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Non-Indication Of Service Tax In Bill - An Analysis

08th September 2009
By Taxmannlaw in Taxes
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M. Govindarajan

Whenever a service is brought into the service tax net, the service provider is liable to levy service tax on the service provided by him and to pay the service tax so collected from the service receivers. The Service Tax Rules make it mandatory to issue bill/invoice/ challan to the service receivers indicating the details as required by the rules including the service tax payable. In some cases, the Tribunal have held that if service tax is not levied, the gross amount collected may be treated as cum-tax value. But it has been now decided that unless the invoice specifically says that gross amount charged includes service tax, it cannot be treated as cum-tax service price.

1. Rule 4A of the Service Tax Rules, 1994 provides that every person providing taxable service 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, shall issue an invoice, a bill or, as the case may be, a challan issued by such person or a person authorized by him in respect of such payable service provided or to be provided. Where any payment towards the value of taxable service is not received and such taxable service is provided continuously for successive periods of time and the value of such taxable service is determined or payable periodically, an invoice, a bill or, as the case may be, a challan shall be issued by a person providing such taxable service, not later than fourteen days from the last day of the said period.

2. Such invoice, bill or, as the case may be, a challan shall serially be numbered and shall contain the following, namely :—

A -The name, address and the registration number of such person.

B -The name and address of the person receiving taxable service.

C -Description, classification and value of taxable service provided or to be provided and The service tax payable thereon.

If the provider of taxable service is a banking company or a financial institution including a non-banking company or any other body corporate or any other person providing service to any person, in relation to banking and other financial services, an invoice, a bill or, as the case may be, a challan shall include any document, by whatever name called, whether or not serially numbered and whether or not containing the address of the person receiving the taxable service but containing other information in such documents as required.

If the provider of taxable service is a Goods Transport Agency, providing service to any person, in relation to transportation of goods by road in a goods carriage, an invoice, a bill or, as the case may be, a challan shall include any document, by whatever name called, which shall contain the details of the following :

A -Serial number.

B -Name of the consignor and consignee.

C -Registration number of the vehicle.

D -Details of goods transported.

E -Details of the place of destination.

F -Person liable for payment of service tax (consignor/consignee/goods transport agency).

It is mandatory to separately indicate the amount of service tax in the bills/invoice/challan raised on the clients as per section 12A of the Central Excise Act, 1944 which is made applicable to service tax under section 83 of the Finance Act, 1994. Such mention of the service tax amount in the invoice/bill/challan would also facilitate the service receiver to avail the CENVAT credit of the service tax paid on the input services.

3. If the service tax payable is not indicated in the bill/invoice/challan, what is the legal position under the service tax provisions—Service tax is payable on amount realized. If the value of taxable service includes service tax, the amount so collected/realized from the client would be treated as gross amount inclusive and, accordingly, the value of taxable service and the service tax liability may be worked out. The benefit availed is called as ‘cum-tax benefit'. In Panther Detective Services v. CCE [2007] 8 STT 215 (New Delhi - CESTAT), the Delhi Tribunal held that the only relief in regard to the valuation is that the appellants would be entitled to treat the total receipts as inclusive of service tax. It is, accordingly, ordered by the Tribunal that the revenue shall recompose the tax amount in these appeals treating the total receipt as cum-tax.

4. In Bhagawati Security Services v. CCE [2007] 7 STT 129 (New Delhi - CESTAT) the appellant had not raised any service tax bill to their service receivers. They had paid service tax calculated on these invoices but they had not received any such payment from their clients. The Tribunal found that there was in force the appellants' contention that if service tax is to be paid, it has to be worked out on the basis of gross amount received by them as being inclusive of service tax.

In Shakti Motors v. CCE [Order A/1415 (Ahd.) of 2008, dated 23-7-2008], the Tribunal made it mandatory to include service tax component in the bill/invoice/challan in consonance with the provisions of section 67(2) of the Finance Act, 1994. The facts of the case are as follows :

The appellants were engaged in the business of selling of Hero Honda brand motor bikes/scooters and they were authorized dealers of the said company. They were also providing business auxiliary services to various financial companies, etc. On the basis of investigation conducted, a show-cause notice was issued to them requiring them to pay service tax on taxable services rendered under the categories of ‘Authorized service station' and ‘Business auxiliary service' with appropriate interest and proposing to impose penalty, which culminated into confirmation of payment for service tax amounting to Rs. 46,255 with equal amount as penalty and penalty under sections 76 and 77 of the Finance Act, 1994 in addition. There was no dispute as regards liability of service and the same had been fully paid.

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