CHAPTER- 5 PROCEDURE TO ASSESS TAX
This chapter has been divided into following sub chapters:-
5.1.REGISTRATION
5.2.PAYMENT OF SERVICE TAX
5.3.BOOKS & RECORDS
5.4.FILING OF RETURN
5.5.ASSESSMENT
5.6.APPEALS
5.7.DEMAND AND REFUNDS
5.8.RECTIFICATION OF MISTAKE
5.9.POWER OF SEARCH
5.10.PENALTY
5.11.IMPOSITION OF INTEREST
5.12.REVISION
5.13.CLASSIFICATION
5.14.VALUATION
For easy reference and analysis:-
5.1 REGISTRATION
5.1.1When application of registration to be filed:-
Rule 4 of the Service Tax Rules, 1994 relating to registration stipulates that every person liable for paying the Service Tax shall make an application to the concerned Central Excise Officer appointed under Rule 3 in Form ST-1 for registration within a period of 30 days of the service tax having come into force. Registration in form S.T. –2 shall be granted within seven days.
It has been further provided that where a person commences the business of providing a taxable service after such service has been notified; he shall make an application for registration within a period of 30 days from the date of such commencement.
It has also been provided that a person liable for paying the service tax in the case of taxable services referred to in sub-clause (zzp) of clause (105) of section 65 of the Act may make an application for registration on or before the [31st day of March, 2005].
Where the aggregate value of taxable service exceeds Rupees Seven Lakhs, the application for registration in specified form shall be filed within thirty days from the date on which the aggregate value of taxable service exceeds Rupees Seven Lakhs [w.e.f. 1/04/2007 and prior to the same Rs. Three Lakhs] – see rule 3 (2) of the Service Tax (Registration of Special Categories of Persons) Rules, 2005 with Notification No. 26/2005 S.T. dt. June7, 2005.
5.1.2Modification in Application:-
Rule 4(5A) of the Service Tax Rules, 1994 lay down that where there is a change in any information or details furnished by an assessee in Form ST-1 at the time of obtaining registration or he intends to furnish any additional information or detail, such change or information or details shall be intimated, in writing, by the assessee, to the jurisdictional Assistant Commissioner or Deputy Commissioner of Central Excise, as the case may be, with-in a period of thirty days of such change.
5.1.3When there is centralized accounting or billing system:-
Sub-rule (2) of rule 4 provides that where an assessee is providing a taxable service from more than one premises or offices and has centralized billing systems or centralized accounting systems in respect of such service, and such centralized billing or centralized accounting are located in one or more offices or premises, he may at his option register such premises or offices from where such centralized billing or centralized accounting systems are located.
Sub-rule (3) stipulates that the registration under sub-rule (2), shall be granted:-
- by the Commissioner of Central Excise or the Chief Commissioner of Central Excise, as the case may be, in whose jurisdiction all the premises or offices providing taxables service and the premises or offices from where centralized billing or centralized accounting is done, are located ; and
- in case other than (a) above, by such authority, as may be specified by the Board:
However, the above system is not applicable in those cases where the registration has been granted for such centralized offices or premises prior to April 1, 2005.
The detailed procedure to be followed by the assessee in case he opted for centralized registration and payment of service tax was the same as had been prescribed vide Circular No. 21/1/97, dated 27-1-1997 (F. No. 137/11/96 CX.4) in the case of services rendered by courier agencies. Now, the procedure has been prescribed vide CCE, Madurai – 2, Trade Notice No.52/2005 S.T.U. dt.13/06/2005 and CBEC Circular vide M.F.(D.R.) Letter F.No.B-1/06/2005 TRU dt.27/07/2005 as given under Part V of this Book.
5.1.4When each premises is required to be registered:-
However, where an assessee is providing a taxable service from more than one premises or offices, and does not have any centralized billing system, he shall be required to make separate applications for registration in respect of each such premises or offices to the concerned Central Excise Officer in jurisdiction.
5.1.5When there is not a centralized accounting system:-
Rule 4(3A) lays down that where an assessee is providing a taxable service from more than one premises or offices, and does not have any centralized billing system or centralized accounting systems, as the case may be, he shall make separate applications for registration in respect of each of such premises or offices to the jurisdictional Superintendent of Central Excise.
5.1.6 When there is more than one taxable services provided by the assessee:-
Sub-rule (4) of rule 4 lays down that where an assessee is providing more than one taxable service, he may make a single application, mentioning therein all the taxable services provided by him to the concerned Central Excise Officer.
In other words, only a single registration for all the taxable services provided by the service provider shall be given and the declaration submitted at the time of registration in the application for registration (ST 1) shall be accepted by the jurisdictional Superintendent of Central Excise and the registration must be given immediately but within seven days in any case.
