BUDGETARY CHANGES IN SERVICE TAX

[Mr. M. GOVINDARAJAN]

INVOKING EXTENDED PERIOD

 Section 73 of the Finance Act, 1994 deals with recovery of service tax not levied or paid or short levied or short paid or erroneously refunded. The limitation period for this purpose is eighteen months.   If the same was by reason of-

(a) fraud; or

(b) collusion; or

(c) wilful mis-statement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Chapter or of the rules made there under with intent to evade payment of service tax, the department can invoke the extended period of 5 years. Clause 93(E) of the Finance Bill proposed to insert clause (2A) after clause (2) of Section 73 of the Act.   The inserted clause (2A) reads as follows:

(2A) Where any appellate authority or tribunal or court concludes that the notice issued under

the proviso to sub-section (1) is not sustainable for the reason that the charge of,—

(a) fraud; or

(b) collusion; or

(c) wilful misstatement; or

(d) suppression of facts; or

(e) contravention of any of the provisions of this Chapter or the rules made there under with intent to evade payment of service tax,

has not been established against the person chargeable with the service tax, to whom the notice was issued, the Central Excise Officer shall determine the service tax payable by such person for the period of eighteen months, as if the notice was issued for the offences for which limitation of eighteen months applies under sub-section (1).

PENALTY ON FAILURE TO REGISTER

Section 77(1)(a) provides penalty for failure to register for Rs.10,000/- or Rs.200/- for every day during which such failure continues, whichever is higher, starting with the first day after the due date, till the date of actual compliance.  

Clause 93(F) of the Finance Bill proposed to retain one type of penalty i.e., penalty which may extend to Rs.10,000/-.

PENALTY FOR OFFENCES BY DIRECTOR

 Clause 93(G) introduced a new section 78A after Section 78.   The new section proposed to impose penalty for offences by Director of a Company.   The new section 78A reads as follows:

 “78A. Where a company has committed any of the following contraventions, namely:—

(a) evasion of service tax; or

(b) issuance of invoice, bill or, as the case may be, a challan without provision of taxable

service in violation of the rules made under the provisions of this Chapter; or

(c) availment and utilization of credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation of the rules made under the provisions of this Chapter; or

(d) failure to pay any amount collected as service tax to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due, then any director, manager, secretary or other officer of such company, who at the time of such contravention was in charge of, and was responsible to, the company for the conduct of business of such company and was knowingly concerned with such contravention, shall be liable to a penalty which may extend to one lakh rupees.”;

 CHANGE IN SECTION 83

 Section 83 prescribes what the sections in the Central Excise Act are, 1944 are applicable to the service tax provisions. Earlier Section 9 is marked as applicable. The Finance Bill makes Section 9(2) only applicable to service tax provisions.

 APPEAL BY DEPARTMENT BEFORE TRIBUNAL

 Section 86(5) provides that the Appellate Tribunal may admit an appeal or permit the filing of a memorandum of cross-objections after the expiry of the relevant period referred to in sub-section (3) or sub-section (4) if it is satisfied that there was sufficient cause for not presenting it within that period.

 The Clause 93(I) of the Finance Bill, 2013 substitutes in Section 86(5) for sub-section (3) or sub-section (4), the sub section (1) of Section 86. Sub section (3) of Section 86 provides that every appeal under sub-section (2) or sub-section (2A) shall be filed within four months from the date on which the order sought to be appealed against is received by the Committee of Chief Commissioners or, as the case may be, the Committee of Commissioners. Sub-Section (4) of Section 86 provides that the Commissioner of Central Excise or any Central Excise Officer subordinate to him or the assessee, as the case may be, on receipt of a notice that an appeal against the order of the Commissioner of Central Excise or the Commissioner of Central Excise (Appeals) has been preferred under sub-section (1) or sub-section (2) or sub-section (2A) by the other party may, notwithstanding that he may not have appealed against such order or any part thereof, within forty-five days of the receipt of the notice, file a memorandum of cross-objections, verified in the prescribed manner, against any part of the order of the Commissioner of Central Excise or the Commissioner of Central Excise (Appeals), and such memorandum shall be disposed of by the Appellate Tribunal as if it were an appeal presented within the time specified in sub-section (3).

 The proposal put the department at par with the assessee.   According to this change the Department is to file appeal before the Appellate Tribunal within 3 months from the date of receipt of the order.

