2015 (12) TMI 1451 - HC - Service Tax

Benefit of VCES - whether the petitioner, who is an assessee for the service tax payable for the years 2010- 11, 2011-12 and 2013-13, is entitled to file the declaration on 21.6.2013 before the fourth respondent seeking to declare that the petitioner is entitled to get the benefit of VCES in the light of Section 106(2) of the Finance Act, 2013 - Held that - If a declaration is made by a person against whom an inquiry or investigation in respect of a service tax not levied or not paid or short-levied or short-paid has been initiated by way of search of premises or an audit has been initiated, during the pendency of such an inquiry as on the first day of March, 2013, the designated authority shall by an order reject such declaration with the reasons to be recorded therein. In the present case, admittedly the premises of the petitioner came to be visited by the internal audit section of the respondents and an audit was conducted on 25.2.2013 and 28.2.2013. During the course of audit, the audit party noticed that the assessee was also providing renting of immovable property service, but had not taken registration for this service nor had included this service in the service tax registration certificate and also not paid the service tax for the renting of immovable property service. Hence the matter was under consideration of audit as on 1.3.2013, which is not yet being over. Therefore, as per Section 106(2) of the Finance Act, the petitioner is not entitled to get the benefit of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES), hence the fourth respondent, rightly in this case, has rejected the application dated 21.6.2013 holding that the petitioner is not entitled to get the benefit of the VCES. Court is not inclined to interfere with the impugned order of rejection of the declaration filed by the petitioner. Accordingly, the writ petition fails - Decided against assessee.

Summary

Issues:
1. Rejection of declaration under Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) by the Assistant Commissioner.
2. Appeal process before Commissioner of Central Excise (Appeals) and Customs, Excise and Service Tax Appellate Tribunal (CESTAT).
3. Entitlement to file declaration for service tax under VCES in light of Section 106(2) of the Finance Act, 2013.

Issue 1: Rejection of VCES Declaration
The petitioner, a hotel business, filed a writ petition challenging the rejection of their declaration under VCES by the Assistant Commissioner. The petitioner argued that they were regular in paying taxes, but failed to pay service tax for renting of immovable property service. The rejection was based on an ongoing audit as of 1.3.2013. The petitioner contended that the rejection was against a circular clarifying VCES eligibility. The respondents argued that the audit identified the unpaid service tax, making the petitioner ineligible for VCES. The court held that as per Section 106(2) of the Finance Act, if an audit was initiated and pending as of 1.3.2013, the declaration should be rejected. Since the audit identified the unpaid tax, the rejection was upheld.

Issue 2: Appeal Process
The petitioner appealed to the Commissioner of Central Excise (Appeals) and later to CESTAT. However, due to the writ petition, the CESTAT appeal was withdrawn. The petitioner argued that the legal issues raised were pending consideration, yet a show cause notice was issued demanding payment. The court noted the procedural history but emphasized that the rejection under VCES was valid due to the ongoing audit, dismissing the writ petition and the related motion.

Issue 3: Entitlement to File Declaration under VCES
The key question was whether the petitioner, liable for service tax for specific years, could file a VCES declaration. Section 106(2) of the Finance Act, 2013 was cited, stating that if an audit was ongoing as of 1.3.2013, the declaration should be rejected. The court found that the audit identified the unpaid service tax, making the petitioner ineligible for VCES benefits. The rejection was deemed valid, and the writ petition was dismissed, along with the related motion.