penalty under service tax

[satbir singhwahi]

Audit party has detected service tax on Rent of immovable property . Service tax and interest at the rate of 15 p.a. has been deposited . Whether penalty will need to be deposited.

[YAGAY andSUN]

Dear Satbir,

In the Finance Budget 2012 there was a notification which stated that if service tax on renting of immovable property was deposited within six months (if not paid earlier due to pendency of this matter in various courts of India), then, no interest and penalty would be levied.

Further, ACES was in force.  You would had seek the benefit of such Schemes to avoid any interest and penalty.

But in your case, the Audit Party has deducted this non payment of Service Tax on Renting of Immovable Property. Therefore, in our opinion Department may impose penalty on your organization.  However, you may avail the benefit of Section 80 of the Finance Act, 1994 for not imposing the penalty on your organization.

Regards

Team YAGAY & SUN

(Management & Indirect Tax Consultants)

 

[R Ashok]

dear satbir,

There may be genuine cases, where the assessee may not be knowing his service tax liability; ( let us assume & proceed on this assumption ) Then in such cases, the assessee may use the provisions contained in Section 73(3), to avoid levy of penalty. To avail this benefit, the assessee should pay both service tax and interest before the serving the show cause notice. Then the assessee should intimate the details of payment to the central excise officer . ( pl refer Sen brothers Vs. Commissioner of central excise, Bolpur - 2014 (33) S.T.R. 704 ( TRI - KOLKATA )= 2013 (12) TMI 433 - CESTAT KOLKATA

Ashok

​Chartered accountant, coimbatore

AI Summary

Penalty for service tax on rent may be avoided if tax and interest are paid before show cause notice. Audit found unpaid service tax on rent; taxpayer paid tax and interest and asked about penalty. Relief avenues include a limited waiver scheme for matters pending in courts permitting deposit without penalty, a general finance act penalty relief provision, and a pre notice remedy where payment of tax and interest before a show cause notice and intimation to the officer can prevent penalty, as supported by tribunal authority. Absent timely use of these mechanisms, the department may impose penalty.