Mandatory Penalty for payment of Service Tax Manually?
AS per Rule 6(2) of the Service Tax Rules, the assessee is required to pay Service Tax electronically, through Internet banking.
What does this mean? Is there any other mode of paying the tax? If electronic payment is mandatory, why should they accept any other form of payment?
Nonetheless, the proviso clause mentions that the Assistant/Deputy Commissioner may for reasons to be recorded in writing, allow the assessee to deposit the service tax by any other mode other than internet banking. So, is "any other mode" referring to "any other mode of electronic payment" or is it referring to the time tested ‘payment in cash/cheque'? A simple one-liner rule but which throws up many possibilities!
As per Section 77(1)(d) of the Finance Act 1994,
Any person who is required to pay tax electronically, through internet banking, fails to pay the tax electronically, shall be liable to a penalty which may extend to ten thousand rupees.
An assessee recently received the following letter from a Service Tax Superintendent:
Gentlemen,
Sub: Service Tax -SOF on theme based audit by AG Audit - demand for payment of penalty for physical payment of Service Tax - Reg.
The AG Audit has conducted a theme based audit on "Tax Accounting and Reconciliation" covering the payments made by the assessees falling under this Commissionerate. In terms of proviso to Rule 6(2) of the Service Tax Rules, 1994, all assessees who paid duty/service tax of ten lakh rupees or more, in the preceding financial year are required to deposit the tax electronically, through internet banking
During, the course of audit, the AG has pointed out that you have paid certain amount of Service Tax physically instead of paying electronically during the year 2013-14 and you are liable to pay a penalty of Rs. 10,000/-(Ten thousand Only) under Section 77(1)(d) of the Finance Act, 1994 for contravention of Rule 6 (2 ) of the Service Tax Rules, 1994.
In view of the above, it is requested to pay the penalty of Rs.10,000/- immediately, in compliance of the objection raised by the AG Audit and intimate the details of the payment to this office.
Yours faithfully,
Superintendent of Service Tax Range
Is the Department on a fast track? Have they forgotten concepts like Show Cause Notice, hearing, adjudication etc?
The learned Superintendent is not even sure as to whether the assessee has really failed to pay the tax electronically - he doesn't mention as to when the assessee failed. He only depends on the AG Audit.
The Law states that the penalty may extend to ten thousand rupees. Superintendent Sir, the maximum penalty is ten thousand rupees.