Amendment in Section 78

[Admin TMI]

Question - What are proposed amendment in Section 78 in Finance Bill 2015 ?

[Admin TMI]

Section 78 is being amended to rationalize penalty, in cases involving fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act or rules with the intent to evade payment of service tax, in the following manner,-

(i) penalty shall be hundred per cent of service tax amount involved in such cases;

(ii) penalty equal to 15% of the service tax amount is to be paid if service tax, interest and reduced penalty is paid within 30 days of service of notice in this regard;

(iii) a reduced penalty equal to 25% of the service tax amount determined by the Central Excise Officer, by an order, is to be paid if the service tax, interest and reduced penalty is paid within 30 days of such order; and

(iv) if the service tax amount gets reduced in any appellate proceeding, then penalty amount shall also stand modified accordingly, and benefit of reduced penalty (25%) shall be admissible if service tax, interest and reduced penalty is paid within 30 days of such appellate order.

AI Summary

Penalty rationalization under service tax: higher penalties for evasion with staged reduced penalties for voluntary payment within prescribed timeframes. Amendment to Section 78 prescribes a penalty of 100% of the service tax amount for cases involving fraud, collusion, wilful misstatement, suppression of facts or contravention with intent to evade. It allows reduced penalties: 15% if service tax, interest and reduced penalty are paid within thirty days of service of notice; 25% if paid within thirty days of an order by the Central Excise Officer. If service tax is reduced on appeal, penalty is correspondingly modified and the 25% reduced penalty is available if paid within thirty days of the appellate order.