Saturday, March 12, 2016

Deemed conclusion under section 78a - Welcome provision

The budget, 2016-17 has fulfilled the wishes of the assessees to a great extent and one of the provision that is being welcomed by the assessees is the deemed conclusion of proceedings under section 78A of the Finance Act. This article is an attempt to discuss the amendment made in section 78A of the Finance Act. This section pertains to penalty on any director, manager, secretary or officer who is engaged in the day to day operations and conduct of business and was knowingly party to the contravention made by the organisation. The penalty provisions contained in the section 78A are produced for the sake of convenient reference as follows:-
SECTION 78A. Where a company has committed any of the following contraventions, namely:—
(a) evasion of service tax; or
(b) issuance of invoice, bill or, as the case may be, a challan without provision of taxable service in violation of the rules made under the provisions of this Chapter; or
(c) availment and utilisation of credit of taxes or duty without actual receipt of taxable service or excisable goods either fully or partially in violation of the rules made under the provisions of this Chapter; or

(d) failure to pay any amount collected as service tax to the credit of the Central Government beyond a period of six months from the date on which such payment becomes due, then any director, manager, secretary or other officer of such company, who at the time of such contravention was in charge of, and was responsible to, the company for the conduct of business of such company and was knowingly concerned with such contravention, shall be liable to a penalty which may extend to one lakh rupees.".
The Finance Bill, 2016, proposes to insert an explanation in this section which reads as follows:-
"Explanation.–– For the removal of doubts, it is hereby clarified that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, and the proceedings with respect to a notice issued under sub-section (1) of section 73 or the proviso to sub-section (1) of section 73 is concluded in accordance with the provisions of clause (i) of the first proviso to section 76 or clause (i) of the second proviso to section 78, as the case may be, the proceedings pending against any person under this section shall also be deemed to have been concluded.".

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