1. The service tax is levied in terms of the Chapter V of the Finance Act, 1994, w.e.f. 1-7-1994. Though service tax is being levied on various services since 1994, no separate enactment has been created providing for levy and collection of service tax. In the absence of there being any separate enactment exclusively providing for service tax, the tax is being levied in terms of Chapter V of the Finance Act, 1994.
2. The provisions relating to service tax have been substantially amended by the Finance Act, 2012 w.e.f. 1-7-2012. Under the new scheme of service tax (post negative regime), there are no different entries prescribing specifically the various services which are taxable. Now, the expression ‘service’ has been defined under Section 65B(44) of the Finance Act, 1994. The definition of ‘service’ reads as under:
“Service” means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include—
i. A transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or
ii. Such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of Article 366 of the Constitution; or
iii. A transaction in money or actionable claim;
iv. A provision of service by an employee to the employer in the course of or in relation to his employment;
v. Fees taken in any court or tribunal established under any law for the time being in force.
3. From the above definition. it is evident that an activity that constitute sale cannot be considered as being in the nature of service. This definition is in tune with the judgment of the Hon’ble Supreme Court in the case of M/s.Imagic Creative Pvt. Ltd. vs. Commissioner of Commercial Taxes and others (reported in 12 VST 371) wherein the Hon’ble Court was pleased to hold that service tax and VAT are mutually exclusive.
4. Section 66B is the charging section providing for of levy of tax @ 14% on the value of taxable services provided or agreed to be provided by one person to another excluding the services specified in the negative list. It may be noted that in addition to the basic rate of 14%, the Swachh Bharat Cess (SBC) at the rate of 0.5% of the taxable value is leviable. The effective rate of tax would thus be 14.5% .
5. About sixteen services so far have been specified as falling under the negative list under Section 66D of the Finance Act, 1994. The list of services prescribed under the negative list are not liable to tax. Further the Government is empowered to exempt the taxable services from payment of service tax under Section 93(1) of the Finance Act, 1994. Accordingly a notification No. 25/2012, dated 20-6-2012 has been issued exempting about 47 services from payment of tax. An assessee is required to verify the negative list as well as the above said notification, so as to find out whether services so provided are taxable or not.
6. Therefore all the services other than falling under the negative and exempted list would be considered as taxable services and accordingly tax is leviable at the appropriate rate on the consideration received by the provider of service. It is also pertinent to mention here that certain services specified under Section 66E have been considered as “Declared Services”. The works contracts and the food/beverages/drinks served in restaurants are among the list of services included under the ambit of ‘declared services’.
7. The Section 67 is the provision relating to valuation of taxable services. In case where the provision of service is for a consideration which cannot be ascertained, the consideration so taxable can be determined in the manner prescribed under Service Tax (Determination of Values) Rules, 2006.
8. The Government has issued a notification bearing No. 33/2012, dated 20-6-2012 providing for basic exemption up to ten lakhs received in any financial year. However, for purpose of being eligible to basic exemption of ten lakh, the turnover during the preceding financial year should not exceed ten lakh. For the purpose of computing basic exemption limit, the value of taxable services which are exempt from tax would not be taken into consideration. It may be noted that the service receivers paying tax under the reverse charge mechanism in terms of notification issued under Section 68(2) of the Act, are not entitled for basic exemption of Rs. 10 lakh as provided for under notification bearing No. 33/2012, dated 20-6-2012. Further services provided under a brand name or trade name whether or not registered, are not eligible for exemption under the above notification.
9. Normally, the service tax is payable by the provider of service. However, as per Section 68(2) of the Finance Act, the service tax can be collected from the receiver of service under the reverse charge mechanism. It may be noted that initially the scheme of service tax was made applicable only to the provider of service. In other words, the service tax was leviable only in the hands of the service provider. However, a provision was made in Rule 2(d) of Service Tax Rules providing for levy of service tax in the hands of the receiver of service. The levy of service tax in the hands of the receiver of service in terms of Rule 2(d) of the Service Tax Rules, 1994 was challenged before the Hon’ble Supreme Court. The Hon’ble Supreme Court in the case of M/s.Laghu Udyog Bharati v. Union of India (reported in 2 STR 276) was pleased to declare the provisions of Rules 2(d)(xii) and (xvii) of service tax Rules as ultra vires the provisions of the charging Section 66 of the Finance Act, 1994.
