2018 (10) TMI 215 - AT - Service Tax

Voluntary Compliance Encouragement Scheme (VCES) - VCES rejected on the ground that they had failed to make deposit of 50% of Service Tax amount declared by the due date - Works Contract Services - appropriation of the amount for payment of Service tax - penalties. Held that - It is a fact that, while filing the VCES declaration the Appellants have failed to fulfill the requirements prescribed for the said scheme. The declaration was to be filed and appellants were required to deposit the 50% of admitted tax liability by 31.12.2013. However the appellants have failed to comply with the said requirement, as they had filed the challans in respect of their unit in Vishakhapatnam. The submissions made by the appellants to the effect that the payments made by them in against the STC No of Vishakhapatnam unit should be considered as payment made for their Goa unit is devoid of merits - There may be errors committed in day to day functioning but not in case when a person is specifically opting for the beneficial scheme. It is also settled principle in law that every prescribed condition cannot be brushed aside as procedural and act of the person justified as bonafide, just to promote the cause of the appellants. It is also settled principle in law that no one should be allowed to take benefit of his own wrongs. (commodum ex injuria sua non habere debet and nullus commodum capers potest de injuria sua propria.) - In the present case undisputedly appellants had been evading the payment of Service Tax during the period 2011 onwards. VCES scheme was intended to help the persons, who would like to discharge the tax liability and was a onetime measure. Since the appellants were evading the payment of tax willfully during the relevant period they cannot claim benefit of such scheme without showing the compliance in respect of the scheme. Appellants had filed the declaration under the VCES scheme on 31.12.2013, along with the challans dated 29.12.2013 & 30.12.2013. Since the declaration was filed only on the last date for making 50% of the payments under the scheme, they had virtually denied the departments the opportunity of any cross verification. Further even if it is accepted that the error was made while filing the challans in first instance, appellants, should have established their bonafides by filing the challans for remaining amount in correct manner which they failed to do. Appropriation of amount paid by the amount under STC No of the Vishakhapatnam unit for payment of Service Tax liability confirmed by them against the unit in Goa - Held that - The said adjustment has ben allowed by the Commissioner in light of the decisions in case Devang Paper Mils Pvt Ltd 2016 (1) TMI 389 - GUJARAT HIGH COURT . Penalty - Held that - During the relevant period and time appellants have knowingly and willingly suppressed the value of taxable service and the tax due with intention to evade payment of tax. It was only when the investigations were started against the unit by DGCEI in March 2013, that Appellants came forward and made certain deposits towards the tax payment - Appellant were liable to penal action under Section 78 of the Finance Act, 1994, as all the ingredient required to invoke the said section are present in this case - Since appellants have not filed the ST-3 returns during the relevant period Commissioner was also correct in imposing penalty under Section 77 of the Finance Act, 1994 - penalties upheld. Appeal dismissed.

Summary

Issues Involved:
1. Whether the appellant's declaration under the Voluntary Compliance Encouragement Scheme (VCES) was valid.
2. Whether the payments made under the wrong assessee code could be appropriated towards the correct service tax liability.
3. Whether the appellant was liable for penalties under Sections 77 and 78 of the Finance Act, 1994.

Issue-Wise Analysis:

1. Validity of VCES Declaration:

The appellants filed a declaration under the VCES for their Goa unit but erroneously paid the service tax under the Vishakhapatnam unit's assessee code. The department rejected the declaration, stating that the appellants failed to deposit 50% of the service tax amount by the due date under the correct account head. The appellants argued that the payments should be considered towards the Goa unit's liability, citing various judicial precedents. However, the tribunal found that the appellants did not fulfill the requirements of the VCES scheme, emphasizing that specific compliance with the scheme's conditions was mandatory. The tribunal held that the appellants' failure to deposit the amount under the correct account head by the due date invalidated their VCES declaration, and the decisions cited by the appellants did not apply to one-time compliance schemes like VCES.

2. Appropriation of Payments:

In the second appeal, the tribunal considered whether the payments made under the Vishakhapatnam unit's assessee code could be appropriated towards the Goa unit's service tax liability. The Commissioner had allowed the appropriation after verifying that the amounts were indeed meant for the Goa unit. The tribunal upheld this decision, agreeing that the amounts paid could be appropriated towards the correct liability, as the payments were verified to be for the Goa unit's tax obligations.

3. Liability for Penalties:

The tribunal examined the imposition of penalties under Sections 77 and 78 of the Finance Act, 1994. The appellants argued that the penalties were unjustified as there was no mensrea (intent to evade tax). However, the tribunal found that the appellants had knowingly and willingly suppressed the value of taxable services and the tax due, intending to evade payment. The tribunal cited several judicial precedents to support the view that mensrea was not required to impose penalties under these sections. The tribunal concluded that the appellants' actions justified the penalties imposed by the Commissioner, including penalties for not filing ST-3 returns during the relevant period.

Conclusion:

The tribunal dismissed both appeals, affirming the rejection of the VCES declaration and the imposition of penalties. The tribunal emphasized the importance of strict compliance with statutory requirements and the inadmissibility of benefiting from one's own wrongs. The decisions were pronounced in court on 28.09.2018.