Service Tax - Compounding of Offences
GOVERNMENT has notified the Service Tax (Compounding of Offences) Rules, 2012.These are on almost identical lines to the Central Excise (Compounding of Offences) Rules, 2005.The compounding of offences under the Central Excise Act is not very popular and there are hardly any cases where the offences are compounded.
The Compounding Amount : For the purpose of compounding of offences under the provisions of the Act, the compounding amount shall be as provided in the following Table.
S. No. | Offence | Compounding amount |
|---|---|---|
(1) | (2) | (3) |
1. | Offence specified under section 89 (1)(a) of the Act [ knowingly evades the payment of Service Tax under this chapter] | Up to fifty per cent of the amount of service tax evasion, subject to minimum of ten per cent of amount of tax evaded. |
2. | Offence specified under section 89 (1)(b) of the Act [avails and utilizes credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation of the rules made under the provisions of this Chapter] | Up to fifty per cent of the amount of CENVAT Credit wrongly taken or utilised, subject to minimum of ten per cent of said amount. |
3. | Offence specified under section 89 (1)(c) of the Act [maintains false books of account or fails to supply any information which he is required to supply under this Chapter or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information] | Rupees fifty thousand for the first offence and to be increased by hundred per cent. of this amount for each subsequent offence. |
4. | Offence specified under section 89 (1)(d) of the Act [collects any amount of service tax but fails to pay the amount so collected to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due] | Up to twenty five per cent. of the amount of service tax not deposited subject to a minimum of two per cent. for each month for which the amount has not been so deposited. |
If a person has committed offences falling under more than one category specified above and where the amount of service tax evasion or amount of CENVAT Credit wrongly taken or utilised is the same for all such offences, the compounding amount, in such cases, shall be the amount as determined for the offence for which a higher compounding amount has been prescribed.
Now you know the reason why compounding is not very attractive, especially considering the inflated demands the Department makes. It is cheaper to go for litigation than compounding.
Notification No. ; Dated May 29 2012