2018 (7) TMI 861 - AT - Service Tax

Validity of SCN - Voluntary Compliance Entitlement Scheme - Section 73 of the Finance Act, 1994 - The ground for challenge is since they have made the declaration under VCES scheme and also a certificate under VCES scheme has been issued to them, the proceedings could have been initiated against them only in terms of Section 111 of the Finance Act, 2013 and not under Section 73 of the Finance Act, 1994. Held that - In terms of Section 111(3), it is a fact that any notice issued under the provisions of this section is deemed notice under Section 73 of the Finance Act, 1994. If that be so, this section does not bar initiation of the proceedings under Section 73 of the Finance Act vis- vis the service tax short paid or not paid. The show cause notice issued under Section 73 cannot be faulted on this account - it may be seen that the investigations in the present case have been started on 8.1.2013 whereas the VCES scheme has come into operation only from 10.5.2013. Thus, when the proceedings have already been initiated before the VCES scheme, the show cause notice for short payment would have been issued only in terms of Section 73 of the Finance Act, 1994. The recovery was to be initiated in terms of Chapter V of the Finance Act, 1994 and adjudged accordingly. From the construct of Section 106 to Section 111 of Finance Act, 2013, it is clear that when a declaration is made under the provisions of VCES, 2013, and where the service tax liability declared under VCES cannot be disputed by the department, either with reference to value or with reference to applicable tax rate, entitlement for abatement etc., and the declaration passes the text laid down under Section 106 & Section 111 of Finance Act, 2013 by being not substantially false; the declaration made need to be accepted and immunity granted. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Challenge against order-in-original by Commissioner of Service Tax-VII, Mumbai.
2. Validity of proceedings initiated under Section 73 of the Finance Act, 1994 despite declaration under VCES scheme.
3. Interpretation of Section 111 of the Finance Act, 2013 in relation to the notice issued under Section 73.

Analysis:

1. The appellant challenged the order-in-original by the Commissioner of Service Tax-VII, Mumbai, confirming a Service Tax demand of ?81,64,644 under Section 73(2) of the Finance Act, 1994. The appellant had paid a sum before the investigation, made delayed payments, and also declared tax dues under the VCES scheme.

2. The appellant contested the proceedings initiated under Section 73, arguing that since they had made a declaration under the VCES scheme and received a certificate, proceedings should have been under Section 111 of the Finance Act, 2013. The appellant relied on the self-contained mechanism of VCES to discharge tax liabilities without penal action.

3. The interpretation of Section 111 of the Finance Act, 2013 was crucial in determining the validity of the notice issued under Section 73. The Revenue argued that Section 111 did not bar proceedings under Section 73 and that a notice under Section 111 would be deemed as issued under Section 73. The appellant contended that since no notice was issued under Section 111, proceedings under Section 73 were not valid.

4. The Tribunal noted that the VCES scheme came into effect after the investigations had started, justifying the initiation of proceedings under Section 73. The CBEC's FAQs on VCES clarified that immunity from interest and penalty applied only to tax dues declared under VCES, not amounts paid before the scheme.

5. Referring to Sections 106 to 111 of the Finance Act, 2013, the Tribunal emphasized that if the department intended to raise additional demands post VCES declaration, they could issue notices under Section 73. The Tribunal cited a judgment of the Madras High Court supporting this interpretation.

6. Ultimately, the Tribunal rejected the appellant's arguments, stating that there was no merit in challenging the proceedings under Section 73 despite the VCES declaration. The appeal was dismissed as the appellant did not press any other grounds during the hearing.

This detailed analysis covers the issues raised in the legal judgment comprehensively, highlighting the key arguments and interpretations made by both parties and the Tribunal's final decision.