2014 (11) TMI 252 - HC - Service Tax

Rejection of the declaration made under Section 106 - Voluntary Compliance Encouragement Scheme - Held that - It is to be noticed that at an earlier point of time when recovery proceedings were initiated during the pendency of the 1st appeal filed under Section 85, petitioner was before this Court. In that writ petition, a specific contention was taken up by the Department, that no appeal would be maintainable under Section 85. Evidently, there is a further appeal to the Central Excise and Service Tax Appellate Tribunal as provided under the Finance Act, 1994. The petitioner cannot be permitted to bye- pass such remedy and approach this Court, especially since on a reading of the judgment of this Court, rendered in the earlier round, it is evident that there is a dispute with respect to the satisfaction of the 50% amounts as directed in Section 107 also.

Summary

Issues:
1. Rejection of declaration under Section 106 of the Finance Act, 2013 for a 'Voluntary Compliance Encouragement Scheme'.
2. Interpretation of the 2nd proviso to Section 106 regarding the challenge of show cause notice and payment of tax.
3. Bypassing statutory remedy and relying on a decision of the High Court of Delhi.
4. Consideration of maintainability of appeal under Section 85.
5. Availability of further appeal to the Central Excise and Service Tax Appellate Tribunal.
6. Jurisdiction of the Court to decide factual aspects and the three-tier fact-finding system.

Analysis:
1. The petitioner challenged the rejection of the declaration under Section 106 of the Finance Act, 2013 for a 'Voluntary Compliance Encouragement Scheme'. The rejection was based on the issuance of a show cause notice for the assessment year 2008-09. The petitioner argued that since they had not challenged the show cause notice and had paid tax accordingly, the rejection should not stand. The main contention was the entitlement to make a declaration under Section 106 in the year 2011-12.

2. The petitioner bypassed the statutory remedy and relied on a decision of the High Court of Delhi, which was not the appropriate approach. The Court noted that the petitioner should have followed the statutory procedure and exhausted all available remedies before approaching the Court.

3. The issue of maintainability of the appeal under Section 85 was raised, and the Department initially contended that no appeal would be maintainable. However, the Court found that the maintainability issue could be considered by the 1st Appellate Authority. The Authority rejected the appeal on merits, leading to the possibility of further appeal to the Central Excise and Service Tax Appellate Tribunal.

4. The Court emphasized the importance of following the three-tier fact-finding system provided in the Act, involving the original authority, the 1st Appellate Authority, and the Tribunal. The petitioner was directed to approach the Tribunal and reserved the right to raise contentions before the Tribunal.

5. The Court refrained from delving into the merits of the case to avoid preempting the fact-finding authority's decision. It highlighted that factual aspects should be left to the fact-finding authorities and that the petitioner should address any contentions before the Tribunal. The writ petition was closed without addressing the merits of the case to allow the Tribunal to decide based on facts and interpretation of the relevant provisions.