2019 (5) TMI 164 - HC - Service Tax

Voluntary Compliance Entitlement Scheme - no inquiry had been initiated against the respondents herein to warrant rejection of the declaration made under the VCES scheme - Section 106(2A) of the Finance Act, 2013 - HELD THAT - Before Section 106(2) of the Finance Act, 2013 can be invoked so as to reject the application under the VCES scheme, it is necessary that the declaration is made by a person against whom an inquiry / investigation for service tax not paid / short paid has been initiated. In this case, admittedly no inquiry / investigation has been initiated against the respondents but a Notice has been issued to M/s. Marvel Realtors, which admittedly is a non-existing entity. Therefore, no proceedings have been initiated against the two respondents herein who had filed declaration under the VCES scheme so as to be hit by Section 106(2) of the Finance Act, 2013. The impugned order of the Tribunal allowing the appeal of the respondents before it, cannot be found fault with as the Authorities had no jurisdiction to reject the declaration filed under the VCES scheme by the two respondents. This is particularly so as no inquiry / investigation had been initiated in respect of them. Whether in the facts and circumstances of the case and in law, was the Tribunal justified in holding that the information sought from M/s. Marvel Realtors was an inquiry of roving nature and, therefore, the declaration ought to have been accepted? - HELD THAT - The Tribunal found that the enquiry being made in respect of the respondents were in nature of roving enquiry, not hit by Section 106(2) of the Finance Act, 2013 - the finding of the Tribunal is one of facts and nothing has been shown to us to indicate that the same is perverse. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Interpretation of Section 106(2A) of the Finance Act, 2013 in relation to the VCES scheme declaration.
2. Consideration of the nature of inquiry and rejection of declaration under the VCES scheme.

Analysis:

Issue 1 - Interpretation of Section 106(2A) of the Finance Act, 2013:
The case involved appeals challenging an order passed by the Tribunal allowing the respondents' appeals under the VCES scheme. The Revenue contended that Section 106(2A) of the Finance Act, 2013 should be applied as no inquiry had been initiated against the respondents. However, the Tribunal found that a notice issued to a non-existing entity, M/s. Marvel Realtors, could not be considered as commencing an inquiry against the respondents. The Tribunal held that for Section 106(2) to be invoked, an inquiry must be initiated against the person making the declaration. As no inquiry was initiated against the respondents, the declarations under the VCES scheme could not be rejected under Section 106(2). The Court agreed with this interpretation, emphasizing that no proceedings had been initiated against the respondents, and thus upheld the Tribunal's decision.

Issue 2 - Consideration of the nature of inquiry and rejection of declaration:
The second issue raised by the Revenue questioned whether the information sought from M/s. Marvel Realtors constituted a roving inquiry justifying the rejection of the VCES scheme declaration. The Tribunal found that the inquiry was not of a roving nature and did not warrant rejection under Section 106(2) of the Finance Act, 2013. The Tribunal's decision was based on a previous case law precedent and was upheld by the Court. The Court noted that the Revenue failed to demonstrate any perversity in the Tribunal's findings, leading to the dismissal of this issue as well.

In conclusion, both issues raised by the Revenue were dismissed, and the appeals were rejected. The Court found no substantial question of law arising from the Tribunal's decision and upheld the Tribunal's order allowing the respondents' appeals under the VCES scheme.