2014 (4) TMI 133 - HC - Service Tax

Failure to deposit service tax - one time amnesty or relief scheme - Rejection of Exemption notification dated 10.09.2004 - Notification No.3/2010 - petitioner deposited 50% of the amount due before the time stipulated - Held that - Scheme was introduced to give benefit of one time amnesty or relief to service tax defaulters or those who had not paid their dues fully. In its terms, the assessment as to the liability has to be made and if the declaration or application is found to be in order and compliant with the provisions, the authority would accept the application and grant immunity from prosecution and also exempt interest and penalty liability. Keeping in mind the spirit of the Scheme, certain safeguards and conditions have been indicated. The first and perhaps foremost one is that the applicant should deposit 50% of the admitted liability with the declaration itself on or before 31.12.2013 and the balance should be paid latest by 31.12.2014. The second is in respect of the subject matter that there should be no issue pending or determined before any of the tax authorities or Tribunals for adjudication. The object of this is to avoid multiplicity and reopening of settled matters. Therefore, the view of the designated authority that the pendency of the issue or question of the petitioner s liability for a past period when it sought to avail the advantage of the exemption notification bars the remedy under Section 106 is clearly in error - Decided in favour of assessee.

Summary

Issues involved:
1. Interpretation of the Service Tax Voluntary Compliance Encouragement Scheme, 2013.
2. Rejection of the petitioner's application under the Scheme due to a pending dispute before the Tribunal regarding a previous period.
3. Examination of the second proviso of Section 106 of the Scheme and its applicability.
4. Determination of whether the pendency of a dispute concerning a previous period can bar the petitioner from availing the benefits of the Scheme for a different period.

Detailed Analysis:
1. The petitioner conducted vocational training and sought to avail the benefit of a service tax exemption notification. However, due to changes in regulations, it faced a service tax liability for a specific period. The Service Tax Voluntary Compliance Encouragement Scheme, 2013, was introduced to provide relief to defaulters. The petitioner applied under the Scheme but faced rejection based on a dispute pending before the Tribunal regarding a previous period's liability.

2. The petitioner argued that the dispute concerning the previous period should not impact its application under the Scheme for a different period. The respondents contended that any issue pending before tax authorities or Tribunals precludes availing the Scheme benefits. The critical aspect was the interpretation of the second proviso of Section 106, which restricts declarations on issues already under inquiry or investigation.

3. The Court examined the provisions of the Scheme, emphasizing the need for a strict interpretation to prevent reopening of settled matters. It highlighted that the second proviso of Section 106 should apply only if the issue or liability for a specific period is pending or determined. In this case, as the dispute concerned a different period, the rejection based on the previous period's dispute was deemed erroneous.

4. Consequently, the Court set aside the impugned order, directing the respondents to process the petitioner's application as per the law. The judgment clarified that the pendency of a dispute for a past period should not hinder the petitioner from seeking relief under the Scheme for a distinct period. The decision in W.P.(C) 2028/2014 favored the petitioner, ensuring a fair assessment of its service tax liability under the Scheme.