Penalty on wrong ST3 filing

[abhishek gupta]

Dear Experts,

I have wrongly filled my ST3 return for the period 2014-15. In it I have clubbed the value of taxable services of maintenance or repair services and manpower supply services and took the 75% of taxable value of manpower supply as other deduction in the return as the same was paid by the service receiver under reverse charge mechanism. However I have paid the service tax correctly. Now during audit the officer has raised demand disallowing the deduction stating that there is no provision for deduction under maintenance or repair service? Kindly Help!

[KASTURI SETHI]

Whether maintenance and repair under contract ? If so, for what ? name of the goods whether plant and machinery ?

[Ganeshan Kalyani]

Sir, as you have mention that you have paid service tax correctly which means only the disclosure in the retun is wrong. In such situation it is advisable to substantiate your claim by producing your working back up duly reconciled with books of accounts. This will prove your genuine mistake to the Auditor who upon satisfaction would consider your submission and may conclude the case in your favour. Thanks.

[Rajagopalan Ranganathan]

Sir,

In respect of manpower supply services you have correctly paid service tax on RCM for the period 2014-15. in respect of maintenance and repair service, if it is a pure service then 100% tax is to be paid by the service provider. Bit you have paid 75% of the tax under RCM. However of the maintenance and repair service involves supply of materials also then it will become works contract service and your liability is 50% under RCM. Since there is no non-payment of tax by you and the service provider Department cannot make it a big issue and they settle the issue as closed since the entire tax is paid by you under RCM and your service provider.

AI Summary

Reverse charge mechanism: misclassification between manpower supply and maintenance alters tax liability and demands documentary substantiation. Taxpayer misclassified maintenance/repair and manpower supply values in ST-3, claiming a 75% reverse charge deduction though tax was paid; auditor disallowed the deduction. Tax treatment: pure maintenance/repair is provider-liable (not eligible for the 75% RCM deduction); manpower supply is taxable on recipient under RCM; where supply of materials converts the service into a works contract, RCM treatment differs. Provide reconciled working papers to substantiate the genuine mistake to the auditor.