What are the penal provisions for various contraventions of the Service Tax Law?

The Penal provisions for various contraventions of the Service Tax Law are as follows:-

  • Non registration or delayed registration: An amount which may extend to Rs. 5000/- or Rs.200/- for every day during which such failure continues, whichever is higher could be imposed as penalty under sec 77(1)(a) of the Act.
  • Non payment or delayed payment of service tax- A mandatory penalty, not less than Rs.200/- for every day during which such failure continues or @2% of such tax per month, whichever is higher, shall be imposed by the adjudicating authority. However, the penalty amount payable shall not exceed the amount of service tax payable. [section 76 of the Act]
  • Non-filing / delayed filing of returns: A mandatory penalty has been prescribed under Rule 7C of the Service Tax Rules, 1994, as well as an amount not exceeding Five Thousand Rupees could be imposed as penalty under sec 77 of the Act. (see question No.4.11)
  • Contravention of any of the provisions of the Finance Act, 1994 (Chapter V) or the Rules made thereunder for which no penalty is separately provided: An amount which may extend to Rs.5000/- shall be liable to be imposed as penalty under Sec.77(2) of the Act.
  • Failure to keep, maintain or retain books of account and other documents as required in accordance with the provisions of the Finance Act, 1994 (Chapter V) or the rules made thereunder: An amount which may extend to five thousand rupees shall be liable to be imposed as penalty. [Section 77(1)(b) of the Act]
  • Failure to
    • furnish information called by an officer in accordance with the provisions of the Finance Act,1994 (Chapter V) or rules made thereunder; or
    • produce documents called for by a Central Excise Officer in accordance with the provisions of this Chapter or rules made thereunder; or
    • appear before the Central Excise Officer, when issued with a summon for appearance to give evidence or to produce a document in an inquiry,

An amount which may extend to five thousand rupees or two hundred rupees for every day during which such failure continues, whichever is higher, shall be liable to be imposed as penalty. [Section 77(1)© of the Act]

  • Person who is required to pay tax electronically, through internet banking, but fails to pay the tax electronically: An amount which may extend to five thousand rupees shall be liable to be imposed as penalty. [section 77(1)(d) of the Act]
  • Person who issues invoice in accordance with the provisions of the Act or rules made thereunder, with incorrect or incomplete details or fails to account for an invoice in his books of account: An amount which may extend to five thousand rupees shall be liable to be imposed as penalty. [section 77(1)(e) of the Act]
  • Suppression of the value of taxable services: Penalty to an extent ranging from 100% to 200% of the Service Tax which was not levied or paid or erroneously refunded, can be imposed on any person, if such short levy or short payment or erroneous refund is by reason of fraud collusion, willful mis-statement, suppression of facts; or contravention of any of the provisions of the Act or the rules made thereunder with an intent to evade payment of Service Tax. Such liability towards penalty would be in addition to the Service Tax amount evaded or erroneously refunded and the interest thereon (Section 78 of the Act).
  • Reduced Penalty in respect of item 5 above: If the Service Tax amount as determined by the competent authority is paid within 30 days from the date of communication of the order, along with interest, the amount of penalty liable to be paid shall only be 25% of the Service Tax amount so determined. The benefit of reduced penalty equivalent to 25% of the said Service Tax is available only if such lesser penalty amount is also paid within the aforesaid period (First and second proviso to Section 78 of the Act).