What are the Penalties for Suppressing Value of Taxable Service [Section 78]?

(c) Willful mis-statement; or

(d) Suppression of facts; or

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(e) Contravention of any of the provisions of this Chapter or of the rules with the intent to evade payment of service tax.

The person, liable to pay such service tax or erroneous refund, as determined under sub-section (2) or section 73, shall also be liable to pay a penalty, in addition to such service tax and interest thereon, if any, payable by him, which shall be equal to the amount of service tax so not levied or paid or short- levied or short-paid or erroneously refunded.

Provided that where true and complete details to the transactions are available in the specified records, penalty shall be reduced to fifty per cent, of the service tax so not levied or paid or short levied or short-paid or erroneously refunded.

Provided further that where such service tax and the internet payable thereon is paid within thirty days from the date of communication of order of the Central Excise Officer determining such service tax, the amount of penalty liable to be paid by such person under the first proviso shall be twenty-five per cent of such service tax.

Provided also that the benefit of reduced penalty under the second proviso shall be available only if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso.

Provided also that in case of a service provider whose value of taxable services does not exceed sixty lakh rupees during any of the years covered by the notice or during the last preceding financial year, the period of thirty days shall be extended to ninety days.

(2) Where the service tax determine to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purposes of this section, the service tax as reduced or increased, as the case may be, shall be taken into account.

Provided that in case where the service tax to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then the benefit of reduced penalty under the second proviso to sub-section (1), shall be available, if the amount of service tax so increased, the interest payable thereon and twenty-five per cent, of the consequential increase of penalty have also been paid within thirty days or ninety days, as the case may be, of communication of the order by which such increase in service tax takes effect.

Provided further that if the penalty is payable under this section the provisions of section 76 shall not apply.

Explanation:

Any amount paid to the credit of the Central Government shall be adjusted against the total amount due from such person.

When Penalties not to be imposed [Section 80]:

Penalties will not apply if the assessee proves that there was reasonable cause for the said failure. It is to be noted that, even if a reasonable cause is given interest on delayed payment of service tax is leviable.

The words ‘reasonable cause’ has not been defined. The dictionary meaning of the word “reasonable” is “sensible, not excessive, suitable and logical.” Hence, the reason given by the assessee has to be sensible and logical.

Central Excise Officer is the ultimate authority to decide whether the cause is reasonable or not.

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