Customer Care No.

91-1145562222

Service Tax Default or

Evasion Relevant
Aspects of Penalty
under section 76
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1. Section 76 of Finance Act,1994 : Penalty under section

76 of the Finance Act, 1994, as amended by the Finance
Act,2015, w.e.f.14.05.2015, is to be levied in following
circumstances where:
(a) Service tax has not been levied or paid, or has been
short-levied or short-paid, or erroneously refunded,
(b) Such non-levy, non-payment, short-levy, shortpayment or erroneous refund has occurred for any reason,
other than the reason of fraud or collusion or wilful
misstatement or suppression of facts or contravention of
any of the provisions of the Act or of the rules made
thereunder with the intent to evade payment of service
tax, and
(c)The person has been served a notice under section 73
(1).
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2. Maximum amount of penalty:A person who has been served a notice under section 73(1) would be liable to pay penalty under
section 76, not excluding 10% of such amount as mentioned in notice .The penalty is in addition
to service tax and interest thereon as specified in the notice. Further, the Adjudicating Authority
may at his discretion to impose even lesser amount of penalty depending on the timing of the
payment of service tax and interest and such lesser amount may be from nil to 25%as follows:
(a) In case, service tax and interest are paid within a period of 30 days of the date of service of
show-cause notice under section 73(1) -- No penalty is imposable.
(b) In case, service tax and interest are paid within a period of 30 days of the date of receipt of the
Adjudication Order passed under section 73 (2) -- Only 25% of the penalty imposed in the order.
It is to be noted that benefit of reduction in penalty shall be available only if such reduced penalty
would be paid within such period.
For example : If notice was received on 1.7.2015 demanding service tax of 10 lakh (non- evasion
case) then if service tax and interest thereon was paid by 1.8.2015, no penalty was to be levied.
In any other case, penalty up to 1,00,000 would be imposed.

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3. Effect of Appellate/Court's order under section 76(2):Where Commissioner (Appeals), the Tribunal or, the Court modifies the service tax determined
under section 73 (2) then, the amount of penalty payable thereon shall also stand to be
modified accordingly. Further, where penalty amount gets reduced consequent to Appellate/
Court order (such order).The benefit of reduced penalty under the proviso to sub-section (1)
shall be available if the service tax, interest and reduced penalty so payable, is paid within a
period of 30 days from the date of receipt of the order by which such modification is made. It is
to be noted that the reduced or otherwise of the amount of penalty shall be payable and
counted from the date of such order of the Commissioner or the Tribunal or the Court , as the
case may be.
4. Pendency of proceedings on 14-5-2015:By the Finance Act 2015, w.e.f. 14.5.2015, a new section 78B was inserted. The sub-section (1)
of 78 B provides that where in any case,(a)Service tax has not been levied or paid or has been
short-levied or short-paid or erroneously refunded and a notice has been served under
section73 (1) or under the proviso thereto, before 14-5-2015; or(b)Service tax has not been
levied or paid or has been short-levied or short-paid or erroneously refunded and a notice has
been served under section 73 (1) or under the proviso thereto, but no order has been passed
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5. Rationalization of provisions:The Finance Act, 2015, w.e.f 14.5.2015, has rationalized the penalty sought to be imposed under
section 76. It is to be noted that provisions of section 80 had been omitted simultaneously,
which shows that now the Adjudicating Authority is not vested with any discretion to dispense
with the imposition of penalty, except as provided under proviso to section76 (1) .Prior to 14-52015, section 76 was covered by section 80 which provided that penalty under section 76 was
not imposable where assessee proved reasonable cause of the failure to pay service tax. Hence,
imposition of penalty was not mandatory in all cases. Penalty under section 76 payable for
different periods in view of several amendments made and now would be levied according to
period of default

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