2018 (11) TMI 1396 - HC - Service Tax

Voluntary Compliance Entitlement Scheme - correction sought in the erroneous declaration made in VCES-1 form to reduce the tax liability - eligibility of benefits u/s 108 of the Finance Act, 2013 - penalty - Held that - The Assistant Commissioner does not dispute the Petitioner s assertions that not the tax of ₹ 4,73,527/, but sum of ₹ 3,40,686/was outstanding. The declaration included a payment of ₹ 1,32,841/previously made. If that was the case, the Assistant Commissioner ought to have considered the correct figure of tax dues. He could not have enforced the Petitioner s declaration which was factually erroneous. Even if the declaration required an amendment, the Petitioner had under his letter dated 27th December, 2013 brought the correct facts to the notice of the Departmental Authorities. Such letter could have been treated as a request for amending the declaration. Nothing is brought to our notice to suggest that such amendment application had to be filed in a particular format. Even if so, the same would be a purely procedural aspect. The authority shall therefore grant the benefit of the Voluntary Compliance Encouragement Scheme to the Petitioner - Petition allowed.

Summary

Issues:
Challenge to rejection of application under Voluntary Compliance Encouragement Scheme.

Analysis:
The petitioner challenged the rejection of their application under the Voluntary Compliance Encouragement Scheme by the Assistant Commissioner of service tax. The scheme was introduced by the Government of India for settling service tax disputes, providing for penalties and interest waiver upon fulfillment of conditions. The petitioner made a declaration of unpaid tax but later realized an error in the declared amount, which included a sum already paid. The petitioner then communicated the correct tax liability to the department and deposited installments accordingly.

The Assistant Commissioner rejected the petitioner's application, citing the original declaration amount as the basis for installment payment requirement. However, the Assistant Commissioner did not contest the petitioner's claim that the actual outstanding tax was lower due to the previously paid sum. The High Court found that the Assistant Commissioner should have considered the correct tax dues and allowed for an amendment to the declaration based on the petitioner's communication of the error.

The High Court noted that upholding the Assistant Commissioner's order would result in injustice as it would allow for the recovery of the entire declared sum, including the amount already paid by the petitioner. Emphasizing that tax recovery must be lawful, the High Court set aside the order and directed the authority to grant the petitioner the benefit of the Voluntary Compliance Encouragement Scheme. The judgment highlighted the importance of correcting factual errors in declarations and ensuring fairness in tax assessments.