the entire service tax amount that he or she was required to pay in addition to any interest that may be charged.

    Penalty For Service Tax Offences Committed By Companies:

    Section 78A deals penalties that are levied with regards to any offence or violation caused by a company that goes against the rules and provisions outlined by the Act in accordance with payment of service tax. Penalties under this section are levied in the following scenarios:

    • If the company in question has been found guilty of evading payment of service tax
    • If the company in question has furnished invoices or bills, which fail to show any evidence of services that may be deemed taxable
    • If the company in question has been found guilty of making use of any amount acquired without receiving any form of service that may be deemed taxable
    • If the company in question does not remit the service tax amount it has accumulated to the Central Government following the expiration of the due date. In this case, the director or manager of the company, if found guilty of such violation, will be levied with a penalty that may could rise to a maximum of Rs 100,000
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