C.No.

V/15/SMV/33/2013-ADCSTA-III

Dated :

ORDER IN ORIGINAL No.

.12.2015.

/ 2015 (ST)

Sub: Service Tax M/s. Vijay Sales Corporation, Vellore Non-payment of

interest for delayed payment of Service Tax SCN No.4/2014 dt.2.04.2014 Order Passed Regarding.
** *** **
M/s. Vijay Sales Corporation, No.99A, Vellore Katpadi Road, Vellore 632007,
holders of Service Tax Registration No.AAAFV0580GST001 (hereinafter referred to as
VSC ) are engaged in providing Authorised Service Centre services.
2.

Whereas on the basis of intelligence gathered that VSC are not paying Service Tax

properly, investigation was conducted by the Divisional Preventive Unit.

3.

Enquiry revealed that VSC have filed ST-3 Returns for the period ending 31.03.2011

only and have not filed ST-3 Returns during the financial year 2011-12. Further they have
paid Service Tax only for the quarter ending June, 2011. However they have been charging
and collecting Service Tax from their customers from July. 2011 to March, 2012. Details of
Service Tax payable from July, 2011 to March, 2012 based on the ledger extracts are
submitted as under:
Taxable

Service

Edu.

SHE

Total Tax

Value

Tax

Cess

Cess

Payable

07/11 to 09/11

4738030

473803

9476

4738

488017

10/11 to 12/11

5053684

505368

10107

5054

520529

01/12 to 03/12

5344031

534403

10688

5344

550435

1513574

30271

15136

1558981

Period

TOTAL

4.

A statement was recorded from Shri. K.Margabandu. Accounts Manager, VSC on

19.06.2012, wherein, he has stated, interalia, that VSC have filed ST-3 Returns for the half
year ending March, 2011 only; they have paid Service Tax only for the quarter April to June,
2011; they have not filed ST-3 Returns during April, 2011 to March, 2012; after June, 2011,
1

they have not paid Service Tax; even though they have collected the Service Tax from the
customers, due to certain financial crunch, they were not able to pay the Service Tax within
due time; and that their Service Tax due from July, 2011 to March, 2012, works out to
Rs.15,58,981.00.
5.

Subsequent to the investigations, VSC have so far paid an amount of Rs.15,36,585/-

towards the Service Tax due as under:

Sl.No.

Challan No & date

Date

00009472206201200091

22.06.2012

304226

00009470307201200035

03.07.2012

195127

00009471011201200090

10.11.2012

194772

00009471211201200102

12.11.2012

603682

00009472311201200031

23.11.2012

200000

00009472611201200100

26.11.2012

38778

TOTAL

6.

1536585

They have adjusted input credit to the extent of Rs.45,068/- as under:

Sl.
No.
1

Month/
Year
Oct. 2011

Credit
Adjusted
7818

Nov. 2011

7277

Dec. 2011

8621

Jan. 2012

6692

Feb. 2012

7151

Mar. 2012

7509

TOTAL

7.

Tax paid

45068

Further, it is found that the assessee has filed the ST-3 returns for the half-yearly

ending September, 2011 and for the half-yearly ending March, 2012 in ACES on 11.07.2012
and 16.07.2012 respectively. On perusal of the ST-3 returns for the period from July, 2011
to March, 2012, the value of taxable service and the service tax payable declared by VSC is
as follows:
2

Period

Service

Edu.

SHE

Total Tax

Value

Tax

Cess

Cess

Payable

07/11 to 09/11

4738030

473804

9476

4738

488018

10/11 to 12/11

5052497

505250

10104

5053

520407

01/12 to 03/12

5342006

534201

10684

5342

550227

1513574

30271

15136

1558652

TOTAL

8.

Taxable

As per Rule 6 of the Service Tax Rules, 1994, VSC, being a partnership firm, is liable

to pay Service Tax within 5 days from the end of the month following the quarter. However,
it is seen from the payment details, they have paid the service tax amount belatedly which
attracts interest @18% per annum for the period of delay in payment of Service Tax as per
Section 75 of the Finance Act, 1994. The interest payable by the assessee for delayed
payment of Service Tax works out to Rs.2,15,034/- and out of this amount they have paid
only Rs.20,000/- vide Challan No.00058 dt. 14.06.2013. The balance is yet to be paid by
them and is demandable under Section 75 of the Finance Act, 1994.
9.

