2017 (10) TMI 707 - AT - Service Tax

Voluntary Compliance Encouragement Scheme - rejection of declaration on the ground that in terms of proviso to section 106 (1) of the Finance Act, 2013, where a notice or an order of determination has been issued to a person in respect of any period on any issue, no declaration shall be made of his tax dues on the same issue for any subsequent period - Held that - pendency of liability for the past period cannot act as a bar for seeking the advantage of the exemption scheme - otherwise also, it is not the Revenue s case that the dispute in the present case as also in the earlier pending case, were similar. The present case deals with non-payment of tax on the Construction Service, whereas, the earlier case is in respect of appellant s liability to service tax on the construction undertaken under Works Contract Service. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Rejection of declaration under Voluntary Compliance Encouragement Scheme.
2. Interpretation of proviso to section 106 (1) of the Finance Act, 2013.
3. Relationship between earlier proceedings and current declaration.
4. Applicability of exemption scheme and liability for past periods.

Analysis:
1. The appellant, engaged in Construction of Complex Services, filed a declaration under the Voluntary Compliance Encouragement Scheme disclosing tax dues for a specific period. The original adjudicating authority rejected the declaration citing the proviso to section 106 (1) of the Finance Act, 2013, which prohibits making declarations on the same issue for subsequent periods if a notice or order has been issued earlier. The rejection was upheld by the Commissioner (Appeals), leading to the current appeal.

2. The appellant argued that the issue in the earlier proceedings was a classification dispute related to Works Contract Service, whereas the current declaration under the VCES Scheme pertained to service tax due on amounts received from clients for construction activity not disclosed in tax returns. Citing a Delhi High Court order, the appellant contended that the two events were unrelated, and the benefit under the scheme should be available. The Tribunal found in favor of the appellant, emphasizing the distinction between the issues in the earlier and current cases.

3. The Tribunal referred to the Delhi High Court's observation that the VCES Scheme aimed to provide amnesty to tax defaulters, with conditions to prevent multiplicity of issues. It highlighted the requirement of no pending or determined issue for the same period as a precondition for availing the scheme. The Tribunal concluded that the pendency of liability for a past period should not bar seeking benefits under the exemption scheme, especially when the issues in the current and earlier cases were distinct.

4. It was established that the dispute in the present case, involving non-payment of tax on Construction Service, differed from the earlier case concerning liability for Works Contract Service. The Tribunal noted that the Revenue did not argue similarity between the disputes. Consequently, the impugned orders were set aside, and the appeal was allowed in favor of the appellant, granting consequential relief.

This detailed analysis of the judgment addresses the rejection of the declaration under the VCES Scheme, the interpretation of relevant legal provisions, the connection between earlier proceedings and the current declaration, and the applicability of exemption schemes to liabilities for past periods.