10. To get over the judgment of the Hon’ble Supreme Court, the provisions of Sections 66 and 68 of Finance Act, 1994 were amended providing for levy of tax in the hands of the receiver of the service. The Rule 2(1)(d) of the Service Tax Rules, provides for the list of services where the tax is payable by the receiver of service and accordingly all the provisions of the Finance Act would mutatis mutandis apply as if the service receiver has provided the services which are taxable. For details of the services which are subject to tax in the hands of the receiver of service under the reverse charge mechanism, the notification bearing No. 30/2012, dated 20-6-2012 may be looked into.
11. It is also pertinent to mention here that the Government has also issued a notification bearing No. 26/2012, dated 20-6-2012 providing for abatement in respect of certain services specified in the said notification. The service tax has to be paid on the percentage as fixed for the respective services at appropriate rate and subject to complying with the conditions laid down in the said notification against each service.
12. The Section 69 read with Rule 4 of Service Tax Rules, 1994 deals with registration. The Superintendent of the Service Tax is the competent authority to issue the registration certificate. A separate registration is required to be obtained for each place of business. However, where an assessee is having a centralised accounting system or centralised billing system, a single registration can be obtained which is called a centralised registration. However, in respect of centralised registration, the Commissioner is the competent authority to issue the certificate of registration. The concerned authority is required to issue the registration certificate within 7 days from the date of receipt of the application. In case, the authority does not issue the certificate within 7 days from the date of receipt of the application, the registration is deemed to be have been granted.
13. The Section 70 provides for filing of returns by the assessee. Normally the assessee has to himself assess the tax payable and file returns accordingly. The Central Excise Officer in terms of Section 72 is empowered to make an assessment to the best of judgment where an assessee fails to file a return or assess the tax payable in accordance with the provisions of law.
14. Further, Section 72A empowers the Commissioner to order audit of the books of account of an assessee in certain circumstances specified under the said provision.
15. The assessee has to pay tax by 5th of the succeeding month. In case of payment of tax through internet banking, the due date for payment of tax is the 6th of the succeeding month. However, as per Rule 6(1) of Service Tax Rules, 1994 where an assessee is an individual or proprietary or partnership concern, the tax can be paid quarterly. The tax payable for the month of March has to be paid by 31st of the same month. It may be noted that as per Rule 6(2) of Service Tax Rules, an assessee has to pay service tax through internet banking only unless the Assistant Commissioner or the Deputy Commissioner as the case may be having jurisdiction over the place of business of the assessee, allows the assessee for the reasons recorded in writing to deposit the service tax by any other mode other than by way of internet banking.
16. All the assessees have to file returns electronically half yearly by 25th of the succeeding month after the end of the half year as per Rule 7 of Service Tax Rules, 1994. As per Rule 7B of Service Tax Rules, 1994 an assessee can file revised return within 90 days from the date of filing of return if there is any mistake or omission in the return filed.
