BELATED FILING OF SERVICE TAX RETURNS

[Dr. Sanjiv Agarwal]

Section 70 of Finance Act 1994 provides for furnishing of service tax returns including belated filing of returns

The service tax return is required to be filed under Section 70 of the Act read with rule 7 of the Rules, by 'any person liable to pay the service tax'. This return is required to be filed on a half yearly basis, in Form ST-3. For the periods from April to September and October to March, it must be filed by the 25th October and the 25th April respectively. Further, 'Input Service Distributor' is also required to file this return. Persons who are not liable to pay service tax (because of an exemption including turnover based exemption), are not required to file ST-3 return.

Finance Act, 2007 had amended section 70(1) for filing of returns of provide for belated furnishing of service tax returns on payment of prescribed late fees which shall not exceed Rs. 2000. Simultaneously, section 94(2) has also been amended so as to empower the Central Government to make rules to prescribe the form, manner and frequency of service tax returns to be furnished and the prescription of late fees for delayed furnishing of returns by the assessees under section 70(1).

Ministry of Finance (TRU) has vide Letter No. 334/1/2007-TRU dated 28.2.2007 explained the amendment as follows —

"At present filing of a return after the due date is treated as a violation and is liable for penal action. It is proposed to prescribe a specified amount of late fee linked to period of delay for filing of return after the due date. The assessee is required to pay the amount prescribed depending upon the period of delay. For this purpose, section 70(1) is being amended. After the proposed amendment in section 70(1) comes into force, appropriate rules will be notified indicating the conditions and the amount to be paid for delayed filing of return."

Notification No. 20/2007-ST dated 12.5.2007  inserted new Rule 7C in Service Tax Rules,  so as to provide for amount to be paid for delay in furnishing the prescribed return under section 70. Rule 7C provides as under—

Accordingly, prescribed late fee shall be as under —

Delay of 15 days (from the last due date)	Rs.500
Delay of more than 15 days but up to 30 days (from the last due date)	Rs.1000
Delay of more than 30 days (from the last due date)	Rs 1000 Plus Rs 100 per day of delay from the 31st day till the date of furnishing the return.

The above amount of late fee shall be subject to the maximum amount which shall not exceed the amount specified in section 70. In section 70, no amount is prescribed but for default under section 70, penalty is prescribed under section 77 according to which a maximum of Rs 1000 can be levied as penalty per default. The new rule also prescribes that if the amount as stipulated above is paid by the assessee for the delayed filing of return. The proceedings, if any, for delayed submission shall be deemed to be concluded. In case of pending cases as on the date of presidential assent to Finance Bill 2007, i.e,. 11.5.2007, such pending proceedings shall be deemed to be concluded if such payment is made within 60 days of enactment i.e., by 10th July, 2007.

W.e.f. 1.3.2008, third proviso has been inserted in Rule 7C by Notification No. 4/2008-ST dated 1.3.2008 whereby powers have been provided to revenue officers to reduce or waive penalty for delayed filing of returns where gross amount of service tax payable is nil. Accordingly, rule 7C now empowers the Central Excise Officers to either reduce or waive altogether the levy of late fees for filing a belated return, where gross amount of service tax payable is nil. The discretion to reduce or waive vests with the Central Excise Officer and is final. It does not clash with section 80 and no reasonable cause is required to be shown by the assessee.

Rule 7C stipulates that —

(a) such payment of late fee is fixed and no discretion vests on lowering or enhancing of amount.

(b) It is for the assessee to opt for the late fee payment made to avoid penal proceedings.

(c) If the late fee amount as aforesaid is paid, penal provisions for delayed submission of return shall be deemed to be concluded and no penalty be levied.

(d) The amount of late fee is linked to period of delay but the maximum amount is only
Rs. 2000 irrespective of days of delay.

(e) In case of pending proceedings, if the late fee in paid within 60 days from 11.5.2007, such pending proceedings shall be deemed to be concluded.

(f) W.e.f.  1.3.2008, fees can be reduced or waived by Central Excise Officer   if service tax payable by the assessee is nil.