2017 (5) TMI 962 - AT - Service Tax

Penalty u/s 78 - VCES scheme - false delaration made by assessee - differential tax with interest was paid by assessee on being pointed out by Revenue regarding false declaration - Held that - Since there is a false declaration, the appellants cannot be absolved from the penalty as malafide intention is clearly proved - penalty upheld. There is no dispute on the fact that appellants while availing VCES gave a false declaration as they have not declared the correct dues. Therefore, their case cannot be settled under the VCES. Appeal dismissed - decided against assessee.

Summary

Issues:
1. False declaration under VCES scheme leading to tax dues discrepancy and penalty imposition.

Analysis:
The appeal was filed by the appellants who had initially declared total tax dues of ?9,47,803 under the VCES scheme. However, a subsequent investigation revealed that the actual tax dues amounted to ?13,55,3,70 based on income tax returns and balance sheet. This led to a show-cause notice being issued on the grounds of false declaration. The appellants paid the entire tax liability but not within the stipulated time frame, resulting in a demand of ?12,61,989 being confirmed by the adjudicating authority, along with an equal penalty under Section 78 and interest on the confirmed service tax amount. The appellants, dissatisfied with the Order-in-Original, filed an appeal.

The appellant's counsel argued that since the entire tax amount had been paid along with interest, the penalty under Section 78 should be waived. It was contended that the delay in paying the balance amount should not be considered substantially false, as more than 50% of the tax dues determined by the department had been paid by a certain date, and the remaining amount was paid before the deadline with interest. The counsel emphasized that apart from a minor mistake in declaring the total tax dues, all payments were made within the prescribed time limit, warranting no penalty imposition.

On the other hand, the revenue's representative reiterated the findings of the impugned order, stating that the false declaration, not due to clerical error, rendered the appellants ineligible for VCES benefits and relief from penalty. The authority contended that the false declaration established malafide intention, justifying the penalty imposition.

After considering both sides' submissions, the Member (Judicial) noted the undisputed fact of the appellants providing a false declaration while availing VCES. Consequently, the case could not be settled under VCES, and a show-cause notice for the entire amount was rightfully issued due to the false declaration. Given the clear proof of malafide intention, the appellants were not absolved from the penalty, leading to the upholding of the impugned order and the dismissal of the appeal.