2022 (12) TMI 50 - AT - Service Tax

Interpretation of the expression true liability in the first proviso to section 106 of the Finance Act, 1994 the Finance Act relating to Service Tax Voluntary Compliance Encouragement of the Finance Act Scheme 2013 - period April, 2012 to September, 2012 - HELD THAT - It is under sub-section (1) of section 106 of the Finance Act that any person can declare his tax dues in respect of which no notice or an order of determination under section 73A has been issued or made before the first day of March, 2013. However, the first proviso provides that any person who has furnished return under section 70 and disclosed his true liability, but has not paid the disclosed amount of service tax or any part thereof shall not be eligible to make a declaration for the period covered by the said return. Thus, it is only in a case where a person has disclosed his true liability but has not paid the disclosed amount of service tax or any part thereof that a person would not be eligible to make a declaration for the period covered by the return. A person who claims that he has not disclosed his true liability in the return and has not paid the amount can, therefore, file a declaration under section 107(1) of the Finance Act. Some emphasis has to be placed to the word true occurring before liability in the first proviso to section 106 of the Finance Act - In the present case, as noticed above, the appellant claimed that it had not disclosed the true liability in the service tax return earlier filed for the period April, 2012 to September, 2012 and it is for this reason that the true liability was disclosed in the declaration filed by the appellant under section 107(1) of the Finance Act. The conclusion drawn by the Commissioner in the impugned order that since the amount of Rs. 64,67,773/- disclosed in the return was included in the amount of Rs. 66,98,098/- declared by the appellant, the appellant would not be justified in including this amount of Rs. 64,67,773/- in the declaration is apparently not in accordance with the provisions of section 106 of the Finance Act. If a true liability is disclosed subsequently by a person it is obvious that the amount earlier declared in the return would be included and it would not disentitle a person from including this amount in the declaration filed under section 106(1) of the Finance Act. There cannot be two amount towards tax dues. The appellant is clearly entitled to claim the entire amount of Rs. 01,051,31,384/- in the declaration filed under section 107(1) of the Finance Act and the view of the Commissioner to the contrary cannot be accepted - Appeal allowed.

Summary

Issues Involved:
1. Interpretation of the expression "true liability" in the first proviso to section 106 of the Finance Act, 1994.
2. Eligibility to make a declaration under the Service Tax Voluntary Compliance Encouragement Scheme 2013 (VCES) when true liability was not disclosed in the initial service tax return.

Issue-wise Detailed Analysis:

1. Interpretation of "true liability":
The core issue revolves around the interpretation of the term "true liability" as used in the first proviso to section 106 of the Finance Act, 1994. The appellant argued that the service tax dues initially declared in the return for April 2012 to September 2012 did not reflect the true liability, which was later corrected in the declaration filed under section 107. The department, however, contended that once a return disclosing a liability is filed, the appellant cannot subsequently increase this liability under the VCES.

2. Eligibility to make a declaration under VCES:
The appellant filed a declaration under section 107 of the Finance Act, enhancing the liability for the period from Rs. 64,67,443/- to Rs. 66,98,098/-. The department rejected this declaration for the period April 2012 to September 2012, asserting that the appellant had already disclosed the liability in the initial return, thus making them ineligible under section 106.

The tribunal examined the relevant provisions of the Finance Act, including sections 105, 106, and 107, and the Circular dated February 28, 2013, which outlined the features of the 2013 Scheme. It was noted that the scheme was intended to encourage voluntary compliance by allowing non-filers or those who had not made a truthful declaration in their returns to declare their true liabilities.

The tribunal emphasized the importance of the term "true" before "liability" in the first proviso to section 106. It was concluded that the legislature's use of "true liability" was deliberate, allowing individuals who had not disclosed their true liability in earlier returns to file a declaration under section 107.

The tribunal found that the appellant had not disclosed the true liability in the initial return and had corrected this in the subsequent declaration. Therefore, the appellant was eligible to include the entire amount, including the previously declared amount, in the declaration under section 107.

Conclusion:
The tribunal held that the appellant was entitled to claim the entire amount of Rs. 1,05,31,384/- in the declaration filed under section 107(1) of the Finance Act. The rejection of the declaration by the Commissioner was not in accordance with the provisions of section 106. Consequently, the tribunal set aside the Commissioner's order and allowed the appeal. The order was pronounced in the open court.