2022 (3) TMI 634 - AT - Service Tax

Rejection of application filed under Voluntary Compliance Encouragement Scheme, 2013 - rejection on the ground that the appellant has not paid 50% of the declared tax dues on or before the last date i.e. 31.12.2013 - whether the appellant can be considered to have paid 50% of the declared tax dues when part of the amount has been presented by cheque on the last date of the scheme? - HELD THAT - Rule 6 of the Scheme which has been noticed above states that the amount has to be paid in the manner prescribed for payment of service tax under Service Tax Rules, 1994. Rule 6(2A) of Service Tax Rules, 1994 provides for payment of service tax by way of cheque also. In the present case, the appellant has filed the declaration along with the demand draft and cheque on the last date of the scheme. In page 32 of the appeal paper book, the letter accompanied with the documents is furnished by the appellant - Though the appellant specified the number of the demand draft as well as the cheque, he had not specifically stated that 000416 pertains to cheque and not demand draft. It is seen that department has collected the bank details of the appellant and found that there was no sufficient fund to honour the cheque on 31.12.2013. On receiving the cheque, the department ought to have presented the cheque and if the same is dishonored could have rejected the declaration as the payment of 50% dues was not made. Without presenting the cheque, merely collecting the bank details on the date of closure of the scheme, it cannot be concluded that appellant has not paid the tax dues in accordance with the provisions of law. The rejection of declaration filed by appellant under VCES cannot sustain - Appeal allowed - decided in favor of appellant.

Summary

Issues: Appeal against rejection of application under Voluntary Compliance Encouragement Scheme, 2013 due to non-payment of 50% of declared tax dues by the last date.

Analysis:
1. The appellant, a shipping company, filed a declaration under the Voluntary Compliance Encouragement Scheme in 2013, declaring service tax dues of ?9,97,349, of which 50% was required to be paid by 31.12.2013 to avail scheme benefits.

2. The appellant paid ?4,98,675 through a Demand Draft on 31.12.2013 and the balance of ?2,48,675 through a Cheque on the same day, submitting the VCES declaration along with both instruments, which were acknowledged by the department.

3. Subsequently, the department rejected the Cheque payment as the last date for the scheme did not allow Cheque payments, citing Trade Notice No. 32/2013. The department contended that the appellant did not have sufficient funds in the account on 31.12.2013.

4. The appellant argued that as per Rule 6(2A) of the Service Tax Rules, 1994, payment by Cheque should be deemed paid on the date of presentation subject to realization. The department did not present the Cheque to the bank for verification.

5. The department highlighted the trade facilitation measures announced on 30.12.2013, allowing payment through Demand Draft or Pay Orders only, excluding Cheques, which were widely publicized. The department emphasized that the appellant failed to comply with the specified payment method.

6. The Tribunal analyzed the relevant rules and the appellant's submission, noting that the appellant did not clearly differentiate the Cheque from the Demand Draft in the submission letter. However, the department's failure to present the Cheque for verification raised doubts on the non-payment claim.

7. Referring to a High Court decision, the Tribunal concluded that as per Rule 6(2A) of the ST Rules, the date of Cheque presentation should be considered the payment date, subject to realization. Since the Cheque was honored, the rejection of the declaration was deemed unlawful.

8. Consequently, the Tribunal set aside the rejection of the appellant's VCES declaration, allowing the appeal with any necessary consequential relief.

9. The judgment was pronounced on 14.03.2022 by Member (Judicial) Ms. Sulekha Beevi C.S., in favor of the appellant, emphasizing the importance of adherence to statutory provisions and fair consideration of payment methods under the scheme.