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TMI Blog2014 (12) TMI 326X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a total service tax liability of Rs. 11,31,37,122/- for the period from 1-7-2010 to 31-12-2012, which was acknowledged on 24-7-2013. As per sub-section (2) of Section 106 of the Act, declarations filed under the VCES are liable for rejection in cases where, as on 1-3-2013, against the declarant an inquiry or investigation in respect of service tax levied or short levied or short paid has been initiated by way of search of premises under Section 82 of the Finance Act, 1994 (hereinafter referred to as the 'Finance Act'); issue of summons under Section 14 of the Central Excise Act, 1944 as made applicable to the service tax matters under Section 83 of the Finance Act; requiring production of accounts, documents or other evidence under the Finance Act or the rules made thereunder and where an audit has been initiated. During processing of the declaration in this case, the designated authority found that the jurisdictional Range office has asked the declarant to produce documentary evidence in respect of payment of their service tax liability vide letters dated 12-2-2013 and 27-2-2013 but no response was received from the declarant whose premises was visited by the preventive staff o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 in Civil Writ Petition No. 26929 of 2013, the operative part of which is reproduced as under :- "The impugned order, in our considered opinion, is appealable, under Section 86 of the Indian Finance Act, 1994, particularly as the scheme under which the petitioner has applied, is part and parcel of the aforesaid Finance Act, by virtue of the Indian Finance Act, 2013. Faced with this situation, counsel for the petitioner has pressed into service circular, dated 8-8-2013, issued by the Central Board of Excise and Customs, stating that such an order is not appealable. We are unable to accept correctness of instructions issued by the Central Board of Excise and Customs, for the simple reason that after incorporation of the Service Tax Voluntary Compliance Encouragement Scheme into the Finance Act, all other provisions of the Act except to the extent specifically excluded, apply to proceedings under the scheme. The impugned order passed by the Deputy Commissioner of Central Excise and Service Tax would necessarily be appealable under Section 86 of the Indian Finance Act, 1994. Faced with this situation, counsel for the petitioner prays that the writ petition may be dismissed as wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -2013, as such, the last date for issuance of show cause notice comes to 16-8-2013. Even from the date of issuance of Circular is 8-8-2013, the last date comes to 8-9-2013, whereas the show cause notice has been issued on 18-9-2013. Therefore, the proceedings are contrary to the clarifications issued by the CBEC. The designated authority has also grossly erred in ignoring the CBEC Circular dated 25-11-2013 which further reiterates that the time limit of 30 days is to be followed scrupulously. (iii) That the adjudicating authority has erred in ignoring the fact that it is only the letters requiring production of documents under section 14 of the Central Excise Act, section 72 of the Finance Act and rule 5A of the Service Tax Rules which are excluded from the purview of the VCES. However, letters not bearing any reference of these sections/rules are excluded from the purview of the VCES. The letters dated 12-2-2013 and 27-2-2013 does not mention any of these sections or rules, therefore , the provisions of sub- section (2)(a)(iii) of section 106 are not applicable, as letters requiring production of documents not mentioning Sections 14(CEA), 72(FA) and Rule 5A(STR), woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; That section 106(2)(a)(iii) of the Act says that the declaration filed under the VCES is liable to be rejected if any enquiry or investigation for short payment or non-payment of service tax has been initiated by way of requiring production of accounts/document or other evidence under the chapter or the rules made thereunder and the same is pending as on 1-3-2013. Further as per Section 72 of the Finance Act, the Central Excise Officer may require any person to produce such accounts, documents or other evidence as he may deem necessary. The letters dated 12-2-2013 and 27-2-2013 have been written by the superintendent Range-I, Derabassi under the authority of Finance Act and Rules made thereunder which is sufficient to constitute that an enquiry or investigation has been initiated against the declarant and the same was pending as on 1-3-2013. The letters dated 12-2-2013 and 27-2-2013 satisfy the conditions of section 106(2)(a)(iii) of the Act. The declarant's contention that in the letter written by the superintendent no statutory provisions as clarified by the Board vide their Circular dated 13-5-2013 and 8-8-2013 has been mentioned, does not hold ground as it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e declarant was not responding to the Range Office letters dated 12-2-2013 & 27-2-2013 regarding non-filing of Returns and non-payment of Service Tax, the office premises of the declarant were visited by the Hqrs. Preventive Staff on 4-3-2013 and a case booked against the said declarant for non-payment of Service Tax amounting to Rs. 12.87 Crores. That the case is still pending and during investigation, the declarant has deposited Service Tax amounting to Rs. 3.46 Crores. The Hqrs. (Adt.) vide its letter of C.No. 112/HQ/Adt/PC/Chd-II/13, dated 6-9-2013 (received by fax on 16-9-2013) intimated that the declarant was earmarked for audit in the month of July 2013. However, the declarant