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Rejection Order under VCES is appealable & recent clarifications issued pertaining to VCES

Dear Professional Colleague,

Rejection Order under VCES is appealable & recent clarifications issued pertaining to VCES

We are sharing with you an important judgement of the Hon’ble Punjab & Haryana High Court in the case of M/s Barnala Builders and Property Consultants Versus the Deputy Commissioner of Central Excise & Service Tax, Derra Bassi pision on the following issue:

Issue:

Whether the Order passed by Revenue under Service Tax Voluntary Compliance Encouragement Scheme, 2013 (“VCES” or “the Scheme”) is appealable?

Facts & Background:

M/s Barnala Builders and Property Consultants (“the Petitioner”) filed a civil writ petition No. 26929 of 2013 before the Hon’ble Punjab & Haryana High Court (“the High Court”) against the Order passed by the Deputy Commissioner of Central Excise and Service Tax under the Scheme.

The Central Board of Excise & Customs (“the CBEC”) vide its Circular 170/5/2013-ST dated August 8, 2013 (“the Circular”) had clarified that the Scheme has no provision of appeal against the rejection of declaration, relevant extract of the Circular is reproduced hereunder:

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What is the appeal mechanism against the order of the designated authority whereby he rejects the declaration under section 106 (2) of the Finance Act, 2013?

The Scheme does not have a statutory provision for filing of appeal against the order for rejection of declaration under section 106 (2) by the designated authority.

The issue before the High Court was whether the Order passed by the Deputy Commissioner of Central Excise and Service Tax under the Scheme is appealable or not.

Held:

The High Court has held that the Order passed under the Scheme is appealable. It was held that VCES is part and parcel of Finance Act, 1994 by virtue of amendment made by the Finance Bill, 2013 (“the Finance Act”) and all the provisions of the Finance Act are applicable to the Scheme except to the extent specifically excluded. Accordingly, the Circular issued by the CBEC is not correct in law and the Order passed by the Deputy Commissioner of Central Excise and Service Tax is appealable in accordance with the provisions of the Finance Act.

Further, the CBEC has issued certain clarifications with regard to the Scheme vide F. No. B1/19/2013-TRU (Pt.) dated December 11, 2013 as under:

Query: Where the declarant has declared his tax dues only for a part of the period covered by the Scheme, whether he is required to furnish an undertaking that he had no unpaid “tax dues” for the remaining period covered by the Scheme?

Reply: The Scheme does not envisage furnishing of any such undertaking. A declarant may have tax dues only for a part period covered by the Scheme. In terms of the Scheme, a declaration of tax dues has to be made in Form VCES-I, which includes an undertaking that the information given in the declaration is correct and complete. Therefore, the Designated Authority should not ask for any other undertaking or declaration beyond what has been prescribed in the Scheme or Rules made there under.

Query: Can the Designated Authority object to the payment of the first tranche of 50% of the declared amount in installments?

Reply: The Scheme only prescribes that the declarant would pay a minimum amount of 50% of the tax dues by 31.12.2013. Rest of the payment may be made by 30.6.2014, without any interest, and any amount remaining unpaid on 30.6.2014 shall be paid by 31.12.2014, with interest for the period of delay beyond30.6.2014. There is no bar to pay these amounts in installments. For example a declarant may pay the 50% amount that he is required to pay by 31.12.2013 in more than one installment. Therefore, payment of 50% “tax dues” in lump-sum may not be insisted to.

Query: Can the Designated Authority raise queries as regards the veracity and the manner of calculation of tax dues?

Reply: The Designated Authority may cause arithmetical check as regards the correctness of computation of tax dues. The Scheme does not envisage investigation by the Designated Authority into the veracity of declaration. Only if the Commissioner has reasons to believe that the declaration filed by the declarant is substantially false he may, for reasons to be recorded in writing, serve notice on the declarant requiring him to show cause why he should not pay the tax dues not paid or short-paid.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks & Best Regards

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)

E-mail: bimaljain@hotmail.com

F-30/31/32, Pankaj Grand Plaza

1st Floor, Mayur Vihar, Phase–I,

Delhi – 110091 India

Released a Book - "Guide to Service Tax Voluntary Compliance Encouragement Scheme, 2013"

Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the authors nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this document nor for any actions taken in reliance thereon.

Readers are advised to consult the professional for understanding applicability of this newsletter in the respective scenarios. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. No part of this document should be distributed or copied (except for personal, non-commercial use) without our written permission.

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