2016 (4) TMI 728 - AT - Service Tax

Entitlement for abatement of 40% - Notification No. 1/2006-ST - Held that - the Ld. Commissioner has not given proper finding as regard the abatement available to the appellant to the extent of 40% from the gross value as provided under Notification No. 1/2006-ST. On perusal of the books of accounts of the appellant, it is found that the gross receipt shown in the balance sheet/profit and loss account is inclusive of catering / food. As per Notification No. 1/2006-ST the abatement of 40% is allowed subject to condition that the gross amount charge is inclusive of food items. As the cost of the food item is inclusive in the gross amount charged by the appellant, they are entitled for the abatement. Acceptability of VCES declaration - Charge of false declaration - Held that - the mistake has occurred due to arithmetic error in quantifying the due and the same was pointed by the appellant themselves and made good by making the payment of correct amount, and for the delay in making the payment, they also paid the interest. From this fact, I do not find any intention of the appellant to make a false declaration. This is only due to arithmetical error that there is mistake in declaring the actual dues. It is also found that the appellant have paid the entire amount of correct dues along with interest before the last date. Therefore, no reason found why the VCES declaration should not be accepted. Accordingly, impugned order is set aside. - Decided in favour of appellant

Summary

Issues:
1. Validity of VCES declaration filed by the appellant.
2. Determination of correct dues and abatement under Notification No. 1/2006-ST.
3. Allegation of false declaration and consequences under the VCES Scheme.

Analysis:
1. The appeal challenged an Order-in-Original by the Commissioner, where the appellant's VCES - 1 declaration was deemed substantially false, resulting in a demand of Rs. 3,08,672, interest under Section 75, and a penalty under Section 78 of the Finance Act, 1994. The appellant initially declared dues of Rs. 2,78,118, paid 50% on 31.12.2013, and the remaining in two installments. However, an error was later discovered, leading to a shortfall of Rs. 35,288. The appellant rectified this by paying the correct amount along with interest. The Commissioner, despite the rectification, held the declaration false, leading to the demand and penalties.

2. The appellant contended that the error was due to an arithmetical mistake, promptly rectified by them without external prompting. They argued for abatement of 40% under Notification No. 1/2006-ST, as the gross receipt included food/catering services. The Commissioner failed to address this aspect in the decision. The appellant maintained that the correct dues were paid before the due date, including interest for the initial shortfall. The Revenue, however, insisted on the false declaration due to the initial error in the VCES declaration.

3. Upon review, the Tribunal found that the Commissioner did not consider the abatement provision under Notification No. 1/2006-ST, which entitled the appellant to a 40% deduction due to the inclusion of food items in the gross receipts. The Tribunal also noted that the error in the declaration was an arithmetic mistake promptly corrected by the appellant, who paid the correct dues with interest before the deadline. Consequently, the Tribunal ruled in favor of the appellant, overturning the Commissioner's decision, as there was no evidence of intentional false declaration, only a genuine error rectified in good faith. The appeal was allowed, setting aside the impugned order.