5.1.7 When service provider is non-resident:-
In case of a non resident Indian or a person who was from outside India, who did not have any office in India, registration was not required if he paid the tax under rule 6. However, by Notf. No. 12/2002 ST dt. 1-8-2002, the facility has been withdrawn. Now, in terms of Rule 2(1)(d)(iv), read with Explanation to Sec. 65 (105) of the Finance Act, 1994, the person receiving taxable service in India shall be liable for paying service tax, so, he shall be required to be registered.
5.1.8When business is transferred:-
Where a registered assessee transfers his business to another person, the transferee shall obtain a fresh certificate of registration.
5.1.9When the assessee ceases to provide the taxable service:-
Every registered assessee, who ceases to provide the taxable service for which he has been registered, shall surrender his registration certificate immediately. However, on receipt of such certificate for surrender, the Superintendent shall ensure that the assessee has paid all monies due under the provisions of the Act or Rules & Notifications issued under the Act, than cancel the certificate.
5.1.10 When the constitution is changed:-
In the case of limited company, death of a director would not affect the status of Registration, since Registration is issued to the body corporate recognizing the same as a legal person. In the case of partnership firm also normally no difficulty would arise with regard to succession, since the surviving partners will continue either in the same name or with the change of name of the business. However, in the case of proprietary business when the proprietor dies, the successor in estate has to apply for a fresh Registration. Ordinarily fresh Registration would be issued to the person who happens to be in the actual possession of the business. However, granting the fresh registration to the successor in estate could not be regarded that the Government has accepted the said person as the legal successor / heir to the deceased.
5.1.11 Penalty for non-registration:-
With effect from sept. 10, 2004, now under section 77, at maximum, a penalty of Rs. 1,000/- may be imposed for non-registration or delayed registration except in case of bonafide failure as given under sec. 80 of the Act, 1994.
5.1.12 Service Tax Code (STC) Number based on Permanent Account Number (PAN):-
The application for obtaining service tax code number has been specified vide Form No.11. Since all concerned persons requiring registration in terms of Rule 4 of Service Tax Rules. 1994 (hereafter referred to as the Rules) will be applying for allotment of STC Number, a centralized allotment will be done at the level of;
5.1.13 Service Tax Cell, where a concerned person has one premises or office:-
Headquarter or Division: - Where a concerned person has one premises or office; or more than one premises or offices having centralized billing / accounting system and has allowed centralized registration of only such premises or office where such centralized billing / accounting is done in terms of sub-rule (2) or (3A) of Rule 4 of the Rules
Commissionerate: - Where a concerned person has more than one premises or offices in respect of which registration has been obtained within the jurisdiction of the same Commissionerate
Directorate General of Service Tax, Mumbai (DGST): - Where a concerned person has obtained registration for more than one premises or offices falling within the jurisdiction of different Commissionerates.
The STC Number will be PAN + alpha –code (ST)+ numberic – code (001). If there are more than one premises or offices or offices registered of such a person having common PAN for all such premises or offices, the last number code of STC Number would be “001, 002, 003……… etc.]
The procedure to allot the service tax code number has been prescribed by vide service tax circular No. 40/2/2002, dt. 21-2-2002 – 2002 (140) ELT. T55.
5.1.14 Input service distributor: -
In the definition given under clause (m) of Rule 2 of CENVAT Credit Rules, 2004, input service distributor means an office of the: -
Manufacturer or producer of final products; or
The provider of output service,
(i)which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services; and
(ii)issues bills, invoices or as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or provider, as the case may be,
Rule 4A(2) of the Service Tax Rules 1994 lays down that every input service distributor distributing credit of taxable service shall, in respect of credit distributed, issued an invoice, a bill or, as the case may be, a challan signed by such person or a person authorized by him, for each of the recipient of the credit distributed, and such invoice, bill or as the case may be challan shall be serially numbered and shall contain the following, namely: -
(i)the name, address and registration number of the person providing input service and the serial number and date of invoice, bill or as the case may be, challan issued under sub-rule(1);
(ii)the name [and address] of the said input service distributor;
(iii)the name and address of the recipient of the credit distributed;
(iv)the amount of the credit distributed.
[Provided that in case the input service distributor is an office of a banking company or a financial institution including a non-banking financial company, or any other body corporate or commercial concern, providing service to a customer, in relation to banking and other financial services, an invoice, a bill or, as the case may be, challan shall include any document, by whatever name called, whether or not serially numbered but containing other information in such documents as required under this sub-rule.]
In terms of Rule 3 of the Service Tax (Registration of Special Categories of Persons ) Rules, 2005, the input service distributor shall apply for registration with-in Thirty Days from the date of commencement of business or the 16th day of June, 2005 which ever is later in specified form – See also Notf. No. 26/2005 S.T. dt.June7, 2005.
