Penalty for ST3 Return

[Raja krishnan]

Sir,

A export unit belatedly filed their ST3 during the period of 2013-2014 and after that they have paid applicable interest for the delay days...now department insist to applicable penalty. Whether it is correct...Please clarify

[Ganeshan Kalyani]

Sir, Section 70(1) of Finance Act, 1994, as amended w.e.f. 08.04.2011 provides that in cases where returns are filed after due date, late fees not exceeding ₹ 20,000/- is payable for delayed filing of return, as may be prescribed.

If return of Service Tax is not filed within prescribed period, penalty is leviable u/s 77(2) which can be up to ₹ 10000/-. If late fee is paid, penalty will not be imposed.

The above provision will clear your doubt, I hope. Thanks.

[KASTURI SETHI]

Late fee and penalty both are separate in Service Tax. Normally, the department closes the chapter after deposit of late fee for delay in filing ST-3 return. On the other hand at the same time, the doors of Section 77 (2) are open. Late fee and penalty are totally different in the eyes of law.

[Ganeshan Kalyani]

Yes Sir I agree with you. Thanks.

[Rajagopalan Ranganathan]

Sir,

According to proviso 2 of rule 7C of Service Tax Rules, 2004 " where the assessee has paid the amount as prescribed under this rule for delayed submission of return, the proceedings, if any, in respect of such delayed submission of return shall be deemed to be concluded". Therefore if you have paid late fee leviable for delayed filing of return then you are liable to pay any penalty.

[KASTURI SETHI]

Sh.Raja Krishnan Ji,

The term, "deemed to be" means supposed to be, considered to be, thought to be etc. but which is not in reality. In other words,"the element of discretion" is included.

Late fee is not penalty and vice versa. Late fee is for late submission of any form, return etc. whereas penalty is imposed for contravention of the provision of Rule/Section of an Act.Both have different purposes. Moreover, Rule cannot override Section of an Act.

In Central Excise both terms have been explained separately and separate provisions are for both.

AI Summary

Late fee payment for delayed ST 3 returns can preclude penalty proceedings if the prescribed rule amount is paid.
An export unit filed ST 3 late and paid interest; legal debate is whether payment of a prescribed late fee under the return submission rule, which states proceedings shall be deemed concluded, precludes levy of a separate penalty, versus the view that late fee and penalty are distinct remedies and rule language cannot override statutory penalty authority.