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Penalty on late Payment of Service Tax under Service Tax Act - Section 75 to 80

Contents -
  1. Interest on Delayed Payment : Section 75.
  2. Penalty for Failure to Pay Tax : Section 76.
  3. Penalty for Different Reasons : Section 77.
  4. Penalty Liable for Various Defaults.
  5. Penalty for Suppressing Value : Section 78(1).
  6. Waiver Penalty : Section 80.

Introduction -

It is basic theme that the discipline must be followed by both the parties. In lack of discipline either or other party would suffer the financial loss.
It is the basic principle in the transaction that, if one party delayed the payment to other party, the punishment in the nature of interest is awarded.
In the revenue departments always and obviously one party is assessee and other is revenue department. Maximum percentage is of the assessee, who are defaulter in the eyes of revenue department who enjoyed the provision of imposition interest.




Interest on Delayed Payment of Service Tax : Under Section 75 -

As per provision to Section 75 in the case of small service provider whose value of taxable services during the last financial year does not exceed Rs.60 lakhs, the rate of interest shall be reduced by 3%.
Every person liable to pay the tax in accordance with the provision of section 68 or rules made there under, who fails to credit the tax or any part thereof to the account of the central government within the period prescribed, shall pay simple interest (at such rate not below 10% and not exceeding 36% p.a. as is for the time being fixed by the central government by notification in the official gazette for the period) by which such crediting of the tax or any part thereof is delayed.

Penalty for Failure to Pay Service Tax : Section 76 -

Any person liable to pay service tax in accordance with the provisions of section 68 of the rules made under this topic who fails to pay such tax, shall pay in addition to such tax and the interest on that tax amount in accordance with the provision of section 75, a penalty which shall not be less than 100 rupees for every day during which such failure continuous or at the rate 1% of such tax, per month whichever is higher, starting with the first day after the due date till the date of actual payment of the outstanding amount of service tax.
Provided that the total amount of the penalty payable in terms of this section shall not exceed 50% the service tax payable. (Finance bill 2011, with effect from 8-4-2011).

Illustration -
A an assessee, fails to pay service tax of rupees 10 lacs payable by 5th March. A pays the amount on 15 March. The default has continued for 10 days. The penalty payable by a is computed as follows :
1% of the amount of default for 10 days penalty calculated at Rupees 100 per day for 10 days = Rs.1000 Penalty liable to be paid is Rs.3226 

Different Reasons for Penalty : Section 77 -

Heavy penalties can be imposed under Section 77 of the Finance Act, for various offences like non registration, not furnishing information, non maintenance of books of account, not attending summons, issuing incorrect invoices etc. as explained below :

1. Penalty for not obtaining Registration : Section 77(1) -
If a person who is liable to pay service tax or required to take registration fails to take registration, he shall be liable to pay a penalty which may extend to an amount not exceeding 10,000 rupees or 200 rupees for every day during which such failure continues.

2. Penalty for Non Maintenance of Books of Accounts : Section 77(1)(a) -
If person fails to keep maintain or retain the books of accounts and other requirement document, he shall be liable to pay a penalty which may extend to 10,000 rupees.

3. Penalty for Not Furnishing Information : Section 77(1)(c) -
A person fails to furnish information called by an officer or fails to produce documents called for by Central Excise Officer, he or she shall be liable to pay a penalty which may extend to 10,000 rupees or 200 rupees for every day during which such failure continues, whichever is higher.

4. Non Appearance before Officer on Issue of Summons : Section 77(1)(c)(iii) -
When the summons are issued to the person for producing the documents or to give evidence and the person fails to appear before the offices for the same, the person is liable to pay a penalty which may extend to 10,000 rupees or 200 rupees for every day during which such failure continues, whichever is higher.

5. Penalty for Failure to Pay Tax Electronically : Section 77(1)(c)(iii) -
If a person, who is required to pay tax electronically through internet banking fails to pay the tax electronically, shall be liable to pay penalty which may extend to Rupees 10,000.

6. Penalty for Issuing Incorrect Invoice : Section 77(1)(e) -
If a person issues invoice with incorrect or incomplete details or fails to account for an invoice in his books of accounts, shall be liable to pay penalty which may extend to Rupees 10,000.

The summary in brief for Penalty liable for various defaults as under :

Section

Default

Penalty

76

Failure make the payment of service tax 

Rs.100/- per day or 1% of the tax p.m. subject to a maximum of 50% of Tax amount.

77(1)(a)

Failure to apply for registration 

Penalty may be levied up to Rs.10,000/- or Rs.200/- per day of default whichever is higher.

77(1)(b)

Failure to keep and maintain books of accounts

Penalty may be levied up to Rs.10,000/-

77(1)(c)

For produce documents or failure to furnish information 

Penalty may be levied up to Rs.10,000/- or Rs.200/- per day of default whichever is higher.

77(1)(d)

Failure to deposit tax electronically where necessary 

Penalty may be levied up to Rs.10,000/-

77(1)(e)

Improper issue of invoice or failure to record the invoice in the books of accounts 

Penalty may be levied up to Rs.10,000/-

77(2)

Contravention of any provision where no penalty is prescribed

Penalty may be levied up to Rs.10,000/-


Penalty for Suppressing Value of Taxable Service : Section 78(1) 

Where any service tax has not been levied or paid or has been short-levied or short paid or erroneously refunded, by reason of : fraud, collusion, willful miss-statement, suppression of facts or contravention of any of the provisions of this topics or of the rules made there under with intent to evade payment of service tax, the person liable to pay service tax or erroneous refund as determined under sub-section (2) of section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any payable by him, which shall be equal to the amount of service tax, so not levied or paid or short levied or short paid or erroneously refunded.

Provided further that where such service tax and interest payable there on is paid within 30 days from the date of communication of order of the Central Excise Officer determining such service tax, the amount of penalty liable to be paid by such person under the first provision shall be 25% of such service tax.

Provided that where true and complete details of the transactions are available in the specific records, penalty shall be reduced to 50% of the service tax so not levied or paid for short paid or erroneously refunded.

Provided also that the benefit of reduced penalty under the second provision shall be available only if the amount of penalty, so determined has also been paid within the period of 30 days referred to in that provision.

Provided also that in case of service provider whose value of taxable services does not exceed rupees 60 lakhs during any year covered by the notice or during the last preceding financial year, the period of 30 days shall be extended to 90 days.

Where the service tax determined to be payable is reduced or increased by the Commissioner (appeal) the Appellate Tribunal or as the case may be the court, then for the purposes of this section, the service tax as reduced or increased as the case may be, shall be taken into account.

Provided that in case where the service tax determined to be payable is increased by the Commissioner (appeals), the Appellant Tribunal or as the case may be the court, then the benefit is reduced penalty under second provision to sub section.
shall be available, if the amount of service tax so increased, the interest payable there on and 25% of the consequential increase of penalty have also been paid within 30 days or 90 days as the case may be of communication of the order by which such increase in service that takes effect.
Provided further that if penalty is payable under this section, the provision of section 76 shall not apply.

Explanation :
For the removal of doubts, it is hereby declared that -
Any amount paid to the credit of Central Government prior to the date of communication of the order referred to in the second provision to sub section (1) or the first provision of sub section (2) shall be adjusted against the total amount due from such person.

Waiver or Reduction of Penalty : Section 80 -

Penalty under section 76, 77 or provision to 78(1) can be waived if assessee proves that he has reasonable cause for the failure.

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