‘collection of service tax’ for arrest u/s 91 r.w 89 (st)

Service Tax:- Meaning of ‘Collection of Service tax’ for the Purpose of Arrest Provisions under Service Tax Statute

Section 91 of Chapter V of Finance Act,1994 as inserted w.e.f 1.4.2013 by Finance Act,2013 powers the Service tax department to arrest any person who has committed an offence specified in clause (i) or clause (ii) of sub-section (1) of section 89.

The offences listed under section 89 are as under :-

1. knowingly evades the payment of service tax under this Chapter or
2. avails and utilises 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,
3. maintains false books of account or fails to supply any information which he is required to supply under this Chapter or the rules made thereunder 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,
4. 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 issue to ponder in the said mailer is to discuss whether the service tax can be ‘deemed to be collected’ even where the actual service tax is not collected on invoice by taking value of consideration as inclusive of service tax (on cum duty basis).

View of CBEC in this regard is essential and noteworthy as explained in circular No. 140/9/2011-TRU dated 12.5.2011 which provides that :-

“9. Clause (d) of section 89(1) of Finance Act, 1994, will apply only when the amount has been collected as service tax. It is not meant to apply to mere non-payment of service tax when due.  This provision would be attracted when the amount was reflected in the invoices as service tax, service receiver has already made the payment and the period of six months has elapsed from the date on which the service provider was required to pay the tax to the Central Government.  Where the service receiver has made part payment, the service provider will be punishable to the extent he has failed to deposit the tax due to the Government. “

The above circular is self explanatory and clearly formulates the departmental stand in regard to Section 89(1)(d).