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CGST Act IGST Act UTGST Act GST (Compensation to the States) Act Addendum to the GST Rate Schedule - 03.06.2017 101st Constitution Amendment Act, 2016 Addendum to the GST Rate Schedule - 18.05.2017 GST Compensation Cess Rates Decided in the GST Council Meeting held on 18.05.2017 Chapter Wise Rate wise GST Schedule - 03.06.2017 Chapter wise GST Rate Schedule for Goods Decided in the GST Council Meeting held on 18.05.2017 Revised Threshold for Composition Scheme - 11.06.2017 IGST Exemptions Approved by the GST Council - 11.06.2017 GST Rates Approved by the GST Council - 11.06.2017 Service Tax Exemptions in GST IGST Exemption, Concession List - 03.06.2017 Composition - Rules Valuation Rules ITC - Rules Invoice, Debit & Credit Notes - Rules Payment - Rules Refund - Rules Registration - Rules Return- Rules Transition Rules Proposed CTD Document Accounts and Record Rules GST rate Schedule for Services Decisions Taken by the GST Council in the 16th Meeting - 11.06.2017 List of Services under Reverse Charge Classification Scheme for Services Under GST
13 February, 2013 Ahmedabad :

Various Courts have time and again emphasized that law enforcing officers should be more cautious at the time of imposition of penalties and the same should be in proportion to the magnitude of breach of the legal provisions. However one seldom see a show cause notice where the penalties are proposed judiciously. The revenue officers in pressure to meet their targets always impose maximum possible penalties. Section 78 of the Finance Act, 1994; proposes penalties where a service provider fails to pay proper tax with the motive of fraud or collusion or wilful misstatement or suppression of facts. Here, the intention to evade tax has to be established before imposing the penalty. According to Section 78, 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, wilful mis-statement, suppression of facts or contravention of any of the provisions with the intent to evade payment of service tax, then the person, shall be liable to pay a penalty equal to the amount of service tax, in addition to service tax and interest.

Moreover, in situations where the taxpayer has captured the true and complete information in the specified records, penalty shall be 50% of the Service Tax amount. Thus, where the Service Tax is not paid but if value of services were shown in statutory financial statements, Balance Sheet, Profit & Loss Account, etc. maintained by the assessee then the maximum penalty would be reduced to 50% of Service Tax. This reduction in penalty is a provision which is never observed in the real life by the authorities who are hell bent to impose maximum penalties on the assessee.

Further with a view to avoid litigation the government has provided that where service tax and the interest payable as per the order is paid within 30 days from the date of communication of order, the amount of penalty liable to be paid shall be 25% of Service Tax demanded. Hence if the assessee pays Service Tax, Interest and 25% of penalty within 30 days of the receipt of the order then rest of the penalty need not be paid. Further for small assessee whose value of taxable services does not exceed sixty lakh rupees during any of the years covered by the notice or during the last preceding financial year, the period of 30 days shall be extended to 90 days. Still many officers are not forwarding this benefit of 90 days to assessee.

Further if the assessee or the department prefers an appeal and where the service tax determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or the court, then, penalty shall be accordingly reduced or increased. But that in case where the service tax to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or the court, then the benefit of reduced penalty of 25% shall be available, if the amount of service tax so increased, the interest payable thereon and 25% per cent of the consequential increase of penalty have also been paid within 30 days or 90 days.

The authorities have power to invoke Section 80 whereby the penalty should not to be imposed in certain cases if the assessee proves that there was reasonable cause for the failure in payment of Service Tax. Therefore the spirit of the law is that it is not mandatory to impose penalties, and even if the penalties are imposed it can be waived. But at the lower level of adjudication, it is hardly seen that any benefit is granted to assessee. However genuine the assessee may be, but to reduce or for the waiver of penalty, he has to plead before Tribunal. It is about time that the department should change their approach, when the government is giving options to reduce or waive the penalties for assessee who might have not paid the tax because of some misunderstanding. It seems that while levying penalties the adjudicating authorities see only one side of the coin.

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Courtesy: From the desk of Monish Bhalla, Founder, www.servicetaxonline.com
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