The revised return cannot be filed where the issue involves legal interpretation relating to rate of duty or valuation. As per Rule 7C of the Service Tax Rules, there is a provision for levying fee in the case of delay in filing the returns. The quantum of fee depends upon the period involved. However, the fee cannot exceed
17. The limitation for issuing the notice for demand of tax by the suthority is 18 months from the relevant date as per Section 73(1) of the Finance Act, 1994. However, in the case of suppression of facts and wilful non-payment of tax with an intention to evade tax, the authority is empowered to issue notice within a period of 5 years from the relevant date. An assessee can pay tax voluntarily or on the basis of tax ascertained by the authorities and inform the authority in writing. In such an event as per Section 73(3) of the Finance Act, the authority shall not issue any notice under Section 73(1) of the Finance Act. Where the tax is paid voluntarily no penalty is imposable under the provisions of the Act as per explanation 2 to Section 73(3) of the Finance Act, 1994. In this connection, reliance can be placed on the decision of the Hon’ble Tribunal in the case of Bangalore Vihara Kendra vs. Commissioner of Central Excise (reported in 45 VST 265). Also see the decisions of the Hon’ble Tribunal reported 19 STR 276 and 24 STR 574. The provisions of Section 73(3) have no application to the cases involving suppression of turnover/wilful mis-statement etc. by an assessee with an intention to evade tax. However, interest has to be paid at the appropriate rate under Section 75 of the Finance Act.
18. As per Section 74(1) of the Act, the authority is empowered to rectify any mistake apparent from the records within a period of 2 years from the date on which the order was passed.
19. Interest is levied for delay in payment of service tax under Section 75 of the Finance Act, 1994. At present interest is levied @ 18% p.a. However the rate of interest is reduced by 3 per cent in case the value of service provided in a financial year does not exceed 60 lakhs during the any of the financial year covered by notice or during the last preceding financial year.
20. For delay in paying service tax or for non-payment of service tax other than by way of reason of fraud or collusion, wilful mis-statement of facts, a penalty of 10% is levied under Section 76(1) of the Finance Act. However, if the assessee pays the service tax along with the interest within 30 days from the date of service of notice under Section 73(1), no penalty is levied. It may be noted that in case the service tax along with the interest is paid within 30 days from the date of the receipt of the adjudication order passed by the authority, the penalty shall be 25% of the tax subject to the condition that the penalty of 25% is also paid within the 30 days from the date of receipt of the order.
21. There are also other penal provisions provided for under Section 77(1) of the Act for violating various provisions of law. In some cases, the penalty is fixed at
Rs. 10,000/- and in respect of other offences a penalty of Rs. 200/- per day during which such failure continues or
Rs. 10,000/-, whichever is higher can be levied by the authority.
22. As per Section 78(1), a penalty equivalent to tax can be levied by the authority where there is an allegation of suppression of facts and wilful non-payment of tax etc. with an intention to evade payment of tax. However, as per the first proviso to Section 78 of the Finance Act, 1994, a penalty to the extent of 15% is leviable where the tax along with the interest is paid within 30 days from the date of receipt of the notice under the proviso to Section 73(1) of the Finance Act. Further in case, the tax along with interest and 25% of the penalty is paid within 30 days from the date of receipt of an order passed by the adjudicating authority, then in such case the penalty is restricted to 25%.
23. The Section 80 of the Finance Act,1994 which empowers the authorities to waive penalty imposable under Section 76, Section 77 and first proviso to sub-section (1) of Section 78 of the Act, where the assessee proves that there was reasonable cause for non-complying with the provisions of law has been omitted by Finance Act, 2015. Henceforth the authorities have no power to waive the penalty levied under various provisions of Finance Act, 2014.
24. The Section 84 provides for filing of an appeal by the Department before the Commissioner (Appeals) in a case where any order is passed by an officer below the rank of Commissioner. However, an appeal can be preferred by the Department only after an order is passed by the Commissioner of Central Excise suo motu examining the order passed by the lower authority and thereafter directing the lower authority to file appeal before the Appellate Authority. Such order directing the lower authorities to file appeal has to be passed by the Commissioner within 3 months from the date of the communication of the order of the adjudicating authority. The adjudicating authority or the officer authorised in that behalf has to file an appeal before the Appellate Authority within 30 days from the date of receipt of the order passed by the Commissioner directing the authority to file appeal.
25. It is relevant to mention here that there is no revisional power conferred on the authorities under the scheme of the Finance Act, 1994 relating to Service Tax, to revise the order passed by the lower authority. The only remedy for the Department is to prefer an appeal in the manner provided for under the provisions of the Finance Act.
