2014 (5) TMI 219 - HC - Service Tax

Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) - assessee has paid the tax dues amount prior to enactment of Voluntary Compliance Encouragement Scheme i.e. before 10.05.2013. - assessee contended that amount of ₹ 31.51 lakhs was deposited after 8.3.2013 i.e. after the cut-off date on 1.3.2013. Such amount, therefore, would also qualify under the Scheme of 2013. Held that - Combined reading of section 106 with section 105(1)(e) would make it clear that the position of a declarant vis-a-vis his service tax dues would have to be ascertained as on 1.3.2013. If any proceedings for determination of the tax dues of a person have been initiated before 1.3.2013, declaration of such a person would not be accepted. Likewise, arrear of tax which could be declared in such declaration would be the service tax due or payable for the period between 1.10.2007 to 31.12.2012 and which sum is not paid before 1.3.2013. In plain terms, therefore, if any service tax is due and payable by a person for the aforesaid period, the same would be included in the definition of the expression tax dues if the same has not been paid as on 1.3.2013. If the intention of the legislature was to exclude any tax deposited before the framing of the scheme, the same could have been provided in plain language. On the contrary, the legislature excluded from the purview of declaration only those taxes which were already paid by 1.3.2013. The period between 1.3.2013 and 10.5.2013 would, by necessary application of the provision of the scheme, be covered for declaration under the Scheme itself. In our understanding, for a valid declaration two of the essential conditions were that the proceedings for either declaration or recovery of the tax dues should not be pending on 1.3.2013 and secondly that the tax should not have been deposited before the said date. In the present case, both the conditions were fulfilled. Validity of CBEC circular dated 8.8.2013 - Held that - It is well settled in law that an authority cannot, through a circular or clarification, override the provisions of the statute. In the present case, till the Scheme was framed the amount thus remained with the department by way of a deposit. Once the scheme was framed, the petitioners made a declaration and even included such sum of ₹ 35.51 lakhs by way of a declaration of their tax dues. Thus the admission on the part of the petitioners that the service tax was short-paid, came only by way of declaration under the Scheme. The clarification thus even for this reason would not cover the situation on hand. The said authority shall, therefore, issue a fresh acknowledgment or amend the acknowledgment forwarded to the petitioners under communication dated 31.12.2013 so as to include the said additional sum of ₹ 31.51 lakhs as tax dues declared in addition to ₹ 10,24,656/- for which such acknowledgment has already been issued. Petition is allowed. - Decided in favor of assessee.

Summary

Issues Involved:
1. Challenge to the order dated 31.12.2013 by the Deputy Commissioner of Service Tax, Rajkot.
2. Request for a fresh acknowledgment of the petitioners' tax liability.
3. Validity of the clarification to point No.8 in the circular dated 8.8.2013 issued by CBEC.
4. Interpretation of the term "tax dues" under section 105(1)(e) of the Finance Act, 2013.
5. Eligibility of tax amounts paid before the enactment of the Service Tax Voluntary Compliance Encouragement Scheme (VCES) under the scheme.

Detailed Analysis:

1. Challenge to the Order Dated 31.12.2013:
The petitioners contested the order passed by the Deputy Commissioner of Service Tax, arguing that the acknowledgment of their tax dues declaration was incomplete. They claimed that the designated authority only acknowledged Rs.10,24,656/- out of the total declared tax dues of Rs.45,76,476/-. The petitioners argued that the amount of Rs.35.51 lakhs deposited with the department between 9.3.2013 and 15.4.2013 should also be acknowledged under the Scheme.

2. Request for Fresh Acknowledgment:
The petitioners sought a fresh acknowledgment reflecting the full tax liability of Rs.45,76,476/- as declared on 30.12.2013. They contended that the designated authority's bifurcation of the tax dues into amounts deposited before and after 10.5.2013 was incorrect and contrary to the provisions of the Scheme.

3. Validity of the Clarification in Circular Dated 8.8.2013:
The petitioners questioned the validity of the CBEC's clarification, which stated that any tax dues paid before the enactment of the Scheme would not be covered under the Scheme. They argued that this clarification could not override the statutory provisions of the Finance Act, 2013.

4. Interpretation of "Tax Dues" under Section 105(1)(e):
The court examined the definition of "tax dues" under section 105(1)(e) of the Finance Act, 2013, which includes service tax payable for the period from 1.10.2007 to 31.12.2012 but not paid as on 1.3.2013. The court held that the definition clearly covers tax dues unpaid as of 1.3.2013, and any subsequent payment before the Scheme's enactment (10.5.2013) should not exclude such dues from the Scheme.

5. Eligibility of Tax Amounts Paid Before the Scheme's Enactment:
The court found that the Scheme intended to include tax dues unpaid as of 1.3.2013, regardless of whether they were paid before the Scheme's enactment. The court emphasized that the statutory provisions should prevail over the CBEC's circular, which could not restrict the scope of the Scheme contrary to the legislature's intent.

Conclusion:
The court quashed the impugned communication dated 31.12.2013 to the extent that it failed to acknowledge the additional sum of Rs.35.51 lakhs as part of the tax dues. The designated authority was directed to issue a fresh acknowledgment or amend the existing one to include the said amount, in addition to the already acknowledged Rs.10,24,656/-. The petition was allowed, and the rule was made absolute to the specified extent.