SERVICE TAX EVASION BECOMES DANGEROUS

[Dr. Sanjiv Agarwal]

When it comes to service tax, the tax avoidance and tax evasion will now face severe consequences as there are now prosecution provisions introduced by Finance Act, 2011. The new provisions encourage voluntary compliance and penalties principles based on gravity of offences on one hand, prosecution has been introduced to check and handle serious violations, on the other. 

Ministry of Finance has recently issued directions for launching prosecution. The provisions will apply where services have been provided without issuing an invoice or bill within fourteen days from the date of completion of service. Thus, non issuance of invoice shall attract prosecution leading to imprisonment. 

Also where taxpayer avail as well as utilize the credit without having actually received the goods or the service, prosecution may be launched. It will not apply to situation where invoice has been issued for a service yet to be provided on which tax due has been paid. 

It is meant only for typically fake invoices where tax has not been paid or where the service provides an per invoice does not exist. Material alteration in the bill will also be an offence attracting prosecution. Similarly, maintenance of fake books of accounts or failure to supply information or supply of false information (i.e, material particulars having bearing on tax liability) or supply of false information in response to summons will attract prosecution but expression of opinions not covered. 

However, non payment of service tax when due is not covered. Tax collected but not paid is an offence attracting prosecution.  Burden of proof regarding non existence of  ‘mens rea’ is on the assessee or accused. It also stipulates grounds which are not considered for awarding reduced imprisonment (eg, age, first time offence etc.). Prosecution shall be sanctioned by Chief Commissioner / Director General of Central Excise Intelligence. Monetary limit for invoking prosecution provisions is Rs. 10 lakh. Offences involving amount of less than Rs. 10 lakh will not be considered for launching prosecution.  Court proceedings shall commence only after departmental adjudication. To launch prosecution of top management of company, sufficient and clear evidence to show their direct involvement in the offence is required. Once prosecution is sanctioned, compliant to be filed in court immediately. 

So given these draconian provisions, the choice lies with the assessee- to live in peace at home or to live in pieces at Government sponsored home.

 

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