2016 (4) TMI 846 - HC - Service Tax

Imposition of penalty - Services provided as marketing agent - non-payment of Service Tax for the commission payments received - Held that - it is clear that the 2nd respondent has given an opportunity of personal hearing to the petitioner and he was also represented by his counsel before the 2nd respondent. The petitioner also filed his reply before the 2nd respondent, which was also considered by the 2nd respondent. Therefore, from the above, it is clear that there is no violation of principles of natural justice committed by the respondents Therefore, it is clear that the 2nd respondent has given an opportunity of personal hearing to the petitioner and he was also represented by his counsel before the 2nd respondent. The petitioner also filed his reply before the 2nd respondent, which was also considered by the 2nd respondent. Therefore, it is clear that there is no violation of principles of natural justice committed by the respondents. That being the case, the impugned order being an appealable order, the Writ Petition cannot be entertained. Therefore, without exhausting the alternative remedy by way of an appeal, the Writ Petition cannot be entertained. Therefore, it is open to the petitioner to challenge the impugned order before the Commissioner (Appeals) by way of an appeal. - Decided against the petitioner

Issues:
1. Validity of notice issued by the 2nd respondent without recording reasons of the Commissioner of Central Excise.
2. Compliance with the Voluntary Compliance Encouragement Scheme 2013.
3. Principles of natural justice - Personal hearing to the petitioner.
4. Immunity from penalty and interest under Section 108 of the Finance Act, 2013.
5. Correctness of the declaration filed by the petitioner under VCES.
6. Scope of Section 110 in relation to tax dues and interest.
7. Appealability of the order passed by the Deputy Commissioner of Central Excise and Service Tax.

Issue 1: Validity of notice without recording reasons
The petitioner contended that the notice issued by the 2nd respondent without recording reasons of the Commissioner of Central Excise is invalid. The petitioner argued that the 2nd respondent ignored the reply filed, citing a Circular by the Central Board of Excise and Customs. However, the respondents stated that the notice was issued after the petitioner failed to disclose income accurately, leading to a show cause notice under Section 111 of the Finance Act, 2013.

Issue 2: Compliance with VCES 2013
The petitioner sought to pay Service Tax liability under the Voluntary Compliance Encouragement Scheme 2013. The respondents found discrepancies in the petitioner's declaration, leading to a show cause notice. The petitioner's misdeclaration and suppression of income led to the rejection of his VCES application, as he did not disclose the correct tax liability.

Issue 3: Principles of natural justice
The petitioner argued that the 1st respondent did not provide a personal hearing, violating natural justice principles. However, the respondents stated that the petitioner was given multiple opportunities for personal hearings and representation, as evidenced by the dates of interaction between the petitioner and the 2nd respondent.

Issue 4: Immunity under Section 108
The report submitted noted that the petitioner had mis-declared the VCES declaration, potentially impacting his immunity from interest and penalty. The petitioner's failure to declare correct tax liability could result in the loss of immunity under Section 108 of the Finance Act, 2013.

Issue 5: Correctness of declaration under VCES
The discrepancies in the petitioner's declaration, including misdeclaration and suppression of income, led to the rejection of his VCES application. The petitioner's incorrect declaration of tax liability rendered him ineligible for immunity from interest and penalty.

Issue 6: Interpretation of Section 110
The judgment cited interpretations of Section 110, emphasizing the importance of depositing tax dues in two stages under VCES. Failure to deposit taxes as per the scheme's provisions could impact the validity of the declaration. The section pertains to the recovery of declared but unpaid taxes, distinct from the conditions for accepting declarations under VCES.

Issue 7: Appealability of the order
The report highlighted that the order passed by the Deputy Commissioner of Central Excise and Service Tax is appealable under Section 86 of the Finance Act, 1994. The judgment emphasized that all provisions of the Act, except those specifically excluded, apply to proceedings under VCES. The petitioner was advised to pursue an appeal before the Commissioner (Appeals) rather than seeking relief through a Writ Petition.

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