2014 (7) TMI 585 - HC - Service Tax

Validity of recovery proceedings - Non payment of 50% of the tax by December 31, 2013 as per the VCES scheme - Interpretation of Section 107 and Section 110 of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 - petitioners raised a point that when the proviso appended to Section 107 entitles the declarant to pay the amount after the period provided under Sub-section (3) and Subsection (4) with interest till December 31, 2014, the authorities cannot take any recourse for recovery thereof including the steps for arrest of the declarant. - It is tried to be contended by the respondent that Section 102 which contemplates for removal of doubts makes it abundantly clear that the immunity provided under the scheme would not be available to the declarant who committed default for compliance of the conditions relating to the deposit of tax dues. Held that - On meaningful reading of the provisions contained therein it appears that the immunity as to any benefit, concession or immunity granted under Section 96 shall not be available to the defaulting declarant. The aforesaid provisions have to be read conjointly with section 110 of the said Act. If default is committed under the scheme the consequences provided in the scheme is to be adhered to and the authority cannot travel beyond the boundaries set therein. The benefit under the scheme is provided to a person against whom no enquiry or investigation or other proceeding are initiated. Section 106 of the said Act makes the position clear and, therefore, the person who voluntarily declare his liability to pay service tax, if commits defaults in complying the provisions contained under the said scheme, the authorities are bound to take action under the provisions which provides for the steps to be taken for non-compliance of any of the provisions of the said scheme. Proviso of section 107(4) for recovery alongwith interest is applicable only in respect of Sub-section (4) of Section 107 and cannot be stretched to Sub-section (3) of Section 107. The authorities can take recourse under Section 110 of the said Act, in the event any default is committed under the said scheme. - Decided against assessee.

Summary

Issues:
Interpretation of Section 107 and Section 110 of the Service Tax Voluntary Compliance Encouragement Scheme, 2013.

Analysis:

Issue 1: Interpretation of Section 107 -
The scheme provides for immunity against penalties, interest, and proceedings for service tax defaulters who make a declaration before the designated authority within a specified period. The declaration must be acknowledged, and 50% of the tax dues must be paid by a certain date. The scheme allows for an extension to pay the balance amount with interest. The definition of 'Tax Dues' includes service tax dues from a specific period. The petitioner argued that authorities cannot take action beyond what is specified under Section 110 and that they are ready to pay the balance amount with interest.

Issue 2: Interpretation of Provisions -
The petitioner contended that the proviso under Section 107 should apply to both Sub-section (3) and Sub-section (4) and not just Sub-section (4). The court clarified that the proviso is related to Sub-section (4) and not Sub-section (3). The proviso indicates the starting point for interest calculation, making it clear that it applies to Sub-section (4) only. The court emphasized that the proviso regulates the enabling provision and conditions therein must be followed.

Issue 3: Application of Section 110 -
The respondent argued that if the conditions of the scheme are not fulfilled, the benefit cannot be extended. However, the court held that once a declaration is made under the scheme, the person is subject to all provisions. Section 110 applies in case of default in payment under Section 107. The court found no provision excluding defaulting declarants from the scheme and stated that consequences of default must be adhered to.

Conclusion:
The court concluded that the proviso applies only to Sub-section (4) of Section 107 and not Sub-section (3). Authorities can take action under Section 110 in case of default under the scheme. The court disposed of the writ-petition with no costs awarded.