26. An appeal can also be filed by an assessee before the Commissioner (Appeals) under Section 85(1) of the Finance Act, 1994 against an order passed by an officer subordinate to the Commissioner, within 60 days from the date of receipt of the order passed by the lower authority. The Commissioner (Appeals) is empowered to condone delay up to 30 days only.
27. Further, an appeal can be preferred under Section 86(1) of the Finance Act before the Hon’ble CESTAT by an assessee within a period of 90 days from the date of receipt of the order passed by the Commissioner (Appeals) or any order passed by an officer of the rank of Commissioner. It may be noted that the Department is also entitled to file appeals before the Hon’ble CESTAT against the order passed by the Commissioner (Appeals) or any order passed by an officer of the rank of Commissioner. However, the appeal can be preferred by the Department subject to the permission being granted by the Committee of Chief Commissioners or Committee of Commissioners as the case may be. The limitation for filing of the appeal by the Department before Hon’ble CESTAT is 4 months from the date of receipt of the order by the Committee of Chief Commissioners or Committee of Commissioners as the case may be. It is pertinent to mention here that there is no restriction placed on the Hon’ble CESTAT in the matter relating to the condonation of delay in filing the appeal.
28. As per Section 35F of the Central Excise Act as amended by Finance Act, 2014, an assessee is required to deposit 7.5% of the disputed duty or the penalty as the case may be for maintaining an appeal before the Commissioner (Appeals) filed against an order passed by an Officer below the rank of the Commissioner. In case of appeals (first appeal)filed before the Hon’ble Tribunal against an order passed by the Officer of the rank of Commissioner, an assessee is required to deposit 7.5% of duty or penalty as the case may be for maintaining appeal before the Hon’ble Tribunal. In a case of second Appeal filed before the Hon’ble Tribunal against the order passed by the Commissioner (Appeals), an assessee is required to deposit the 10% of the duty or penalty as the case may be for maintaining appeal before the Hon’ble Tribunal. On compliance with the above statutory deposits for maintaining appeals before the respective appellate forums, the balance duty or the penalty as the case may be stands stayed till the disposal of the appeals by the above appellate forums.
29. For filing an appeal before the Hon’ble CESTAT the appellant is required to pay appeal institutional fee in the following manner.
a. Where disputed duty/penalty/interest is
Rs. 5 lakh and below, the appeal fee is Rs. 1,000/-
b. Where disputed duty/penalty/interest is more than
Rs. 5 lakh and not exceeding Rs. 50 lakh, the appeal fee is Rs. 5,000/-
c. Where disputed duty/penalty/interest is more than
Rs. 50 lakh the appeal fee is Rs. 10,000/-
30. It may be noted that no appeal institutional fee is payable in respect of appeals filed before the Commissioner (Appeals) under Section 85(1) of the Finance Act. An amount of
Rs. 500/- is to be paid for filing miscellaneous/condonation petitions before the Hon’ble CESTAT.
31. A further appeal under Section 35G of the Central Excise Act, which is made applicable to service tax provisions, can be filed before the Hon’ble High Court within 180 days from the date of receipt of the order passed by the Hon’ble CESTAT. However, where an issue relates to rate of duty/valuation, an appeal has to be filed before the Hon’ble Supreme Court directly against the order passed by the Hon’ble CESTAT. The Hon’ble Karnataka High Court in the case of Commissioner of Service Tax, Service Tax Commissionerate, Bangalore v. Scott Wilson Kirpatrik (India) Pvt. Ltd. (reported in 43 VST 9) was pleased to hold that in respect of the issue relating to rate of duty and entitlement of exemption under any notification, an appeal lies before the Hon’ble Supreme Court under Section 35L of the Central Excise Act, 1944 and an appeal under Section 35G before the Hon’ble High Court is not maintainable in such cases.
[Source: Article published in Souvenir of 18th National Convention held on 26th and 27th December, 2015 at Hyderabad]