Further, it is noticed that apart from belated payment of Service Tax, the assessee

has filed the ST-3 returns belatedly. The returns for the half yearly ending September,2011
has been filed by them on 11.07.2012 and for the half yearly ending March,2012 has been
filed by them on 16.07.2012. The last date for filing of ST-3 returns for the half-yearly
ending September, 2011 was 06.01.2012 as per C.B.E.C.s Order No.3/2011-Service Tax
dated 29.12.2011 and for the half-yearly ending March, 2012 was 25.04.2012. As VSC have
filed the returns after the due date for filing the filing the ST-3 returns, they are liable to pay
late fee as per the rate mentioned in Rule 7C of the Service Tax Rules, 1994.

10.

It, therefore, appeared that VSC have contravened the following provisions:
(i)

Section 68 of Finance Act, 1994 in as much as they have failed to pay

service tax at the rate specified in section 66 in such manner and within
such period as may be prescribed;

(ii)

Section 70 of Finance Act, 1994 in as much as they have failed to

assess the Service Tax due on the services provided and paid the
same within the prescribed time frame and failed to furnish the return
within the stipulated time;
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(iii)

Rule 6 of the Service Tax Rules, 1994 in as much as they have failed to
pay the Service Tax due on the payments realized by them within the
prescribed time limit.

11.

Hence, therefore, M/s. Vijay Sales Corporation, No.99A, VelloreKatpadi Road,

Vellore 632007 were called upon to show cause by the Additional Commissioner of
Central Excise, Chennai III Commissionerate, vide SCN No.4/2014

dt.2.04.2014

as to

why
(i)

the amount of Rs.15,58,981/- (Rupees Fifteen lakhs fifty eight thousand nine
hundred and eighty one only) already paid by them as mentioned in Para No.5
and 6 should not be appropriated towards the Service Tax liability for the period
July, 2011 to March, 2012;

(ii)

interest amount of Rs.2,15,034/- for the delayed payment of Service Tax should
not be demanded from them under Section 75 of the Finance Act, 1994 and why
interest of Rs.20,000/- paid should not be appropriated towards the interest
amount payable;

(iii)

penalty should not be imposed on them under Sections 76 and 77 of the Finance
Act, 1994;

12.

Accordingly, personal hearing was held on 23.09.2015. Shri.S.Sivaramakrishnan,

Advocate appeared before me and stated that the noticee is bankrupt and

further stated

that the HDFC Bank taken away and attached the property and the assessee is ready to
pay the remaining portion due to department. To that extent he said that he will reply to the
notice within a weeks time and requested for dropping the proceedings of the SCN. No
reply has been received till date.
FINDINGS
13.

I have carefully gone through the facts of the case including the allegations made in

the Notice and the submissions made during the personal hearing.
14.

At the outset, it is observed that the Noticee did not object nor countered the

allegations made in the Notice but accepted the liability. In as much as the assessee has
admitted the service tax liability under the category of Authorized Service station services
and e fact that they also subsequently paid the amount of service tax in full, I feel I need not
4

go into the applicability of service tax law provisions on their activities. However since the
entire Service Tax amount due for the period July 2011 to March 2012 amounting to
Rs.15,58,981/- was paid by him subsequently on follow up action the same is liable for
appropriation towards the Service tax liability.
15.

The following are the provisions under service tax whereby a service provider who

has rendered the taxable services and collected the charges for the same are expected to
comply with the provisions made thereunder:
(i) As per Section 68(1) of the Finance Act, 1994, every person providing taxable
service to any person shall pay the service tax at the specified rate and in such manner and
within such period as may be prescribed. Further Rule 6(1) of the Service Tax Rules, 1994
stipulates that service tax shall be paid to the credit of the Central Government by the 5 th of
the month immediately following the calendar month(quarter in the case of Individual), in
which the payments were received towards the value of the taxable services. But the
Noticee had failed to make payment of Service tax including cesses amounting to
Rs.15,58,981/- for the period from July 2011 to March 2012 within the due dates,

in

contravention of the provisions of Section 68 of the Finance Act, 1994 read with Rule 6 of
the Service Tax Rules, 1994.
(ii) Further under Section 70 of the Finance Act, 1994, every person liable to pay the
service tax shall himself assess the tax due on the services provided by him and shall
furnish to the jurisdictional Superintendent of central excise a return in such form and in
such manner and at such frequency as may be prescribed.

Rule 7 of the Service Tax

Rules, 1994 prescribes that every assessee shall submit a half-yearly return in form ST-3
along with copy of challans. But the Noticee had failed to assess the tax due on the value
of services provided by him and failed to furnish to the jurisdictional Superintendent of
central excise, the returns in Form ST-3 for the period from April 2011 to to March, 2012, in
contravention of the provisions of Section 70 of the Finance Act, 1994 read with Rule 7 of
the Service Tax Rules, 1994.
16.

