Finance Act 2015 has drastically amended the
penalty provisions under the Finance Act 1994 (Service Tax law) in order to
ensure nondiscriminatory form of penalties. Earlier penalties u/s 76 (for short
payment of S/Tax) and u/s 78(Suppression of facts) used to be at Rs 100/- per
day or 1% per month whichever is higher. This lead to the number of litigation
upon the calculation of penalty. Finance Act 2015 has amended the same and the
new provisions have been laid down. Summary chart of the new provisions is as
follows:
Particulars
|
Old Provisions
|
New Provisions w.e.f 14.05.2015
|
|
u/s 76 (No Fraud)
|
u/s 78 (Fraud)
|
||
Penalty
|
100
Rs per day or 1 % per month from the date of default.
|
Nondiscretionary
Minimum Penalty of 10% of Service Tax Liability.
|
Nondiscretionary
Minimum Penalty of 100% of Service Tax Liability.
|
Maximum ceiling
|
50% of the tax liability
|
No maximum ceiling, implied
10%.
|
No maximum ceiling.
|
Waiver of Penalty
|
No Waiver – Penalty could be
dropped on grounds of reasonable cause u/s 80.
|
Complete waiver if service
tax + Interest is paid within 30 days of date of service of notice.
|
Waiver of 85%, if Service Tax
+ Interest + 15% Penalty is deposited within 30 days of service of notice.
|
Relaxation in Penalty after
the order.
|
No relaxation
|
75% penalty is waived if
Service Tax + Interest is paid within 30 days of the order.
|
75% penalty is waived Service
Tax + Interest + 25% Penalty is paid within 30 days of the order.
|
It should be noticed that section 80 which
provided for waiver of penalty under reasonable causes was first introduced in
Finance Act 2012 and the same has been withdrawn by Finance Act 2015 with the
introduction of new provisions u/s 76 && 78 of Finance Act 1994.
It is well established fact under Service Tax
Law that penalty cannot be levied without the issue of Show Cause Notice(SCN)
to the assessee. Since the Finance Act 2015 has been enforced from 14.05.2015,
there are three different scenarios possible under which the penalty provisions
can be enforced, the details of which are as follows:
Situation
|
Applicable Provisions
|
SCN issued after 14.05.2015
|
New Sections 76 & 78
shall apply
|
SCN issued before 14.05.2015
but order passed after 14.05.2015
|
|
Order in original issued
before 14.05.2015
|
Old Sections 76 & 78
shall apply subject to reasonable cause u/s 80.
|
CA
Keshav Garg
Mygst.mytax@gmail.com
servicetaxindia@outlook.com
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