2014 (11) TMI 971 - HC - Service Tax

Service Tax Voluntary Compliance Encouragement Scheme, 2013 - Declaration of tax - Held that - The scheme makes no difference between tax dues which are short-paid due to bona fide error and one which flows from deliberate inaction. There is no power for waiving or relaxing the condition of depositing 50% tax dues flowing from Section 107. It would not be possible for this Court to exercise writ jurisdiction to direct the authority, in plain terms, which the statutory provision does not permit. Only after the taxes are fully deposited stage-wise that the declaration under Section 107 would be accepted. Section 110 only pertains to recovery of the taxes declared, but not paid. This provision has no bearing on the invalidity of declaration when the declarant fails to deposit the taxes as provided in sub-sections (3) and (4) of Section 107. If we interpret Section 110, as urged by the learned counsel for the petitioner, that it encompasses both the cases of delay in depositing the taxes at the first stage of sub-section (3) of Section 107 and second stage of sub-section (4) of section 107, the proviso to sub-section (4) would be rendered wholly redundant. If as suggested, shortfall in the taxes could be accepted after charging interest under Section 110, there was no need to make special proviso for extending time for depositing the remaining of the taxes under sub-section (4) of Section 107. Further, Section 110 pertains to compulsory recovery of taxes with interest. Sub-sections (3) and (4) of Section 107 refer to voluntary tax deposit by a declarant in terms of the scheme. Both these operate in separate fields. - Decided against assessee.

Summary

Issues:
Challenge to communication rejecting VCES declaration due to shortfall in tax dues deposit.

Analysis:
1. Scheme Overview: The Service Tax Voluntary Compliance Encouragement Scheme, 2013, allows declaration of tax dues with immunity from interest and penalties upon fulfilling conditions. Declaration can be made before December 31, 2013, with 50% tax dues paid by then and remaining by June 30, 2014.

2. Petitioner's Declaration: Petitioner declared unpaid tax dues of Rs. 16,42,936, depositing Rs. 8,01,120 by December 31, 2013, with a shortfall of Rs. 20,148. Respondent rejected declaration due to less than 50% payment by the deadline.

3. Communication Challenge: Petitioner challenged the communication rejecting the declaration. The court observed the scheme's requirement of 50% tax dues deposit by December 31, 2013, for acceptance and issuance of discharge acknowledgement.

4. Rejection Validity: The court held that failure to fulfill the scheme's essential requirement of 50% tax dues deposit by the specified date justified rejection of the declaration. No error was found in the authority's decision.

5. Contentions Raised: Petitioner argued shortfall was due to a genuine calculation error and that Section 110 allows tax recovery with interest but not declaration rejection.

6. Court's Decision: The court rejected both contentions. The scheme does not differentiate between short-paid taxes due to errors or deliberate actions. It emphasized the necessity of 50% tax dues deposit for declaration acceptance.

7. Section 110 Interpretation: Court clarified that Section 110 deals with tax recovery for declared but unpaid taxes, not declaration validity. It differentiated between depositing taxes in stages under Section 107 and compulsory tax recovery under Section 110.

8. Final Verdict: The petition challenging the communication rejection was dismissed, emphasizing the scheme's strict requirement of timely and complete tax dues deposit for declaration acceptance.