Mumbai Prentation 17.4.2013 (Session IV)

Presents

6th Knowledge Master Class

On

Understanding Service Tax Law Nuances

Conducted by

Dr. Sanjiv AgarwalFCA, FCS

Wednesday,17th April, 2013Mumbai © Dr. Sanjiv

Agarwal

1

Corporate Knowledge Foundation

SESSION – IV

Recent Amendments,

New Penal Provisions

&

VCES, 2013

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Corporate Knowledge Foundation

This Presentation Covers

• Recent Amends in Service Tax

• New Penal Provisions

• Power to Arrest

• Voluntary Compliance Encouragement Scheme,

2013

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Recent Amendments and New Penal Provisions

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Changes in Budget 2013-14

Stability in negative list maintained with only a few changes.

Vocational courses offered by institutes affiliated to the State Council of Vocational Training and testing activities in relation to agriculture and agriculture produce to be in the negative list.

Definition of "process amounting to manufacture" will also include processes under Medicinal and toilet preparations (Excise Duties) Act, 1955.

Service Tax to be levied on all restaurants which are air conditioned. The condition of liquor license done away with.

Benefit of exemption to copyright on cinematography to be limited to films exhibited in cinema halls / theatres.

Recent Amends in Service Tax

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Changes in Budget 2013-14 All types of testing in relation to agriculture to be in Negative List

Certain exemptions curtailed / withdrawn in relation to auxiliary education services and renting by educational institutes, transportation of goods by railway / vessel, vehicle parking to general public, repair or maintenance of government aircrafts, charitable activities etc. (w.e.f. 1.4.2013)

Retrospective exemption to Indian railways for services provided between 1st July, 2012 upto 28th February, 2013 to the extent notices have been issued.

Where it is held that extended period of limitation u/s 73 is not sustainable for making demands, Department's demand for normal period of 18 months shall be sustainable.


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Penalty u/s 77(a) (in case of non-registration) shall be restricted to a maximum of Rs. 10,000.

Abatement reduced w.e.f. 1.3.2013 from 75% to 70% in case of luxury apartments / residential complexes and others (with carpet area of 2000 sq. ft. or more or value of Rs. 1 crore or more).

New provisions for revised punishments for offences u/s 89, makes certain offences cognizable and others non cognizable and bailable.

New Section 78A inserted to impose penalty on directors and officials of company for specified willful actions / offences.

Power to arrest provided u/s 91 where Service Tax contravention / default is more than Rs. 50 lakhs.


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Advance Ruling can be sought to ascertain eligibility of Cenvat Credit on input services for a manufacturer of excisable goods. (w.e.f 1.3.2013)

Resident public limited companies also allowed to seek advance ruling from Advance Ruling Authority (W.e.f. 1.3.2013)

Stay orders of CESTAT to have a maximum period of 365 days (180+185) upto which stay granted will be operational even when assessee is not at fault.; Stay to get vacated after 365 days (Section 37C of Central Excise)


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In Cestat appeals, single member bench can hear and dispose off appeals upto a monetary limit of Rs. 50 lakhs (previously Rs. 10 lakh).

Mode of delivery of letters, orders etc will also include speed post and approved courier agency.

Voluntary Compliance Encouragement Scheme, 2013 (VCES) introduced as a one time amnesty measure to effect compliance and recovery and provide amnesty from interest and penalties (last date 31.12.2013).

Service Tax appeal forms ST – 5,6,7 amended w..e.f. 1.6.2013


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Section 78A Penalty for offences by director etc. of a company

Section 89 Offences & penalties

Section 90 Cognizance of offences

Section 91 Power to arrest

Goes against non- adversarial tax policy of Government


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Penalty for Non- registrationPenalty for failure to take registration (Section 77(1)(a)]

Now: Penalty which may extend upto Rs. 10000 or Rs. 200 per

day during which default continues, whichever is higher, starting from first day after due date till the date of actual compliance

Proposed:Penalty which may extend upto Rs. 10000Penalty not to exceed Rs. 10000 in any caseFor non payment, there are already strict penalties u/s 76

and 78


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Penalty for Offences by Company Officials (Section 78A)

To impose penalty for contraventions / violations by Company

Penalty may extend up to Rs. one lakh per officialPenalty on any director, manager, secretary or

officer of CompanyIncharge / responsible to Company for conduct of

business of CompanyIf knowingly involved in specified contraventionsPenalty may be levied on more than one person for

single contravention / offences


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Specified Contraventions Evasion of Service TaxIssuance of bill / Invoice / challan without

provision of service in violation of rules.Availment and utilization of credit of taxes /duties

without actual receipt of services /goods either fully or partially.

Failure to pay amount collected as service tax to the credit of Central Government beyond 6 months of the due date


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Who is Punishable Any person who is

• director • manager• secretary • other officer

and who at the time of contravention was in charge of / was responsible to company for conduct of business, and was knowingly concerned with such

contravention.


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Personal Penalty

Till now, there was no provision in the Finance Act, 1994 to levy personal penalty for contraventions by Companies (also legally held)

There can be no penalty on directors /officers / manager / secretary of non-company assessees


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Offences & Penalties (Section 89)

Punishment to whoever commits any offence :

a) Knowingly evades payment of Service Taxb) Wrongly avails / utilizes credit of taxesc) Maintains false books of accounts/ supplies false informationd) Collects tax but fails to pay within 6 months of due date• In such cases, prosecution to be initiated• Cases of no intent to defraud also covered• ‘Knowingly’ is very subjective; to be proved

Contd…..


