GUIDANCE RELATED TO SERVICE TAX MATTER

This query is : Resolved

niiev (Querist)
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12 August 2007 I started the a marketing consultancy company in 1999 after leaving the job.
Since I was trying for a job I started in the name of my wife, not knowing the tax implications.
Through it I was earning approx. 2.5 to 3.0 lacs pa. from 1999 to 2004.
In 2004, I closed it.
Now I have received a summons witness from the department stating that the company has not paid any service tax in 2002-2003, 2003-2004, 2004-2005, 2005-2006 and 2006-2007.
I agree I have not paid service tax since I was not knowing about the taxation issue then. Also I have not collected any service tax.

Now,

a] What will be its implication?

b] Was it mandatory then and what was the limit and service tax structure?

c] What should I do to be least penalised in the matter?

Awaiting your guidance please since I have a date with the deprtment on 14th August 2007. My books are all audited and income tax paid.

Sincerely,

Niiev.

CA Prasanna Krishnan V

CA Prasanna Krishnan V (Expert)
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15 August 2007 Dear Sir

The ST department has issued notice invoking provisions of Section 73 of the Finance Act 1994. Only by verifying the actual date of notice, type of notice and your case facts one can give very effective solution.

Yet, the basic replies are-

Prima facie you may have some service tax liability. But you can suo motto pay the tax with interest if any and plead ignorance for avoidance of penalty.

It appears that by 2004 you stopped your business. Hence effectively year 2002-03 and 2003-04 could be the years for which you may have tax liability.

It is only from 01.03.2005 Notfn 06/2005 came into effect allowing basic exemption of Rs 4 Lakhs.

I repeat - one needs more case specific data to find out right solution.