Third-party information to check service tax evasion - Dr Sanjiv Agarwal - Article published in Business Advisor, dated November 10, 2014 http://www.magzter.com/IN/Shrinikethan/Business-Advisor/Business/

1. Volume IX Part 3 November 10, 2014 11 Business Advisor
Third-party information to check service
tax evasion
Dr Sanjiv Agarwal
Service tax evasion will now be tracked on the
footsteps of income tax as the latest amendments
allow the service tax/ excise officers to resort to
seeking third-party information to identify, detect and
curb tax evasion. The Department feels that tax
evasion is rampant in service tax by assessees who are
heterogeneous and geographically spread, making it
difficult for officers to curb tax evasion. Even the
Voluntary Compliance Encouragement Scheme of
2013 could not bring the desired results.
Furnishing of information by parties (w.e.f. 06.08.2014)
A new section 15A has been inserted in the Central Excise Act, 1944 by the
Finance Act, 2014. This section has been made applicable to service tax by
virtue of section 83 of the Finance Act, 1994. This section stipulates that
third-party shall be required furnish periodic information, as specified, in
the manner as may be prescribed.
The statutory provision provides for as follows –
“Obligation to furnish information return
(1) Any person, being—
(a) an assessee; or
(b) a local authority or other public body or association; or
(c) any authority of the State Government responsible for the collection of
value added tax or sales tax; or
(d) an income tax authority appointed under the provisions of the
Income-tax Act, 1961; or
(e) a banking company within the meaning of clause (a) of section 45A of
the Reserve Bank of India Act, 1934; or
(f) a State Electricity Board; or an electricity distribution or transmission
licensee under the Electricity Act, 2003, or any other entity entrusted, as

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the case may be, with such functions by the Central Government or the
State Government; or
(g) the Registrar or Sub-Registrar appointed under section 6 of the
Registration Act, 1908; or
(h) a Registrar within the meaning of the Companies Act, 2013; or
(i) the registering authority empowered to register motor vehicles under
Chapter IV of the Motor Vehicles Act, 1988; or
(j) the Collector referred to in clause (c) of section 3 of the Right to Fair
Compensation and Transparency in Land Acquisition, Rehabilitation and
Resettlement Act, 2013; or
(k) the recognised stock exchange referred to in clause (f) of section 2 of
the Securities Contracts (Regulation) Act, 1956; or
(l) a depository referred to in clause (e) of sub-section (1) of section 2 of
the Depositories Act, 1996; or
(m) an officer of the Reserve Bank of India, constituted under section 3 of
the Reserve Bank of India Act, 1934,
who is responsible for maintaining record of registration or statement of
accounts or any periodic return or document containing details of payment
of tax and other details or transaction of goods or services or transactions
related to a bank account or consumption of electricity or transaction of
purchase, sale or exchange of goods or property or right or interest in a
property, under any law for the time being in force, shall furnish an
information return of the same in respect of such periods, within such time,
form (including electronic form) and manner, to such authority or agency as
may be prescribed.
(2) Where the prescribed authority considers that the information submitted
in the information return is defective, he may intimate the defect to the
person who has furnished such information return and give him an
opportunity of rectifying the defect within a period of thirty days from the
date of such intimation or within such further period which, on an
application made in this behalf, the prescribed authority may allow and if
the defect is not rectified within the said period of thirty days or, as the case
may be, the further period so allowed, then, notwithstanding anything
contained in any other provision of this Act, such information return shall
be treated as not submitted and the provisions of this Act shall apply.

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(3) Where a person who is required to furnish information return has not
furnished the same within the time specified in sub-section (1) or sub-
section (2), the prescribed authority may serve upon him a notice requiring
furnishing of such information return within a period not exceeding ninety
days from the date of service of the notice and such person shall furnish the
information return.‖
Accordingly, the assessee along with other nodal agencies namely, local
authority or any state government responsible for collection of VAT or
income tax authority, banking company, State Electricity Board, Registrar
or Sub-Registrar, Registrar of Companies, Recognised Stock Exchange,
Registering Authority under Motor Vehicles Act, 1988, the depository and an
office or Reserve Bank of India shall be required to furnish the specified
information to the central excise or service tax authorities in the manner
and period as may be prescribed.
Tax evasion trail: At a glance
• ‗Third eye‘ to check tax evasion trail u/s 15A and 15B to call for third
party data, mandatory information filing and penalties (first time in
indirect taxes)
• Specified persons to furnish information return containing details of tax,
transactions, bank account, consumption, investment etc.
• Period, time, form (including e-form), manner and to whom - to be
prescribed
• Persons include assessee, local authority, State Government, banks,
Income Tax authority, Electricity Companies/ Boards, Registrar
(Property, Companies, and Motor vehicles), stock exchanges, depository
etc.
• Defective information to be rectified in 30 days
• Notice to be served for non-supply of information; to be submitted within
90 days thereafter
Where prescribed authority considers the information submitted in the
return to be defective, an opportunity of being heard and time period of 30
days to rectify the defect shall be given to such person. If the same is not
rectified within 30 days or within the additional time as allowed by
prescribed authority, the said return shall be treated as not filed.

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If every person who is obliged to file the return fails to file the same, the
prescribed authority shall serve a notice requiring him to furnish such
information within 90 days from the date of service of notice and such
person shall furnish the information.
Penalty for failure to furnish information return
A new section 15B has also been inserted by the Finance Act, 2014, in the
Central Excise Act, 1944 and made applicable to service tax law by virtue of
section 83 of the Finance Act, 1994, for imposing penalty in case of failure
to furnish information.
This section reads as follows –
“If a person who is required to furnish an information return under section
15A fails to do so within the period specified in the notice issued under sub-
section (3) thereof, the prescribed authority may direct that such person shall
pay, by way of penalty, a sum of one hundred rupees for each day of the
period during which the failure to furnish such return continues.”
Following points are important for imposing penalty u/s 15B -
• Penalty applicable to any or all specified assessees- no exemption to any
authority / persons
• Penalty on failure to furnish required information after notice
• Monetary penalty of Rs 100 per day of such failure till such failure
continues
• Information authority to be notified
Accordingly, in case of failure in providing the information under section
15A, person in default shall be liable for a fixed penalty of one hundred
rupees for each day for the failure period. The offence shall be a continuous
offence and there is no maximum amount fixed for such penalty.
(Dr Sanjiv Agarwal is Partner, Agarwal Sanjiv & Company, Jaipur)
In case of failure in providing the information under section
15A, person in default shall be liable for a fixed penalty of
one hundred rupees for each day of the failure period.