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Offences & Penalties (Section 89)

For (a), (b) &(c) and amount > Rs. 50 lakhs – imprisonment from 6 months to 3 years

For (d), if amount > Rs. 50 lakh – imprisonment from 6 months to 7 yearsFor any other offence– imprisonment upto 1 yearFor second or subsequent conviction

For (a), (b), (c), other offences – imprisonment upto 3 years

For (d) – imprisonment upto 7 years


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Cognizance of Offences (Section 90)

Cognizable Offence Failure to deposit to the credit of Central Government service tax collected where amount exceeds Rs. 50 lakhs

Non-Cognizable and Bailable OffencesAll offences except cognizable offence as above

Detailed Instructions to be issued


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Power to Arrest (Section 91)

Similar provisions existed earlier but withdrawn in 1998Provides power to arrest (where evasion exceeds Rs. 50

lakhs)Covers all classes of assesseesEmpowers Commissioner of Central ExciseHe may authorize any officer not below the rank of

Superintendent to arrestWho can be arrested – any person as per Section 89Trigger for arrest – offences – as per Section 89(1)

(Reasons to believe that offence has been committed to exist )

Arrests to be made in terms of Code of Criminal Procedure, 1973 (CCP)

Power to Arrest

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Power to Arrest (Section 91)For Cognizable offences

Grounds of arrest to be informed to such person

Produced before Magistrate with in 24 hoursAsstt. / Deputy Commissioner empowered to

release an arrested person on bail in case of non -cognizable / bailable offences

To have same powers as Officer -in -charge of Police Station in terms of Section 436 of CCP

Power to Arrest

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Offence u/s 89 Imprisonment on first default

Imprisonment on subsequent defaults

Cognizable or non- cognizable

Knowingly evades payment of Service tax

3 years ** 3 years Non- cognizable

Avails & utilizes credit of taxes without actual receipt of inputs/ services, whether partly or fully


Maintains false books or fails to supply any information or supplies false information


Collects any amount as service tax but fails to pay the same to government exchequer within 6 months of due date

7 years ** 7 years Cognizable

Any other offence 1 year 3 years Non- cognizable** Provided that in the absence of special and adequate reasons to the contrary to be recorded in the judgment of the court, such imprisonment shall not be for less than six months** if amount exceeding Rs. 50 lakh

Power to Arrest – At a Glance

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Impact of Power to Arrest (Section 91)Punitive punishments measuresPossible harassment of small service providers (sole

proprietors etc.)But tax amount of Rs. 50 lakhs provides a breatherMay improve compliances Regressive; possible threat to otherwise bonafide cases May increase litigationNeed to distinguish between willful and genuine

defaults Arrest can be made at the beginning of proceedings

itself, investigation may follow

Power to Arrest

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Possible Measures to avoid Arrest Suo moto compliance Independent due diligence Promptly attending to notices / summons Ensuring timely / full payment of Service Tax – Taxes

not to be used for working capital / funding other requirements

Where delay is expected, get in touch with Department.

Take aggressive tax positions with utmost care – Risk Management

Strengthen internal processes and controls to avoid unintended failures

Power to Arrest

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Voluntary Compliance Encouragement Scheme, 2013 (VCES)

Chapter VI (Clause 94-104 of Finance Bill, 2013)17 lakh assessees, 7 lakh returns filedStop filers / non-filersOnly a one time schemeTo chase assessees not possibleHope to collect reasonable money / litigation to come down Action & consequences

Truthful declaration of service tax dues since 1.10.2007 upto 31.12.2012 by defaulters as on 1.03.2013

Payment of due tax in 1 or 2 installments Interest , penalties and other consequences waived

Voluntary Compliance Encouragement Scheme

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Not applicable to period before 1.10.2007 or after 31.12.2012Not applicable to cases involving search, audit, investigation,

SCN or summon issued cases as on 1. 03. 2013Not eligible if return furnished u/s 70 but disclosed amount

not paidTo be rejected if audit etc. initiated as on 1st March, 2013Pay at least half of tax before, 31st December, 2013Pay balance by

30th June, 2014 without interest 31st December 2014 with interest w.e.f. 1.07.2014

Dues for period after 31st December, 2012 to be settled as per present Law


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No refund of amount paid under VCES Tax dues declared but not paid – to be recovered as per Law Even in default, only Service Tax and interest is payable False declaration to be rejected - reason to believe, notice to be served Declaration to be final – no withdrawal / no revision Satisfaction of designated authority required where audit /

investigation / summons/ notice issued and pending as on 1.3.2013; Declaration liable to be rejected by written reasoned order.

No action can be taken after one year from date of declaration Acknowledgment is a must Once acknowledgement is issued - no re-opening permissible before

any authority


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THANK YOU

FOR

YOUR

PRECIOUS TIME

AND

ATTENTION

Dr. Sanjiv Agarwal

FCA, FCS, Jaipur

[email protected]

[email protected]

Mumbai Prentation 17.4.2013 (Session IV)

Education

Transcript of Mumbai Prentation 17.4.2013 (Session IV)