THIRD PARTY INFORMATION FOR SERVICE TAX EVASION

[Dr. Sanjiv Agarwal]

Furnishing of information by Parties (w.e.f. 06.08.2014)

A new section 15A has been inserted in the Central Excise Act, 1944 by the Finance Act, 2014. This section has been made applicable to Service Tax by virtue of section 83 of the Finance Act, 1994. This section stipulates that third party shall be required furnish periodic information, as specified, in the manner as may be prescribed.

This section reads as follows –

"Obligation to furnish information return

(1) Any person, being -

1. an assessee; or
2. a local authority or other public body or association; or
3. any authority of the State Government responsible for the collection of value added tax or sales tax; or
4. an income tax authority appointed under the provisions of the Income-tax Act, 1961; or
5. a banking company within the meaning of clause (a) of section 45A of the Reserve Bank of India Act, 1934; or
6. a State Electricity Board; or an electricity distribution or transmission licensee under the Electricity Act, 2003, or any other entity entrusted, as the case may be, with such functions by the Central Government or the State Government; or
7. the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908; or
8. a Registrar within the meaning of the Companies Act, 2013; or
9. the registering authority empowered to register motor vehicles under Chapter IV of the Motor Vehicles Act, 1988; or
10. the Collector referred to in clause (c) of section 3 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013; or
11. the recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956; or
12. a depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996; or
13. an officer of the Reserve Bank of India, constituted under section 3 of the Reserve Bank of India Act, 1934,

who is responsible for maintaining record of registration or statement of accounts or any periodic return or document containing details of payment of tax and other details or transaction of goods or services or transactions related to a bank account or consumption of electricity or transaction of purchase, sale or exchange of goods or property or right or interest in a property, under any law for the time being in force, shall furnish an information return of the same in respect of such periods, within such time, form (including electronic form) and manner, to such authority or agency as may be prescribed.

(2) Where the prescribed authority considers that the information submitted in the information return is defective, he may intimate the defect to the person who has furnished such information return and give him an opportunity of rectifying the defect within a period of thirty days from the date of such intimation or within such further period which, on an application made in this behalf, the prescribed authority may allow and if the defect is not rectified within the said period of thirty days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, such information return shall be treated as not submitted and the provisions of this Act shall apply.

(3) Where a person who is required to furnish information return has not furnished the same within the time specified in sub-section (1) or sub-section (2), the prescribed authority may serve upon him a notice requiring furnishing of such information return within a period not exceeding ninety days from the date of service of the notice and such person shall furnish the information return."

Accordingly, the assessee along with other nodal agencies namely, local authority or any state government responsible for collection of VAT or income tax authority, banking company, State Electricity Board, Registrar or Sub-Registrar, Registrar of Companies, Recognised Stock Exchange, Registering Authority under Motor Vehicles Act, 1988, the depository and an office or Reserve Bank of India shall be required to furnish the specified information to the central excise or service tax authorities in the manner and period as may be prescribed.

Tax Evasion Trail – Over view  ‘Third eye’ to check tax evasion trail u/s 15A and 15B to call for third party data, mandatory information filing and penalties (first time in indirect taxes) Specified persons to furnish information return containing details of tax, transactions, bank account, consumption, investment etc. Period, time, form (including e-form), manner and to whom - to be prescribed Persons include assessee, local authority, State Government, banks, Income Tax authority, Electricity Companies/ Boards, Registrar (Property, Companies, and Motor vehicles), stock exchanges, depository etc. Defective information to be rectified in 30 days Notice to be served for non-supply of information; to be submitted within 90 days thereafter

Where prescribed authority considers the information submitted in the return to be defective, an opportunity of being heard and time period of 30 days to rectify the defect shall be given to such person. If the same is not rectified within 30 days or within the additional time as allowed by prescribed authority, the said return shall be treated as not filed.

If every person who is obliged to file the return fails to file the same, the prescribed authority shall serve a notice requiring him to furnish such information within 90 days from the date of service of notice and such person shall furnish the information.

Penalty for failure to furnish information return

A new section 15B has also been inserted by the Finance Act, 2014 in the Central Excise Act, 1944 and made applicable to Service Tax law by virtue of section 83 of the Finance Act, 1994 for imposing penalty in case of failure to furnish information. This sections reads as follows –

"If a person who is required to furnish an information return under section 15A fails to do so within the period specified in the notice issued under sub-section (3) thereof, the prescribed authority may direct that such person shall pay, by way of penalty, a sum of one hundred rupees for each day of the period during which the failure to furnish such return continues."

Following points are important for imposing penalty u/s 15B -

• Penalty applicable to any or all specified assessees- no exemption to any authority / persons
• Penalty on failure to furnish required information after notice
• Monetary penalty of ₹ 100 per day of such failure till such failure continue
• Information authority to be notified

Accordingly, in case of failure in providing the information under section 15A, person in default shall be liable for a fixed penalty of one hundred rupees for each day for the failure period. The offence shall be a continues offence and there is no maximum amount fixed for such penalty.