CA Manoj Nahata 
Summary of judgment
Recently, the Central Excise & Service Tax Appellate Tribunal (CESTAT) – Kolkata Bench, in case of Suchak Marketing (P.) Ltd. v. Commissioner of Service Tax, Kolkata [2013] 35 taxmann.com 360 (Kolkata – CESTAT) delivered an important judgment whereby the Hon’ble Tribunal held that if no service is rendered by service provider, there is no requirement to file ST-3 Returns, as he is not liable to pay any service tax. Further the late filing fee and penalty levied in case of belated filing of return was also dropped. Before discussing the said judgment, it is important to understand the exact provision of law first to have a clear idea on the topic.
Provisions of law
Section 70 of Finance Act,1994 provides for furnishing of service tax returns including belated filing of returns .The service tax return is required to be filed under Section 70 of the Act read with rule 7 of the Rules, by ‘any person liable to pay the service tax’. This return is required to be filed on a half yearly/quarterly basis, in Form ST-3.Even ‘Input Service Distributor’ is also required to file this return. Further Finance Act, 2007 had amended section 70(1) for filing of returns of provide for belated furnishing of service tax returns on payment of prescribed late fees which shall not exceed Rs. 2000 (Presently it is 20,000). Simultaneously, section 94(2) has also been amended so as to empower the Central Government to make rules to prescribe the form, manner and frequency of service tax returns to be furnished and the prescription of late fees for delayed furnishing of returns by the assessee under section 70(1).
Notification No. 20/2007-ST dated 12.5.2007 inserted new Rule 7C in Service Tax Rules, so as to provide for amount to be paid for delay in furnishing the prescribed return under section 70. Rule 7C provides as under—
Accordingly, prescribed late fee shall be as under —
| Delay of 15 days (from the last due date) | Rs.500 |
| Delay of more than 15 days but up to 30 days(from the last due date) | Rs.1000 |
| Delay of more than 30 days (from the last due date) | Rs 1000 Plus Rs 100 per day of delay from the 31st day till the date of furnishing the return. |
The above amount of late fee shall be subject to the maximum amount of Rs 20,000/- per default. The new rule also prescribes that if the amount as stipulated above is paid by the assessee for the delayed filing of return the proceedings, if any, for delayed submission shall be deemed to be concluded.
W.e .f. 1.3.2008, third proviso has been inserted in Rule 7C by Notification No. 4/2008-ST dated 1.3.2008 whereby powers have been provided to revenue officers to reduce or waive penalty for delayed filing of returns where gross amount of service tax payable is nil. Accordingly, rule 7C now empowers the Central Excise Officers to either reduce or waive altogether the levy of late fees for filing a belated return, where gross amount of service tax payable is nil. The discretion to reduce or waive vests with the Central Excise Officer and is final. It does not clash with section 80 and no reasonable cause is required to be shown by the assessee.
Facts of the case & judgment thereon
Now, in the instant case the appellant company had filed six nil returns in ST-3 form for the period from September, 2005 to March, 2008 on 18-11-2008. Consequently, show-cause notice was issued to them proposing penalty under Rule 7C of the Service Tax Rules, 1994 and Section 77 of the Finance Act, 1994.In appeal, the ld. Commissioner (Appeals) dropped the penalty under Section 77 of the Finance Act, but confirmed the penalty of Rs.12,000/- against the appellant under Rule 7C of Service Tax Rules.
The Hon’ble Tribunal held that undisputedly, the appellants were registered with the service tax Department for providing taxable services. It is also not in dispute that during the period April, 2005 to March, 2008, they have not provided any service and also they have not filed any returns with the Department. In view of the Board’s Circular No.97/8/07-ST, dated 23-08-2007, in the event, no service is rendered by the service provider, there is no requirement to file ST-3 Returns. The ld. A.R. could not produce anything contrary to the said Circular. Besides, as per Rule 7C of the Service Tax Rules, in the event, nil returns are filed, the Assessing Officer had the discretion to waive the late fees for filing the ST-3 Returns. Hence the Tribunal held that it is a fit case to invoke the proviso to Rule 7C and waive the late fees relating to the nil returns filed by the appellant during the period April, 2005 to March, 2008. A similar view has been held by the same Tribunal in the case of Amrapali Barter (P.) Ltd. v. CST [2013-TIOL-32-CESTAT-KOL] was referred in this case also. In these circumstances, the order of the ld. Commissioner (Appeals) was set aside and the appeal filed by the appellants was allowed.
Author’s Comments
This judgment is a welcome step from the view point of reducing litigations to some extent. Presently, there are so many litigations happening on the levy of penalty for non-filing of service tax returns even in case of NIL returns. The officers of the Dept. are not ready to exercise their discretionary powers under third proviso to Rule7C in favour of the assessee without satisfaction. It is really interesting that dept. is demanding late fee/penalty higher than tax amount or sometimes no tax amount.
It is very clear in terms of provisions of section 70 read with rule 7 of Service Tax Rules, that the Service Tax return is required to be filed by ‘any person liable to pay the Service Tax’. Now, the next question comes whether persons who are not liable to pay service tax (because of an exemption including turnover based exemption), are required to file ST-3 return? The answer would be NO in the light of the point /para no. 6 of the Board’s Circular no.97/8/07-ST dated August 23, 2007.Again it should be noted that a persons, who are liable to pay service tax but has NIL service tax payable or no service has been provided during a particular period, would not stand absolved from the requirement of filing return. The return in such cases will still include information relating to CENVAT Credit taken, services received under reverse charge, etc.etc. Even Form ST-3 is also required to be filed under rule 9 of the CENVAT Credit Rules, 2004 specifying Cenvat credit balance/details. Moreover, the fact that proviso to rule 7C provides for waiver of late fees in case of NIL return, also proves itself that law requires filing of even NIL return; otherwise the provisions of rule 7C would be rendered otiose. The instant case was though not argued from this point of view. Further the third proviso to rule 7C was inserted w.e.f. 01.03.2008 onwards for waiver of late fee but what will be the fate of the earlier cases is also not clear. Therefore it is suggested that the assessee should be very careful in applying the said judgment.
In the further clarification on Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) the Board in its Circular no: 170/5/2013 –ST dated: 08.08.2013 clarified that a case where no tax is pending, but return has not been filed, does not come under the ambit of the Scheme. However, Rule 7C of the Service Tax Rules provides for waiver of penalty in deserving cases where return has not been filed and, in such cases, the assessee may seek relief under Rule 7C.
PUNCH LINES
| If no service is rendered by service provider, there is no requirement to file ST-3 Returns, as he is not ‘a person liable to pay any service tax’ in terms of section 70 read with rule 7. Further as per CBEC circular No.97/8/07-ST dated August 23, 2007 the persons who are not liable to pay service tax (because of an exemption including turnover based exemption), are not required to file ST-3 return. |
*The author can be reached at: manoj_nahata2003@yahoo.co.in