 OFFENCES AND PUNISHMENTS

 Section 89 deals with the offences and punishments. This section describes four types of offences punishable which are as below:

(a) knowingly evades the payment of service tax under this Chapter; or

(b) avails and utilizes credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation of the rules made under the provisions of this Chapter; or

 (c) maintains false books of account or fails to supply any information which he is required to supply under this Chapter or the rules made there under or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or

 (d) collects any amount as service tax but fails to pay the amount so collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due;

The punishment prescribed for the above said offences is where the amount exceeds fifty lakh rupees, with imprisonment for a term which may extend to three years; and in other cases the punishment is imprisonment for a term which may extend to one year.

The Clause 93(J)(a) revised the punishment in the above cases as detailed below:

“(i) in the case of an offence specified in clauses (a), (b) or (c) where the amount exceeds fifty lakh rupees, with imprisonment for a term which may extend to three years:

Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for a term of less than six months;

(ii) in the case of the offence specified in clause (d), where the amount exceeds fifty lakh rupees, with imprisonment for a term which may extend to seven years:

        Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for a term of less than six months;

(iii) in the case of any other offences, with imprisonment for a term, which may extend to one year.

 Sub Section (2) of Section 89 provides punishment of imprisonment for second and every subsequent offence, which may extend to three years.   Now this sub section is substituted by Clause 93 (J)(b) which revised the punishment which reads as follows:

“(2) If any person is convicted of an offence punishable under—

(a) clause (i) or clause (iii), then, he shall be punished for the second and for every subsequent offence with imprisonment for a term which may extend to three years;

(b) clause (ii), then, he shall be punished for the second and for every subsequent offence with imprisonment for a term which may extend to seven years.”;

 COGNIZANCE OF OFFENCES

 Clause 93 (K) inserts a new Section 90 after Section 89 which deals with cognizance of offences.   New Section 89 reads as follows:

 90(1) An offence under clause (ii) of sub-section (1) of section 89 shall be cognizable.

(2) Notwithstanding anything contained in the Code of Criminal Procedure, 1973, all offences, except the offences specified in sub-section (1), shall be non-cognizable and bailable.

 POWER TO ARREST

 Clause 93 (K) inserts a new Section 91 after Section 90 which deals with cognizance of offences.   New Section 90 reads as follows:

 91. (1) If the Commissioner of Central Excise has reason to believe that any person has committed an offence specified in clause (i) or clause (ii) of sub-section (1) of section 89, he may, by general or special order, authorise any officer of Central Excise, not below the rank of Superintendent of Central Excise, to arrest such person.

(2) Where a person is arrested for any cognizable offence, every officer authorised to arrest a person shall, inform such person of the grounds of arrest and produce him before a magistrate within twenty-four hours.

(3) In the case of a non-cognizable and bailable offence, the Assistant Commissioner, or the Deputy Commissioner, as the case may be, shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officer in charge of a police station has, and is subject to, under section 436 of the Code of Criminal Procedure, 1973.

(4) All arrests under this section shall be carried out in accordance with the provisions of the Code of Criminal Procedure, 1973 relating to arrests

 POWER TO REMOVE DIFFICULTIES

 Clause 93 (L) inserts sub section (1-J) after sub section (1-I) which reads as follows:

 “(1J) If any difficulty arises in giving effect to section 93 of the Finance Act, 2013, in so far as it relates to amendments made by the Finance Act, 2013 in Chapter V of the Finance Act, 1994, the Central Government may, by an order published in the Official Gazette, not inconsistent with the provisions of this Chapter, remove the difficulty:

Provided that no such order shall be made after the expiry of a period of one year from the date on which the Finance Bill, 2013 receives the assent of the President.

 SPECIAL PROVISION FOR INDIAN RAILWAYS

 Clause 93(M) inserts a new section 99 which is a special provision for taxable services provided by Indian Railways which reads as follows:

 99. Notwithstanding anything contained in section 66, as it stood prior to the 1st day of July, 2012, no service tax shall be levied or collected in respect of taxable services provided by the Indian Railways during the period prior to the 1st day of July, 2012, to the extent notices have been issued under section 73, up to the 28th day of February, 2013.

 SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME, 2013

 Chapter VI of the Finance Bill, 2013 deals with Service Tax Voluntary Compliance Encourage Scheme, 2013 which is well discussed with by CA Shri Surendar Gupta in his article published in TMI.