Arrears of service tax paid

This query is : Resolved

Pradnyesh Shetty (Querist)
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25 October 2013 our client was registered under Service tax since 2008 but the payment of service tax for the year 2008, 2009 and 2010 was made last year along with interest. my querry is since we have made payment of dues last year we cant cover them aces so is their chances of our client being penalised?

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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26 October 2013 Since your client registered with the authorities in 2008, two distinct duties were cast upon him:

(1) To collect service tax due on consideration received for services rendered and deposit them to the Treasury by the sixth of the subsequent month or sixth of the month following the quarter as applicable; and

(2) To file half yearly (for the year 2012-13 two quarterly and one half yearly) ST – 3 Returns by the 25th of October and 25th of April respectively.

In case of failure to discharge the first duty, interest at the rate of 18% p.a. (earlier 13%) on daily basis has to be paid from the due date till the date of payment, both days inclusive in the calculation of number of days delay.
In case of failure to discharge the second duty, penalty for late filing to be paid before filing is as under:
(i) Rs.500/- for the first fifteen days delay, or
(ii) Rs.1,000/- for the first thirty days delay, and
(iii) Rs.1,000/- + Rs.100 per day thereafter upto a maximum of Rs.20,000/-.

Upto 31-03-2011, irrespective of the system of accounting followed, ST was payable on receipt of cash, either against an invoice issued or received in advance. Therefore for the period for which you have paid the ST, the payment would have been on receipt basis. From 01-04-2011, ST is payable on the earliest of the following on which date the liability arises:
(i) Rendering of service; or
(ii) Invoice date if the invoice is issued within 30 days (for 2011-12 fifteen days) of completion [otherwise the liability date will be (i) above; or
(iii) Receipt of consideration or advance.

The assessee should now file all the ST – 3 Returns along with the payment of late fees. The ST – 3 Returns till 31-03-2011 would have to be filed on cash basis and thereafter on accrual basis.

The Department can start proceedings for suppression of facts and evasion of duty, if no returns are filed, on the basis of information available. This can cover a period of five years. Hence the notice will cover the period from 2008 – 09 to 2012 – 13. The penalty for suppression is equal to the amount of ST sought to be evaded. The saving grace in your case will be that the tax due was paid with interest before the issuance of Show Cause Notice and on the basis of a large number of decided cases, the penalty leviable shall be waived. However, the SCN proceedings are extremely cumbersome and time consuming.

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