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Chapter6:OtherComplianceIssues

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Chapter6:OtherComplianceIssues
ReportNo.26of2015(PerformanceAudit)
Chapter6:OtherComplianceIssues
During the course of this performance audit we observed 44 cases of
incorrectapplicationofrateofservicetaxandnon/shortpaymentofinterest
involving`8.84crore.
6.1
Incorrectapplicationofrateofservicetax
AsperFinanceAct,1994,servicetaxoncommercialorindustrialconstruction
service under section 65 (zzq) was leviable with effect from 10 September
2004 while service tax on works contract under Section 65 (zzzza) was
leviablewitheffectfrom1June2007.AsperBoard'scirculardated4January
2008,changingclassificationofservicerenderedforconstructionofaproject
fromcommercialorindustrialconstructionservicetoWCSisnotpermissible.
Weobservedfromthe examinationofrecords ofM/s.ShapoorjiPallonji&
Company Ltd., in Ahmedabad (ST) Commissionerate that they provided
construction service towards two projects viz. Tata Motors Ltd. (TML) and
BhavnagarEnergyCompanyLtd.(BECL)startedfromOctober2008andJuly
2010 respectively classifying the same as Commercial or Industrial
Construction Service. The assessee was availing Cenvat credit of inputs,
capital goods and input services and did not avail abatement under
notification dated 1 March 2006 and discharged service tax at the normal
rate of 12.36 per cent under Commercial or Industrial Construction service.
Wenoticedthattheychangedtheclassificationoftheabovesaidprojectsto
WCSfromJuly2012toMarch2013andpaidservicetaxontaxablevalueof
` 71.31 crore after availing abatement of 60 per cent which is incorrect.
Further,astheyavailedinputcredit,servicetaxisrequiredtobepaidon100
percentoftaxablevaluewithoutanyabatement.Thisresultedinshortlevy
ofservicetaxof` 4.46crore.
We pointed this out (February 2014), the department while accepting the
objectionstated(February2014)thatdraftshowcausenoticeisbeingissued.
ThereplyoftheMinistryisstillawaited(June2015).
6.2
Non/shortpaymentofinterest
Section75oftheFinanceAct,1994,envisagesthateveryperson,liabletopay
the tax in accordance with the provisions of Section 68 or rules made
thereunder,failstocreditthetaxoranypartthereoftotheaccountofthe
Central Government within the period prescribed, shall pay interest for the
periodbywhichsuchcreditingofthetaxoranypartthereofisdelayed.
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ReportNo.26of2015(PerformanceAudit)
Afewillustrativecasesaregivenbelow:
6.2.1 M/s. Jaihind Projects Ltd., in AhmedabadͲST Commissionerate,
engagedinprovidingWCSpaidservicetaxof`27.03crorebelatedlyduring
the period 2010Ͳ11 to 2013Ͳ14. From the details furnished by assessee we
noticed that the interest payable for belated payment of service tax was
`2.60crore. However, the assessee discharged interest liability of
`1.02crore.Thisresultedinshortlevyofinterestof`1.58crore.
Wepointedthisout(January2015),thereplyoftheDepartment/Ministryis
stillawaited(June2015).
6.2.2 M/s. Adarsh Noble Corporation Ltd., in BhubaneswarͲI
Commissionerate,engagedinprovidingWCSpaidservicetaxof`6.85crore
belatedlyduringtheperiod2012Ͳ13and2013Ͳ14.However,theassesseedid
notdischargeinterestliabilityof`65.48lakh.ThisresultedinnonͲpayment
ofinterestof` 65.48lakh.
Wepointedthisout(November2014),thereplyoftheDepartment/Ministry
isstillawaited(June2015).
6.2.3 M/s. Sri Avantika Contractors (I) Ltd., in Patna Commissionerate,
engaged in providing WCS paid service tax of `1.08crore belatedly during
the period 2010Ͳ11 and 2012Ͳ13. However, the assessee did not discharge
interestliabilityof`35.27lakh.ThisresultedinnonͲpaymentofinterestof
` 35.27lakh.
Wepointedthisout(January2015),thereplyoftheDepartment/Ministryis
stillawaited(June2015).
6.2.4 M/s. Gannon Dunkerley and Co. Ltd., in Kolkata (ST)
Commissionerate paid service tax of `2.41crore of in respect of WCS
belatedly during the period 2013Ͳ14, but did not pay interest for delayed
payment of service tax. This resulted in nonͲpayment of interest of
` 24.71lakh.
We pointed this out (May 2014), the assessee paid the interest of
`24.71lakhinJune2014.However,thereplyfromtheDepartment/Ministry
isstillawaited(June2015).
6.2.5 DuringtheexaminationofrecordsatMumbaiͲI(ST)Commissionerate,
weobservedthatM/s.RNAUniversalmadedelayedpaymentofservicetax
of` 3.24croreduringOctober2011toMarch2014butdidnotpayinterest
fordelayedpaymentofservicetax.ThisresultedinnonͲpaymentofinterest
of` 19.98lakh.
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ReportNo.26of2015(PerformanceAudit)
Wepointedthisout(December2014),thedepartmentintimated(May2015)
the recovery of ` 9.98lakh and further stated that the details of balance
amountofrecoverywillbeintimatedsoon.
6.2.6 DuringtheexaminationofrecordsofM/s.JayconInfrastructureLtd.,
inChandigarhCommissionerate,weobservedthattheassesseepaidinterest
amountof` 12.72lakhondelayedpaymentofservicetaxagainstliabilityof
` 34.93lakhfortheperiodOctober2012toSeptember2013.Thisresulted
inshortpaymentofinterestof` 22.21lakh.
Wepointedthisout(May2014),thereplyoftheDepartment/Ministryisstill
awaited(June2015).However,theassesseepaidthedifferentialinterestof
` 22.21lakh.
6.2.7 During the examination of records at Nagpur Commissionerate, we
observed that M/s. Sandesh Infrastructure Ltd., paid interest amount of
` 4.18lakhondelayedpaymentofservicetaxagainstliabilityof` 26.43lakh
fortheperiod2011Ͳ12to2013Ͳ14.Thisresultedinshortpaymentofinterest
of` 22.25lakh.
Onbeingpointedout(January2015),thedepartmentintimated(April2015)
the recovery of ` tenlakh and further stated that the details of balance
amountofrecoverywillbeintimatedsoon.
ThereplyoftheMinistryisstillawaited(June2015).
NewDelhi
Dated:27July2015
(M.HIMABINDU)
PrincipalDirector(ServiceTax)
Countersigned
39
ReportNo.26of2015(PerformanceAudit)
NewDelhi
Dated:27July2015
(SHASHIKANTSHARMA)
ComptrollerandAuditorGeneralofIndia
40
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