2014 (12) TMI 629 - HC - Service Tax

VCES Scheme - Whether any enquiry / audit objection, or any action whatsoever was pending against the petitioner, as on 01.03.2013 - construction of residential houses on contract basis - show cause notice was on 31.07.2013 - Registration problem with ACES - Rejection of application under VCES since audit initiated - Held that - It has to be pointed out that there was no audit initiated/conducted against the petitioner or in the business premises of the petitioner. This has not been disputed by the Department. However, the petitioner would state that an audit was conducted in M/s.Shobika Impex Private Limited and the petitioner had done certain construction activities in the said company and a communication was sent by the Range Officer to the petitioner on 07.03.2013. It has to be further pointed out that the cut-off date is 01.03.2013 and as on the said date, there was no audit objection. Even assuming that M/s.Shobika Impex Private Limited was the subject matter of audit from 01.03.2013, the petitioner was not put on notice, prior to 01.03.2013. The petitioner was intimated by the Range Officer, Tiruppur Range, on 07.03.2013. The petitioner s consistent case is that the Range Officer is not the competent authority to initiate any audit. Nevertheless, a reading of the impugned order shows that the communication, dated 07.03.2013 is only an intimation, probably, with a view to intimate the petitioner that they have to register themselves under the Service Tax regime and pay taxes. The petitioner did not ignore the communication of the Range Officer, but accepted the same with utmost seriousness. This is manifest by the petitioner s representation dated 08.03.2013, addressed to the competent authority, namely, the Superintendent of Central Excise, and the contents of the same have been elaborately set-out in the preceding paragraphs of this order, which clearly show the bona fides of the petitioner. Therefore, this Court has no hesitation to hold that as on the date when the application was filed by the petitioner, there was no audit as against the petitioner. - Even assuming that there was an audit with M/s.Shobika Impex Private Limited, such audit was not put on notice to the petitioner, by the competent authority, till the show cause notice was issued. The communication of the Range Officer was not an intimation of audit objection. Even assuming if it is considered as an intimation of audit objection, yet the communication on 07.03.2013 was much after the cut off date. Thus the issue that has to be considered by the Authority is, as to whether the petitioner could be considered to be ineligible under the scheme, for which the authority should not be solely guided by the Range Officer s communication, dated 07.03.2013, which appears to be an advice or notice and the petitioner has taken the advice well and proceeded in accordance with law. - Matter remanded back - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the order dated 14.03.2014 rejecting the petitioner's application under the Voluntary Compliance of Excise and Service Tax Scheme (VCES).
2. Validity of the subsequent orders dated 25.04.2014 and 28.05.2014.
3. Eligibility of the petitioner to avail benefits under VCES 2013.

Issue-Wise Analysis:

1. Validity of the order dated 14.03.2014 rejecting the petitioner's application under VCES:
The petitioner sought to quash the order dated 14.03.2014, which rejected their application under VCES 2013. According to the scheme, an application can be rejected if an inquiry, investigation, or audit was pending as of 01.03.2013. The court noted that there was no audit initiated or conducted against the petitioner or at their business premises, a fact not disputed by the Department. The audit was conducted at M/s. Shobika Impex Private Limited, and the petitioner was only informed about it on 07.03.2013, after the cut-off date of 01.03.2013. The court held that the Range Officer's communication dated 07.03.2013 was merely an intimation and not an audit objection. Therefore, the court found the rejection of the petitioner's application under VCES 2013 to be improper and quashed the order dated 14.03.2014.

2. Validity of the subsequent orders dated 25.04.2014 and 28.05.2014:
The subsequent orders' validity depended on the outcome of the order dated 14.03.2014. Given the court's decision to quash the 14.03.2014 order, the subsequent orders were also affected. The order dated 25.04.2014, which confirmed the show cause notice, was to be reconsidered by the second respondent. The order dated 28.05.2014, which declared the appeal against the 14.03.2014 order as not maintainable, was rendered moot by the court's decision to remand the matter for fresh consideration.

3. Eligibility of the petitioner to avail benefits under VCES 2013:
The court examined whether the petitioner was eligible for VCES 2013 benefits. The petitioner contended that no inquiry or audit was pending against them as of 01.03.2013. The court observed that the petitioner's proactive response to the Range Officer's communication on 08.03.2013 demonstrated their bona fides. The court also noted that the Range Officer's communication was not an audit objection but an advice to register and pay service tax. Thus, the court concluded that the petitioner was eligible to file a declaration under VCES 2013 and directed the second respondent to reconsider the application after providing a personal hearing to the petitioner.

Conclusion:
The court quashed the order dated 14.03.2014 and remanded the matter to the second respondent for fresh consideration. The second respondent was instructed to provide a personal hearing to the petitioner and pass a fresh order on merits, uninfluenced by previous observations. The appeal against the order dated 25.04.2014 was to be kept in abeyance. The prayer to quash the proceedings dated 28.05.2014 was rejected, and Writ Petition No.24431 of 2014 was closed as no further orders were required.