has not furnished necessary documents yet for preliminary desk review. As such, audit of the declarant is still pending. Since the complete information was received by the designated authority on 16-9-2013, show cause notice was issued on 18-9-2013. (ii) The contention of the declarant that the letters dated 12-2-2013 and 27-2-2013 written by the jurisdictional Superintendent do not constitute initiation of enquiry or investigation against them within the meaning of Section 106(2)(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 5-3-2013 (i.e. after 1-3-2013) does not merit any reliance as the jurisdictional Range Officer had already initiated the enquiry investigations vide his letter dated 12-2-2013 i.e. before 1-3-2013 by way of requiring production of accounts, documents and providing information regarding details of amount booked towards construction linked payments from 1-7-2010 onwards. The Jurisdictional Range Officer's letter dated 27-2-2013 was only a reminder to his earlier letter dated 12-2-2013. Therefore, it is immaterial even if the letter dated 27-2-2013 was dispatched on 5-3-2013. Further, visit of the Preventive Staff to the declarant's premises was exclusively on the basis of jurisdictional Range Officer's letter dated 12-2-2013 i.e. much before the cut-off date for availing benefit under VCES. (iv) That the contention of the declarant that the declaration filed by the declarant on 17-7-2013 has been accepted on 24-7-2013 after duly ascertaining and verifying the fact that no proceedings are pending against them and that they duly comply with the provisions of VCES does not hold ground as VCES-2 dated 24-7-2013 issued to the declarant was just an acknowledgement. (v)& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontained in section 106(2) of the Act. The dispute revolves around section 106(2) of the Act, therefore, before proceeding further, I am reproducing the content of Section 106(2) of the Act, as under :- "(2) Where a declaration has been made by a person against whom, - (a) an inquiry or investigation in respect of a service tax not levied or not paid or short-levied or short-paid has been initiated by way of - (i) search of premises under Section 82 of the Chapter; or (ii) issuance of summons under section 14 of the Central Excise Act, 1944, as made applicable to the Chapter under section 83 thereof; or (iii) requiring production of accounts, documents or other evidence under the Chapter or the rules made thereunder; or (b) an audit has been initiated, and such inquiry, investigation or audit is pending as on the 1st day of March, 2013, then, the designated authority shall, by an order, and for reasons to be recorded in writing, reject such declaration." 9. I find that the designated authority has rejected the declaration of the declarant on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the declarant. 9.2 For proper appraisal, I am taking up all the above mentioned points raised by the declarant one by one. As regards, the time limitation for issue of a notice of intention to reject the declaration filed under the VCES, the declarant has contended that they have filed the declaration on 17-7-2013 and the show cause notice was issued after the stipulated period of 30 days i.e. on 18-9-2013 and hence, is barred by limitation. On the other hand, the designated authority has submitted that for ascertaining whether any enquiry/investigations were pending against the declarant, he has asked for reports from the jurisdictional Range Officer, Hqrs. Preventive as well as the Hqrs. Audit and the complete information was received only on 16-9-2013, that is why the show cause notice was issued on 18-9-2013. With regard to any limitation in issuance of a notice of intention to reject the declaration filed under the VCES, I find that the clarification contained at serial No. 12 of Circular No. 170/5/2013-S.T., dated 8-8-2013 cover the issue at hand, relevant portion of which is reproduced as under :- "To allay any apprehension of undue delays and uncertainty, it is clari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in cases whether any enquiry, investigation or audit as specified under Section 106(2) of the Act is pending as on the 1st day of March, 2013. The declarant have pleaded that no enquiry was pending against them as on 1-3-2013 and to supplement it they pointed out that the letter dated 27-2-2013 was in fact issued on 5-3-2013 by the jurisdictional Range Officer. On this point, I find that on being asked, vide letter C.No. V(STC)VCES/Misc/DB/DIVN/05/2013, dated 17-12-2013, the jurisdictional Deputy Commissioner has confirmed that letter dated 27-2-2013 was sent by registered post on 5-3-2013. As such I observe that it is a matter of record that the letter dated 27-2-2013 of the Range Officer as well as visit dated 4-3-2013 of the HQ Preventive to the premises of the declarant was after the cutoff date of 1-3-2013 stipulated in the VCES. However, on this point, the designated authority has also contended that the letter dated 27-2-2013 was reminder to the earlier letter dated 12-2-2013 and the enquiry/investigation stood already initiated against the declarant by way of issue of letter dated 12-2-2013. As such, I observe that to arrive at a conclusion as to whether the wording of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith documentary evidence. Your reply must reach this office within 10 days of receipt of this letter failing which action will be initiated as per Law." Yours sincerely Sd/- Superintendent" 9.5 I find that the designated authority has contended that the above mentioned letters have been written by the jurisdictional Range Officer under the authority of the Finance Act and Rules made thereunder. He has also contended that these letters regarding non-filing of ST-3 returns were issued under Section 70 of the Finance Act read with Rule 7 of Service Tax Rules, 1994. Further, in these letters, the declarant was asked to provide details of amounts booked towards construction linked payments alongwith documentary evidence, which are very much specific in nature and fall under Section 72 of the Finance Act, as such, satisfy the condition of 106(2)(a)(iii) of the Act and non-mentioning of statutory provisions in these letters does not vitiate the proceedings in the case. On this point, the department has relied upon the case law of Hon'ble High Court in the case of Vardhman India Products reported as [2009 (236) E.L.T. 637 (P & H)]. After going through content of both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejection of the declaration. 