5.2. PAYMENT OF SERVICE TAX
5.2.1 When payment of tax to be deposited:-
Rule 6 of the Service Tax Rules, 1994, which pertains to payment of service tax has been amended vide Notification No. 54/98 – ST, dated 7-10-1998. In case where an assessee is an individual or a partnership firm, the service tax on the value of taxable services received during any quarter shall be required to be paid by him to the credit of the Central Government by the 5th day of the month immediately following the said quarter. However, in all other categories of service tax assessee, the service tax on the value of taxable services received during any calendar month shall be required to be paid by them to the credit of the Central Government by the 5th day of the month immediately following the said calendar month. However, service tax for the month of March or the quarter ending in the month of March is to be paid by 31st March, of that calendar year.
5.2.2 When fee is received in advance:-
Rule 4A(1) of the Service Tax Rules. 1994 stipulates that every person providing taxable service shall [not later than fourteen days from the date of completion of such taxable service or receipt of any payment towards the value of such taxable service, whichever is earlier], issue an invoice, a bill or as the case may be, a challan signed by such person or a person authorized by him [in respect of such taxable service] provided or to be provided and such invoice, bill or as the case may be, challan shall be serially numbered and shall contain the following, namely:-
(i)the name, address and the registration number of such person;
(ii)the name and address of the person receiving taxable service;
(iii)description, classification and value of taxable service provided or to be provided; and
(iv)the service tax payable thereon.
Sec. 67 (3) of the Finance Act, 1994 lays down that the gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service.
The term “value of any taxable service” as defined by sec. 67 means the gross amount charged by the service provider for such services provided or to be provided by him subject to certain specified adjustments.
It means in case where the value of taxable service is received in advance before providing the said service, the service tax shall be paid on the value of service determined to the relevant month or quarter in which the advance has been received. In other words, in such month or quarter as the case may be, to the extent of the amount received, which would be pertaining to the extent of such service to be provided, tax is to be determined and paid accordingly at the time of receiving such advances.
5.2.3 Pre-levy services:-
If the service has been rendered prior to imposition of the levy on such service, but consideration has been received after the levy, on such recovery, the tax payable shall be Nil.
5.2.4 Pre levy advance:-
The liability of Service Tax has been imposed by Sec.66 of the Act 1944, the liability to pay the levy has been determined by Sec.68 and by Rule 6 of the Service Tax Rules, the liability to pay the levy has been postponed till the recovery of the value of such services provided or to be provided. In other words, an amount becomes value of taxable service even when it has a nexus with the service provided or to be provided subject to certain specified adjustments. That is the reason why the expression used is “value of taxable services” and not amount. The implication is that the tax has to be paid on the value of taxable services provided or to be provided at any time [i.e. before, after or during the month or quarter in which the amount has been received]. Thus, Rule 6 (1) cannot be read in isolation, but read along with the other provisions of the Act, it becomes clear that where the value of taxable service has been received in advance for a service which became taxable subsequently, service tax shall not be paid on the value of the service attributable to the relevant month / quarter which shall be on pro rata basis, because of the fact that at the time of receipt, the assessment has been made @ Nil rate of tax or as non taxable and as per provisions of the Rule 4A, the invoice shall be issued within the specified time of receipt of such advance.
5.2.5 When service tax is deposited excessively:-
Sub-rule (3) of Rule 6 provides a facility for adjusting excess payments of service tax by the assessee. It has been provided that where an assessee has paid to the credit of Central Government Service Tax in respect of a taxable service, which is not so provided by him either wholly or partially for any reason, the assessee may adjust the excess service tax so paid by him (calculated on a pro-rata basis) against his service tax liability for the subsequent period, provided that the assessee has refunded the value of taxable service [including the service tax thereon] to the person from whom it was received. However, the assessee is required to file the details in respect of such suo motto adjustments done by him at the time of filing the Service Tax Returns.
Where an assessee has opted for registration under sub-rule (2) of rule 4 of these rules and has paid to the credit of Central Government any amount in excess of the amount required to be paid towards Service Tax liability for a month or quarter, as the case may be, for the reason of not receiving details of payments received towards the value of taxable services at his other premises or offices, the assessee may adjust such excess amount so paid as service tax by him against his service tax liability for the subsequent period and the details of such adjustment shall be intimated to the jurisdictional Superintendent of Central Excise within a period of fifteen days from the date of such adjustment.
5.2.6 How the payment to be made:-
Rule 6 of the Service Tax Rules, 1994 lays down that the procedural aspect of the payment of service tax on monthly / quarterly basis. There is a provision for provisional assessment also. Government has decided that this collection of Service Tax shall be deposited by way of (Yellow colour) TR-6 challan forms (Major Head 0044) submitted only through those banks, which are presently authorized to collect the Central Excise duties in the Commissionerate. For computerized accounting of Service Tax, each assessee shall be assigned code called E.C.C. Code, which must be invariably mentioned on the TR-6 challan forms while depositing the monthly Service Tax. These and other code numbers shall be informed to the assessee, which he should invariably mention on the TR-6 Challans.