1. What is Service Tax and who pays this tax?
Ans: Service tax is, as the name suggests, a tax on Services. It is a tax levied on the transaction of certain services specified by the Central Government under the Finance Act, 1994.
It is an indirect tax (akin to Excise Duty or Sales Tax) which means that normally, the service provider pays the tax and recovers the amount from the recipient of taxable service.
2. Who is liable to pay service tax?
Ans: Normally, the „person" who provides the taxable service on receipt of service charges is responsible for paying the Service Tax to the Government (Sec.68 (1) of the Act).
However, in the following situations, the receiver of the Services is responsible for the payment of Service tax:
(i) Where taxable services are provided by foreign service providers with no establishment in India, the recipient of such services in India is liable to pay Service Tax.
(ii) For the services in relation to Insurance Auxiliary Service by an Insurance Agent, the Service Tax is to be paid by the Insurance Company
(iii) For the taxable services provided by a Goods Transport Agency for transport of goods by road, the person who pays or is liable to pay freight is liable to pay Service Tax, if the consignor or consignee falls under any of the seven categories viz. (a) a factory (b) a company (c) a corporation (d) a society (e) a co-operative society (f) a registered dealer of excisable goods (g) a body corporate or a partnership firm.
(iv) For the taxable services provided by Mutual Fund Distributors in relation to 0distribution of Mutual Fund the Service Tax is to be paid by the Mutual Fund or the Asset Management Company receiving such service.
3. When to file returns?
Ans: ST-3 Return is required to be filed twice in a financial year – half yearly. Return for half year ending 30th September and 31st March are required to be filed by 25th October and 25th April, respectively.
4. Why does Department issue show cause notice?
Ans: When any amount is demanded as Service Tax or other dues from any person under the Finance Act, 1994 and rules made there under towards recovery of service tax or other dues which is not levied or paid or short levied or short paid by any person, or erroneously refunded to any person, and/or any person is liable to penalty under the said Act/Rules, notices are issued in the interest of natural justice to enable such person to understand the charges and defend his case before an adjudicating officer.
5. What is meant by adjudication?
Ans: When show cause notices are issued under provisions of the Finance Act, 1994 charging any person for contravention of any provisions of the said Act and rules and/or notifications issued there under and penal action is proposed, the competent officers of the Department adjudge the case and issue orders. This process is called adjudication.
6. Is there any provision for early settlement of Central Excise dispute?
Ans: In the year 1998 the Central Excise Act, 1944 was amended byt the Finance Act, 1998 inserting new Chapter V, which provides settlement of all types of dispute without following the aforesaid Appellate procedures. In other words this is an alternate remedy to the appellate procedure for resolving any dispute expeditiously.
7. What is Settlement Commission?
Ans: Settlement Commissioner was constituted under Section 32 of the Central Excise Act, 1944. Notification No. 40/99-CX. (NT), dated 09.06.1999, was issued notifying the establishment of Settlement Commission. The various provisions of sections in Chapter V provide details of the functioning of the Settlement Commission.
8. What is the basic objective of the Settlement Commission?
Ans: The Settlement Commission provides quick and easy settlement of tax disputes of high revenue stake. This will save time and energy of both the litigant and the Department adding to the proverb ‘time saved is money saved’.
9. Who can be an applicant before the Settlement Commission?
Ans: Section 32E of the Central Excise Act, 1944, provides categories of persons who can file an application before the Settlement Commission. Such categories of persons were entitled to file an application before the Settlement Commission and called “applicant”. Thus, the applicant is an assessee who can make an application in the prescribed form to the Settlement Commission, containing a full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer. The applicant has to accept the additional amount of Service Tax payable by him and such liability should be not less than `3 lakh in a particular case.
8. What categories of cases that are not covered for Settlement Commission?
Ans: The following categories of cases cannot be taken up for settlement before the Settlement Commission:-
i) If the applicant has not filed any half yearly return showing services rendered and Service Tax paid in the prescribed manner. It does not necessarily imply that such return should be in relation to all services provided by such applicant.
ii) Where the applicant has not received any Show Cause Notice.
iii) Where the case of the applicant is pending with Tribunal or any Court;
iv) Where the dispute relates to interpretation of classification of service under Finance Act, 1994.
v) Where any books of accounts or other documents have been seized by the Central Excise Officers, the applicant cannot file any application till the expiry of one hundred and eighty days from the date of seizure.
9. What procedure is followed in the Settlement Commission?
Ans: On receipt of application, the Settlement Commission will see whether it is a fit case for being admitted for settlement. Once the application is admitted, hearing is given for final disposal of the case after conducting investigation by the Officers of the Settlement Commission if it is so necessary.
10. Can Settlement Commission grant immunity from prosecution and penalty?
Ans: The Settlement Commission if it is satisfied about bonafide conduct of the applicant can grant immunity from prosecution or imposition of penalty, fine, either in whole or in part. Such immunity is not only under the Finance Act, 1994 but also under any other Central Act for the time being in force.
11. What could be the average time for settlement of a case?
Ans: Settlement of a case should be within nine months from the last day of the month in which the application was made. For reasons to be recorded in writing, by the Settlement Commission, the period can be extended by a further period of three months.
12. Is the dispute before the Settlement Commission cost effective?
Ans: The dispute before the Settlement Commission is much less costly and beneficial to the applicant compared to the normal appeal procedure which is not only time consuming but also expensive.
13. Is the proceedings before the Settlement Commission the judicial proceedings?
Ans: Any proceedings before the Settlement Commission shall be deemed to be a judicial proceeding within the meaning of Sections 193 and 228, and for the purposes of Section 196 of the Indian Penal Code.
14. Is the order of settlement conclusive?
Ans: The order of the Settlement Commission is conclusive with the matters settled therein. The matter covered in the Settlement Commission’s order cannot be re-opened in any proceedings under Act or under any other law for the time being in force.