2015 (2) TMI 50 - HC - Service Tax

Denial of benefit of VCES - Rejection of declaration under second proviso to Section 106(1) of the Finance Act, 2013 - whether the declaration can be denied for a period, which was not covered under the earlier proceeding initiated against the petitioners - Held that - One or foremost thing to invoke the provisions of the scheme is the declaration by a person as to his tax dues in respect of which no notice or order of determination under the other provisions of the Chapter is issued on or before 1st day of March, 2013. If an issue, which was the subject matter of an earlier notice or on which the determination has already been done in respect of any period, the designated authority was not obliged to issue declaration for any subsequent period on the same issue. - The authorities in the impugned order have clearly indicated that the earlier show cause notice was issued for short-payment of the service tax on account of GTA, Maintenance & Repair Service and BAS and have been decided against the petitioners by the adjudicating authority. The issue involved in the said scheme also relates to the non-payment of the service tax on the component of GTA, Maintenance & Repair Service and BAS. The second proviso envisaged an embargo in making a declaration even for a subsequent period on the same issue. - Court, therefore, does not find that the authorities have, in fact, wrongly applied the said provision. The writ petition is devoid of merit - Decided against assessee.

Summary

Issues:
1. Interpretation of the second proviso to sub-section (1) of Section 106 of the Finance Act, 2013 regarding the Service Tax Voluntary Compliance Encouragement Scheme, 2013.

Analysis:
The petitioners filed a declaration under the Service Tax Voluntary Compliance Encouragement Scheme, 2013, admitting tax dues for the period 2010-2012. However, the authorities rejected the application citing the second proviso to Section 106(1) of the Finance Act, 2013, as they had issued a show cause notice for short payment of tax relating to GTA, Maintenance & Repair Service, and BAS. The authorities argued that as the issue from the show cause notice was part of the present proceeding, the petitioners were not entitled to the declaration under the scheme.

The key question before the court was whether a declaration could be denied for a period not covered in an earlier proceeding against the petitioners or if issues from an earlier proceeding were similar to those in the current proceeding. The court noted that the scheme allowed defaulting assesses to declare and pay tax dues within specified timelines to avail immunity from penalties and interest. The court emphasized the importance of the second proviso to Section 106(1) in determining the eligibility for declaration under the scheme.

The court examined the legislative intent behind the provision and highlighted that if an issue had been decided in an earlier notice or proceeding, the designated authority was not obligated to issue a declaration for any subsequent period on the same issue. The court emphasized that the focus should be on the similarity of the issue, not the period, to prevent re-adjudication of resolved matters. A Division Bench judgment from the Delhi High Court was referenced to support this interpretation.

In this case, the court found that the authorities correctly applied the second proviso as the issues from the earlier show cause notice overlapped with those in the declaration under the scheme. The court dismissed the writ petition, stating that the authorities did not err in their application of the provision, and the petition lacked merit.