It is pertinent to mention that system of self assessment is in vogue in respect of

collection of Service Tax duties. In the Scheme of self assessment, the department comes
to know about services rendered / received only during the scrutiny of the statutory return
filed by the assessee. Therefore, it places greater onus on the assessee to conform to
highest standards of disclosure of information in the statutory returns. The various Courts
including the Apex Court have clearly laid down the principle that tax liability is a civil
5

obligation and therefore intent to evade payment of tax cannot be established by peering
into the minds of the tax payer, but has to be established through evaluation of tax behavior.
Thus the responsibility of the tax payer to voluntarily make information disclosures is much
greater in a system of self assessment.

17.

Now I take up the issue of liability to pay the interest under Section 75 of the Finance

Act, 1994. As per Section 75 of the Finance Act, 1994, every person liable to pay tax in
accordance with the provisions of Section 68 or rules made there under, who fails to credit
the tax or any part thereof to the account of Central Government within the period
prescribed shall pay simple interest at such rate not below ten per cent, and not exceeding
thirty six percent per annum, as is for the time being fixed by the Central Government by
Notification in the official Gazette for the period by which such credit of the tax or any part
thereof is delayed.
18.

Therefore inasmuch as the Noticee has failed to assess the service tax liability and

failed to pay Service Tax in terms of Section 68 of the Finance Act, 1994 read with Rule 6 of
the Service Tax Rules, 1994 within the time limit mentioned therein, automatically he
rendered himself liable for paying the interest under Section 75 of the Finance Act, 1994.
When service tax is not paid within due dates, payment of interest has to ensue. Further
the payment of interest is not a penal provisions but a legal obligation fastened on the
Noticee when the service tax is not paid within due dates. Hence I hold that interest as
calculated at the appropriate rate of interest is payable by the Noticee
19.

Now I take up the penal provisions . In the instant case, even though the assessee

has provided the Authorized service station service and collected the service tax from the
customers, they did not pay the service tax so collected to the Government account till the
enquiry conducted by the Divisional preventive unit. The assessee has not put forth any
reason for non payment of tax collected to the Government. In the absence of any valid
reason for non payment of tax I am constrained to come to the conclusion that the Noticee
is squarely liable for penal action under Section 76 of the said Act. At the time of personal
hearing the Advocate appearing for the assessee stated that the noticee is bankrupt, that
the HDFC Bank has taken away and attached the property of the assessee and assured
to furnish a letter to that effect within a weeks time. However no proof as stated by the
advocate was furnished till date.
6

20.

As regard to the penalty under Section 77 of the Act, the Noticee did not file the

returns for the period relating to the periods from April 2011 to March 2012 and filed the
returns only after the investigation was conducted by the Divisional preventive unit.
Therefore I hold that the Noticee is liable for penalty under Section 77 (2) of the Finance
Act, 1994 for contravening the provisions of Section 70 of the Finance Act, 1994 read with
Rule 7 of the Service Tax Rules, 1994 as stated in the notice.
21.

Accordingly, I pass the following Order.

ORD ER

I)

I appropriate the amount of Rs.15,58,981/- paid by the assessee on various

dates as mentioned in the Show cause notice towards their liability for the
period July 2011 to March 2012;

II)

I confirm the demand of interest under Section 75 of the Finance Act, 1994
from the Noticee, which works out to Rs.2,15,034/- (Rupees Two lakhs fifteen
thousand thirty four only) calculated at the appropriate rate on the service tax
adjudged at (i) above from the date on which the said tax had become due till
the actual date of payment and appropriate the interest of Rs.20,000/- paid by
the assessee towards the above interest;

III)

I impose a penalty of Rs.1,55.898/- (Rupees One lakh fifty five thousand

eight hundred and ninety eight only) under Section 76 of the Finance Act,
1994 on the assessee. The penalty payable shall be twenty five percent of
the penalty imposed, If the interest and the reduced penalty is paid within a
period of thirty days of the date of receipt fo the order.

IV)

I impose a penalty of Rs.10,000/- (Rupees Ten thousand only) in addition to

(iv) above under Section 77 (2) of the Finance Act, 1994 for contravention of
Section 70 of the Finance Act, 1994 read with Rule 7 of Service Tax Rules,
1994 on him.
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(K.B.RAJU)
ADDITIONAL COMMISSIONER
To
M/s. Vijay Sales Corporation,
No.99A, Vellore Katpadi Road,
Vellore 632 007.

(By SPAD)

Copy Submitted to
The Commissioner of Central Excise, Chennai-III Commissionerate.
(R&T Section / TRC Section), Chennai 600 034.
Copy to
The Assistant Commissioner of Central Excise, Vellore Division, Vellore.
The Superintendent of Central Excise, Service Tax Cell, Vellore Division.
Master / file copy.