2018 (4) TMI 1467 - AT - Service Tax

Voluntary Compliance Encouragement Scheme (VCES) - utilization of credit for payment of tax under the scheme - Held that - as per scheme there is no bar for utilization of credit upto 31.12.2012 however the liability due i.e. not paid upto 31.12.2012 is required to pay in cash. Thus only tax due upto 31.12.2012 and not paid up to 01.03.2013 cannot be paid by utilizing cenvat credit. There is no restriction either under the scheme or anywhere else to compute tax dues after considering all payment either out of challan or out available credit. As such the appellants were entitled for making declaration under VCES and the balance unpaid service tax of 1, 75, 87, 371/- the period from July 2011 to December 2012 was the amount of tax dues as per Section 105(1)(e) of Service Tax Voluntary Compliance Encouragement Scheme 2013. As provided under Rule 6(2) of the Service Tax Voluntary Compliance Encouragement Rules 2013 and clarified by CBEC Circular No. 170/5/2013-ST dated 08.08.2013 such unpaid service tax of 1, 75, 87, 371/- was required to be paid in cash and could not be paid by utilizing Cenvat. Since the appellants have deposited the 50% of service tax before 31.12.2013 and rest amount of service tax on 28.03.2014 therefore the compliance has been made by the appellants as per scheme. The respondent is entitled for the benefit of Service Tax Voluntary Compliance Encouragement Scheme 2013 for discharge of the unpaid Service Tax as per the Scheme and there is no violation of the scheme and rules framed there under - appeal dismissed - decided against Revenue.

Summary

Issues:
Department's appeal against Order-in-Appeal No. 160/2015 dated 25/05/2015 regarding Service Tax Voluntary Compliance Encouragement Scheme, 2013.

Analysis:
The Department filed an appeal against an Order-in-Appeal, challenging the acceptance of unpaid Service Tax under the Service Tax Voluntary Compliance Encouragement Scheme, 2013. The appellant, engaged in clearing and forwarding services, initially adjusted Cenvat Credit towards the Service Tax payment. However, upon the introduction of the Scheme, the outstanding tax was paid by the appellant, which was accepted by the Commissioner. The key issue revolved around the eligibility of utilizing Cenvat Credit for payment under the Scheme. The Commissioner (Appeal) clarified that tax dues as of 31.12.2012, if not paid by 01.03.2013, were required to be paid in cash only, without utilizing any credit. The appellant, a regular assessee, had not paid Service Tax during the relevant period but had adjusted Cenvat Credit against the liability. The Commissioner emphasized that only the actual tax liability, minus the available Cenvat Credit, was payable in cash. The Circular No. 170/5/2013-ST clarified that there was no specific bar on taking credit against the tax paid under the Scheme. The appellant was found entitled to declare unpaid Service Tax under the Scheme, with a portion to be paid by a specified date. The Tribunal concurred with the Commissioner's interpretation, holding that the appellant was eligible for the Scheme without violating its provisions.

The Tribunal, after hearing both parties and examining the records, upheld the Commissioner's decision, stating that the respondent was entitled to the benefits of the Service Tax Voluntary Compliance Encouragement Scheme, 2013. It was concluded that there was no reason to interfere with the Order-in-Appeal, and the appeal filed by the Department was dismissed. The Tribunal affirmed the Commissioner's order, thereby sustaining the decision that the respondent had complied with the Scheme's requirements. The judgment highlighted the importance of adhering to the specific provisions and rules of the Scheme while determining the eligibility and payment modalities, ensuring that the tax liabilities were settled in accordance with the Scheme's guidelines.