9.5.1 Further, I find that CBEC vide Sr. No. 1 of Circular No. 170/5/2013, dated 8-8-2013 clarified the scope of Section 106(2)(a) of the Act, as under :- S. No. Issues Clarification 1 Whether the communications, wherein department has sought information of roving nature from potential taxpayer regarding their business activities without seeking any documents from such person or calling for his presence, while quoting the authority of Section 14 of the Central Excise Act, 1944, would attract the provisions of Section 106(2)(a)? Attention is invited to clarification issued at S. No. 4 of the Circular No. 169/4/2013-S.T., dated 13-5-2013, as regards the scope of section 106(2)(a) of the Finance Act, 2013, wherein it has been clarified that the provision of Section 106(2)(a)(iii) shall be attracted only in such cases where accounts, documents or other evidence are requisitioned by the authorized officer from the declarant under the authority of statutory provision. A communication of the nature as mentioned in the previous column would not attract the provision of Section 106(2)(a) even though the authority of Section 14 of the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on-mentioning of Section/Rules does not vitiate the proceedings. I have carefully gone through the judgment and find that the ratio of this judgment is not applicable to the matter before me as in that case the Hon'ble High Court observed that when the fraudulent availment of modvat credit was not disputed by the assessee and have been discussed specifically in SCN, then extended period is invokable and non quoting of relevant Section or Rules will not vitiate the proceedings. However, in the instant appeal, the Govt./CBEC launched a beneficial scheme known as VCES providing an opportunity to the service tax evaders to come clean and pay tax dues. The purpose is to facilitate and encourage the taxable service providers to pay tax dues, which they could not pay due to any reason. CBEC's various clarifications cited supra have amplified this point in detail. Hence relied upon judgment cannot be made a ground for rejection of said declaration. 9.8 The designated authority has also contended that the declarant has deposited Rs. 3.46 Crores during investigations by the Hqrs. Preventive. I find that on this point, the Hqrs. Preventive vide letter dated 20-12-2013 while confirming d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from 2008-2011, benefit of VCES would be eligible in respect of 'tax dues' for the year 2012, i.e., period not covered by the inquiry, investigation or audit. (2) If an inquiry or investigation, pending as on 1-3-2013 was in respect of a specific issue, say renting of immovable property, benefit of VCES would be eligible in respect of 'tax dues' concerning any other issue in respect of which no inquiry or investigation was pending as on 1-3-2013. It is also reiterated that the designated authority, if he has reasons to believe that the declaration is covered by section 106(2), shall give a notice of intention to reject the declaration within 30 days of the date of filing of the declaration stating such reasons to reject the declaration. Commissioners should ensure that this time line is followed scrupulously." "4 Whether the benefit of the Scheme shall be admissible in respect of any amount covered under the definition of 'taxes dues', as defined in the Scheme, if paid by an assessee after the date of the Scheme coming into effect, (i.e., 10-5-2013), but before a declaration is filed Yes, benefit of the Scheme would be available if such amount is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in rectifying these defects. On this point Para No. 4 of Board's letter F. No. B-l/19/2013-TRU(Pt.), dated 11-12-2013 also clarifies that while the designated authority may cause arithmetical check as regards the correctness of computation of tax dues, the Scheme does not envisage investigation by the designated authority into the veracity of declaration. As such, I observe that in implementation of VCES, the effort must be to accept a declaration as far as possible and recover the arrears of tax. 9.10 As regards the contention of the declarant that the impugned order is bad as the designated authority (adjudicating authority) has no power to recall his earlier order, the designated authority has contested this contention stating that no such order has been reviewed by him. I am constrained not to elaborate on this contention as the declarant has not placed on record any such order dated 25-11-2013 passed by the designated authority. Even otherwise this issue becomes irrelevant once the rejection of declaration is not maintainable on merit. 10. As regards department's contention that there are no provisions for filing of appeals against the order of rejection passed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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