Chapter V of Finance Act, 1994

6[Penalty for failure to pay service tax for reasons of fraud, etc.

78. (1) Where any service tax has not been levied or paid, or has been shortlevied or short-paid, or erroneously refunded, by reason of fraud or collusion or wilful mis-statement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made thereunder with the intent to evade payment of service tax, the person who has been served notice under the proviso to sub-section (1) of section 73 shall, in addition to the service tax and interest specified in the notice, be also liable to pay a penalty which shall be equal to hundred per cent. of the amount of such service tax:

Provided that in respect of the cases where the details relating to such transactions are recorded in the specified record for the period beginning with the 8th April, 2011 upto the date on which the Finance Bill, 2015 receives the assent of the President (both Days inclusive), the penalty shall be fifty per cent of the service tax so determined.”.

Provided further that where service tax and interest is paid within a period of thirty days of —

(i) the date of service of notice under the proviso to sub-section (1) of section 73, the penalty payable shall be fifteen per cent. of such service tax and proceedings in respect of such service tax, interest and penalty shall be deemed to be concluded;

(ii) the date of receipt of the order of the Central Excise Officer determining the amount of service tax under sub-section (2) of section 73, the penalty payable shall be twenty-five per cent. of the service tax so determined:

Provided also that the benefit of reduced penalty under the second proviso shall be available. only if the amount of such reduced penalty is also paid within such period.

Explanation.-For the purposes of this sub-section, “specified records” means records including computerised date as are required to be maintained by an assesse in accordance with any law for the time being in force or where there is no such requirement, the invoices recorded by the assessee in the books of accounts shall be considered as the specified records.”.

“(2) Where the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be, modifies the amount of service tax determined under sub-section (2) to section 73, then the amount of penalty payable under sub-section (1) and the interest payable thereon under section 75 shall stand modified accordingly, and after taking into account the amount of service tax so modified, the person who is liable to pay such amount of service tax, shall also be liable to pay the amount of penalty and interest so modified.

(3) Where the amount of service tax or penalty is increased by the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be, over and above the amount as determined under sub-section (2) of section 73, the time within which the interest and the reduced penalty is payable under clause (ii) of the second provisio to sub-section (1) in relation to such increased amount of service tax shall be counted from the date of the order of the Commissioner (Appeals), the Appellate Tribunal or the court, as the case may be.]

 

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Notes :

1. Substituted for the portion beginning with the words “If the Assistant Commissioner” and ending with the words “value of such taxable service:” by the Finance (No. 2) Act, 2004, w.e.f. 10-9-2004. Prior to its substitution, the said portion, as amended by the Finance Act, 2001, w.e.f. 16-7-2001, read as under:

“If the Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Excise in the course of any proceedings under this Chapter is satisfied that any person has, with intent to evade payment of service tax, suppressed or concealed the value of taxable service or has furnished inaccurate value of such taxable service, he may direct that such person shall pay by way of penalty, in addition to service tax and interest, if any, payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of service tax sought to be evaded by reason of suppression or concealment of the value of taxable service or the furnishing of inaccurate value of such taxable service:”

2. Substituted by the Finance Act, 2003, w.e.f. 14-5-2003. Prior to its substitution, proviso, as amended by the Finance Act, 2001, w.e.f. 16-7-2001 and Finance Act, 2002, w.e.f. 16-8-2002, read as under :

Provided that if the value of taxable service (as determined by the Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Exciseon assessment) in respect of which value has been suppressed or concealed or inaccurate value has been furnished exceeds a sum of two lakh rupees, the Assistant Commissioner of Central Excise or, as the case may be, Deputy Commissioner of Central Exciseshall not issue any direction for payment by way of penalty without the previous approval of the Commissioner of Central Excise.”

3. Substituted for “Assistant Commissioner of Central Excise or, as the case may be, the Deputy Commissioner of Central Excise” by the Finance Act, 2005, w.e.f. 13-5-2005.

4. Fifth proviso inserted vide Finance Act, 2008 w.e.f. 10-5-2008

5.  Substituted vide Finance Act, 2011, before it was read as,

     “Penalty for suppressing value of taxable service.

      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-

            (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 thereunder with intent to evade payment of service tax,

            the person, liable to pay such 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 not be less than, but which shall not exceed twice, the amount of service tax so not levied or paid or short-levied or short-paid or erroneously refunded:]

            2[Provided that where such service tax as determined under sub-section (2) of section 73, and the interest payable thereon under section 75, is paid within thirty days from the date of communication of order of the 3[Central Excise Officer] determining such service tax, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the service tax so determined :

            Provided further that the benefit of reduced penalty under the first proviso shall be available only if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso :

            Provided also that where the service tax determined to be payable is reduced or increased by the Commissioner (Appeals), 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 also that in case where the service tax determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the first proviso shall be available, if the amount of service tax so increased, the interest payable thereon and twenty-five per cent of the consequential increase of penalty have also been paid within thirty days of communication of the order by which such increase in service tax takes effect.

            4[Provided also that if the penalty is payable under this section, the provisions of section 76 shall not apply.]

            Explanation.-For the removal of doubts, it is hereby declared that-

               (1)  the provisions of this section shall also apply to cases in which the order determining the service tax under sub-section (2) of section 73 relates to notices issued prior to the day on which the Finance Act, 2003 receives the assent of the President;

             (2)  any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person.]

6. Substituted vide THE FINANCE ACT, 2015 w.e.f. 14th May 2015, before it was read as,

[5]78. Penalty for suppressing, etc., of value of taxable services.-

(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-

     (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 thereunder with the intent to evade payment of service tax, the person, liable to pay such 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 that where true and complete details of the transactions are available in the specified records, penalty shall be reduced to fifty per cent of the service tax so not levied or paid or short-levied or short-paid or erroneously refunded:

     Provided further that where such service tax and the interest payable thereon is paid within thirty 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 proviso shall be twenty-five per cent of such service tax:

     Provided also that the benefit of reduced penalty under the second proviso shall be available only if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso:

     Provided also that in case of a service provider 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 thirty days shall be extended to ninety days.

(2) Where the service tax determined to be payable is reduced or increased by the Commissioner (Appeals), 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 to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the second proviso to sub-section (1), shall be available, if the amount of service tax so increased, the interest payable thereon and twenty-five per cent of the consequential increase of penalty have also been paid within thirty days or ninety days, as the case may be, of communication of the order by which such increase in service tax takes effect:

     Provided further that if the penalty is payable under this section, the provisions of section 76 shall not apply.

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