2017 (8) TMI 711 - HC - Service Tax

Voluntary Compliance Entitlement Scheme - while appellant had explained the alleged violation of Rule 6(3B) of the CENVAT Credit Rules, 2004, they had sought more time to reconcile the inconsistency between the declaration and ST-3 returns - Held that - when a mistake in the returns filed by the appellant is pointed out and on that basis, the application made by the appellant was proposed to be rejected, the respondent ought to have considered the request of the appellant for more time for reconciliation and on that basis, should have afforded the appellant an opportunity to explain the inconsistency so pointed out. Having not done so, the matter needs to be re-considered by the respondent - appeal allowed by way of remand.

Summary

Issues involved:
Challenge to rejection of application under Service Tax Voluntary Compliance Encouragement Scheme, 2013.

Analysis:
The appellant, a Co-operative Society, challenged the rejection of their application under the Service Tax Voluntary Compliance Encouragement Scheme, 2013. The appellant filed W.P.(C) No.15464 of 2015 against the order rejecting their application, seeking the benefit of the scheme. The appellant's contention was that they were not given an opportunity to explain the alleged inconsistency in their returns, leading to the rejection of their application. The High Court noted that the respondent should have considered the appellant's request for more time to reconcile the discrepancy in the returns before rejecting the application. The Court held that the matter needed to be reconsidered by the respondent, and thus set aside the order rejecting the application.

The appellant, under the CENVAT Credit Rules, 2004, was required to pay an amount equal to 50% of the CENVAT credit availed on inputs and input services every month. The appellant had filed ST-3 returns from April 2011 to March 2013, which prima facie indicated a lack of true declaration of liability under the rules. Subsequently, the Service Tax Voluntary Compliance Encouragement Scheme, 2013 was introduced, and the appellant applied for its benefit. However, the respondent issued a show cause notice pointing out discrepancies in the appellant's declarations and returns. The appellant responded, explaining that their liability under the rules was not disclosed in the returns under the Finance Act, 1994, and requested time for reconciliation. Despite this, the respondent rejected the application without allowing further reconciliation.

The Court emphasized the importance of affording the appellant an opportunity to explain the inconsistencies between their declarations and returns before rejecting their application under the scheme. The respondent was directed to allow the appellant to appear and clarify the figures in the returns and declarations. The Court set aside the order rejecting the application and instructed the respondent to pass a fresh order after considering the appellant's explanations. The judgment under appeal was also set aside, and the appellant was directed to inform the respondent about the Court's decision for compliance.