2016 (2) TMI 25 - AT - Service Tax

Rejection of VCES-1 declaration due to short deposit of tax - appellant that as per their VCES declaration, they had deposited only ₹ 8,42,731/-whereas the amount to be deposited was ₹ 8,44,080, being 50% of the service tax due. - short payment of tax by ₹ 1,349/- Held that - there is no case of deliberate default on the part of the appellant. No opportunity was ever given to the appellant after the filing of the VCES application to remove the defect. It was only after the payment of 2nd (final) instalment (100%) on or before 30/6/14, when the appellant had admittedly paid hundred percent of the tax dues under the scheme, that the objection for the first time was raised by revenue vide letter cum rejection order dated 11/9/14. I find that the facts in the present case are different from the facts before the Honourable Gujrat High Court 2014 (11) TMI 971 - GUJARAT HIGH COURT where notice was issued prior to final payment. There has been miscarriage of justice in the rejection of the application under the VCES of the appellant without any opportunity to remove the defects and further without any opportunity to be heard, the order of rejection was passed. Further there were no tax dues on the date of issue of rejection order - Rejection of VCES set aside - Decided in favor of assessee.

Summary

Issues: Appeal against rejection of VCES application under service tax liability scheme.

Analysis:
1. Background: The appellant filed a VCES application for service tax liability amounting to Rs. 16,88,159, out of which Rs. 8,42,731 was deposited initially, and the balance was paid by the prescribed deadline.

2. Rejection Basis: The Department rejected the VCES application due to a shortfall of Rs. 1,349 in the initial payment, without granting an opportunity to rectify the error. The rejection was based on the Gujarat High Court ruling emphasizing the mandatory 50% deposit requirement by a specified date.

3. Commissioner's Decision: The Commissioner upheld the rejection, citing the Gujarat High Court's decision and emphasizing the lack of discretion to waive the 50% deposit condition, irrespective of the reason for the shortfall.

4. Appellant's Absence: Despite being served a notice, the appellant was absent during the proceedings, prompting the Tribunal to proceed with the hearing based on the Department's arguments.

5. Tribunal's Analysis: The Tribunal noted that there was no deliberate default by the appellant and highlighted the lack of opportunity to rectify the payment shortfall before the final deadline. The Tribunal distinguished this case from the Gujarat High Court ruling, where notice was issued before the final payment. Consequently, the Tribunal found a miscarriage of justice in the rejection without providing a chance to address the issue.

6. Tribunal's Decision: Considering the circumstances, the Tribunal set aside the rejection, deeming the VCES application to be accepted under the scheme and the Finance Act, 2013. The appeal was allowed, overturning the rejection of the VCES application.

In conclusion, the Tribunal's decision focused on procedural fairness, highlighting the importance of providing opportunities to rectify errors before outright rejection. The judgment emphasized the need for due process and consideration of individual circumstances within the framework of the VCES scheme and relevant legal provisions.