2015 (6) TMI 787 - HC - Service Tax

Rejection of declaration under VCES 2013 - Statutory provision of Appeal under VCES - Adjudicating authority vs Designated authority - Held that - In similar circumstances, the Punjab and Haryana High Court, in its decision in M/s.Barnala Builders s case 2013 (12) TMI 568 - PUNJAB AND HARYANA HIGH COURT , has categorically held that the order passed under VCES is appealable. We are unable to accept correctness of instructions issued by the Central Board of Excise and Customs, for the simple reason that after incorporation of the Service Tax Voluntary Compliance Encouragement Scheme into the Finance Act, all other provisions of the Act except to the extent specifically excluded, apply to proceedings under the scheme. The impugned order passed by the Deputy Commissioner of Central Excise and Service Tax would necessarily be appealable under Section 86 of the Indian Finance Act, 1994. Adjudicating authority vs Designated authority - It is pertinent to note that though the second respondent has been described as a designated authority, however, a perusal of the order, dated 15.11.2013 passed by him clearly shows that he has dealt with the issue on merits regarding the eligibility of the assessee/petitioner to avail the VCES scheme and passed a detailed order, dated 15.11.2013 holding that since the petitioner had been issued with show cause notice dated 8.2.2012 demanding service tax of ₹ 21,44,299/- for the period from 1.4.2007 to 31.3.2011, which was confirmed vide original order, dated 28.3.2013 and as such in terms of Section 106(2) of the Act, 1994 and in view of Circular Nos.169 and 170, dated 13.5.2013 and 8.8.2013, the petitioner is not entitled to avail the said scheme. Therefore, when the authority, the second respondent herein has given such a categorical finding on going through the facts and circumstances of the case by applying his mind, his decision, in my considered opinion, would fall within the meaning of adjudication which is meant by settled law that giving or pronouncing a decision or order judicially and thereby, I have no hesitation to hold that the second respondent has acted as an adjudicating authority and not as a designated authority. The remedy of appeal is a creation of a statute. In fact, making a provision of appeal is the statute is to give a hope of success to the aggrieved party who has been affected by the adverse order of the decision maker, who, while passing such order, might have misapplied the law, came to an incorrect factual finding, acted in excess of his jurisdiction, abused his powers, was biased, considered evidence which he should not have considered, or failed to consider evidence that he should have considered. To err is human and hence it cannot be expected that all the decision makers would be perfect in their approach in arriving at just conclusions. If any statute or scheme does not make the appeal provision, it would be nothing to mean that the order passed by the authority has become final and conclusive for all the purposes and thereby, giving uncontrolled and unquestionable powers to the said authority by virtue of which, he becomes as monopoly over the statute and will certainly act in an arrogant manner. Commissioner of Central Excise (Appeals) directed to take up the appeal preferred by the petitioner and dispose of the same in accordance with law - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the petitioner is liable to pay service tax on the lease amount.
2. Whether the petitioner can avail the benefits of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES).
3. Whether an appeal under Section 85 of the Finance Act, 1994 lies against the order of rejection of the declaration under Section 106(2) of the Act by the designated authority.

Detailed Analysis:

1. Liability to Pay Service Tax on Lease Amount:

The petitioner, a Pvt. Ltd. company engaged in the manufacture of Cotton Yarn, entered into a lease agreement with another company, granting the lease of its premises for a monthly rent of Rs. 5,00,000/-. The 2nd respondent issued a show cause notice alleging violation of Sections 68, 69, and 70 of the Finance Act, 1994, demanding service tax, interest, and penalties. The petitioner responded by expressing willingness to pay the service tax but requested a waiver of interest and penalties and to pay the tax in installments. The Additional Commissioner of Central Excise passed an order demanding service tax of Rs. 21,44,299/- along with interest and various penalties.

2. Availing Benefits of VCES:

The petitioner appealed against the order, and the 1st respondent modified the order by allowing a deduction of the tax. Meanwhile, the petitioner sought to avail the benefits of the VCES, 2013, by submitting a declaration. However, the 2nd respondent rejected the declaration under Section 106(1) of the Act, citing that a show cause notice and order had already been passed under Section 73(2). The petitioner's appeal against this rejection was returned by the 1st respondent, stating that the VCES does not provide a statutory provision for filing an appeal against the rejection of a declaration.

3. Appeal Under Section 85 of the Finance Act, 1994:

The core issue is whether an appeal under Section 85 of the Finance Act, 1994, lies against the order of rejection of the declaration under Section 106(2) by the designated authority. The respondents argued that the VCES does not have a statutory provision for such an appeal and that the appeal under Section 85 would lie only against orders passed by an adjudicating authority, whereas the 2nd respondent acted as a designated authority.

The court referred to a similar case decided by the Punjab and Haryana High Court, which held that the order passed under VCES is appealable under Section 86 of the Finance Act, 1994, as the scheme is part and parcel of the Finance Act, 1994. The court endorsed this view and added that the 2nd respondent, while described as a designated authority, acted as an adjudicating authority by dealing with the issue on merits and passing a detailed order. Thus, the order of rejection is appealable under Section 85 of the Act, 1994.

Conclusion:

The court concluded that the order dated 15.11.2013 passed by the Assistant Commissioner of Central Excise is appealable under Section 85 of the Act, 1994. The impugned order dated 11.02.2014 by the 1st respondent was set aside, and the 1st respondent was directed to take up the appeal and dispose of it in accordance with the law after affording an opportunity to the petitioner.