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TMI Blog2019 (5) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... o furnished returns and disclosed their true liability, but not paid the disclosed amount, would all be entitled to file a declaration - But, the first proviso to sub-section (1) to Section 106 of Chapter VI of the Act excludes from the eligibility under Sub-Section (1), persons who belong to the third category, namely, those who filed returns under Section 70 of the Chapter and disclosed their true liability, but had not paid the disclosed amount. Persons belonging to the first and second category, namely, (1) those who never filed returns and (2) those who filed returns but did not disclose the true liability are not excluded by the first proviso. The learned Counsel for the petitioner produced material to show that the tax liability for the period October 2010 to March 2011 arrived at as ₹ 3,30,43,821/- was wrong and that as per the return, the liability disclosed was only ₹ 3,27,09,978/- - Therefore, we directed the learned Senior Standing Counsel to check-up. After checking up, the Assistant Commissioner made a working and communicated to the Senior Standing Counsel by his letter dated 06.02.2019 that there was a mistake on the side of the Department and that fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013. This period is covered by six returns. While five out of those six returns do not fall within the first proviso to Section 106 (1) of Chapter VI of the Act, one return falls within the purview of the first proviso. Therefore, the declaration becomes defective, as Chapter-VI does not enable the authorities to split up the declaration into several parts - But, as we have already pointed out, the returns are divisible, but the declaration is indivisible. A declaration under the Scheme may have to be dealt with as a single sealed basket of apples and it may not be possible to accept the basket as a whole after throwing out those apples which are rotten. Therefore, we find that the order impugned in the writ petition is unassailable. Service of notice on the declarant calling upon him to pay the taxes due - Section 111 (1) of Finance Act - HELD THAT:- The order dated 10.02.2016 is not one under Section 111 of the Act. Section 111 (1) of the Act applies only to cases where the declaration is found to be substantially false. In this case, the petitioner is not accused of filing a false declaration. The case of the respondents is that the declaration of the petitioner would fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny part thereof, shall not be eligible to make declaration for the period covered by the said return: Provided further that where a notice or an order of determination has been issued to a person in respect of any period on any issue, no declaration shall be made of his tax dues on the same issue for any subsequent period. ( 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 (1 of 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said letter dated 10.02.2016 of the Assistant Commissioner that the petitioner cannot even be given a rejection order, as the case would not fall under Section 106 (2). 10. After issuing the said communication dated 10.02.2016, the respondent issued garnishee notices to the 4th respondent Bank on 21.06.2017 forcing the petitioner to come up with the above writ petition. 11. A counter affidavit has been filed on behalf of respondents 2 to 4. It is contended in the counter affidavit that the petitioner filed ST-3 returns for the period from October 2010 to March 2011 on 25.04.2011; they filed ST-3 returns for the period from April 2011 to September 2011 on 22.12.2011; that the returns for the period from October 2011 to March 2012 were filed on 25.04.2012 and that the returns for the period April 2012 to September 2012 and October 2012 to March 2013 were filed respectively on 25.11.2012 and 25.10.2013. It is further contended in the counter affidavit that under the proviso to Section 106(1) of the Act, any person who has furnished returns under Section 70 of the Act and disclosed his true liability, but has not paid the disclosed amount of service t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst and second category, namely, (1) those who never filed returns and (2) those who filed returns but did not disclose the true liability are not excluded by the first proviso. 16. For a person to come within the exclusion enumerated in the first proviso to sub-Section (1) of Section 106 of Chapter VI of the Act, three conditions are to be satisfied, namely, (1) that he has furnished returns under Section 70, (2) that he has disclosed his true liability in the returns and (3) that he has failed to pay even the disclosed service tax. Even in the absence of anyone of these three conditions, a person will not be covered by the first proviso to sub- Section (1). In fact, the very object of introducing VCES in the Budget of 2013, as indicated in the budged speech of the Finance Minister, was to provide a motivation (1) to people who failed to file returns and (2) to people who failed to pay taxes. 17. It is an irony of law that Schemes such as VCES, VDS (Voluntary Disclosure Scheme) or Composition Scheme, are intended for the benefit of defaulters. Therefore, while interpreting the provisions of such Schemes, the Court cannot adopt such an interpretatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3,35,65,279 5,30,78,632 Oct 2012 to Mar 2013 41,49,61,246 5,12,89,210 4,00,79,363 1,76,99,010 5,77,78,373 Total 3,34,59,80,703 21,67,33,392 6,13,81,576 15,64,07,912 21,77,89,488 21. It is seen from the above tabulation that atleast in respect of three periods, namely, October 2011 to March 2012, April 2012 to September 2012 and October 2012 to March 2013, the total taxes paid by the petitioner both way of cash and by way of cenvat credit, is more than the liability disclosed in the return. 22. Insofar as the period October 2010 to March 2011 is concerned, the above tabulation shows that the total taxes paid both by way of cash and by way of cenvat credit was lesser than the liability reflected in the return. While the tax liability reflected in the return for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That takes us to the next question as to whether on account of this default in respect of the period from April 2011 to September 2011, the entire declaration under VCES was liable for rejection or whether the declaration under the VCES was liable to be accepted atleast in respect of the period covered by the other four returns, namely, (1) October 2012 to March 2011, (2) October 2011 to March 2012, (3) April 2012 to September 2012 and (4) October 2012 to March 2013. 27. For finding an answer to the said question it may be necessary to have a look at the broad features of the scheme. The features are as follows: ( i) The Scheme is intended only to cover the tax dues in relation to the period from 01.10.2007 to 31.12.2012. VCES 2013 is not applicable to the tax due in respect of the period before 01.10.2007 and after 31.12.2012. ( ii) Under the Finance Act, 1994, returns are liable to be filed half yearly. Service Tax returns are neither monthly returns nor quarterly returns nor annual returns, but are halfyearly returns. ( iii) But the period covered by the Scheme is from October 2007 to Decem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laration. Such a declaration could be in respect of the entire period covered by the scheme namely October 2007 to December 2012 or for a part thereof. While it is possible to split the period in respect of which the declaration is filed, into 10 half yearly returns and a part of the 11th half yearly return, it is not possible to split the declaration itself. 34. If the interpretation sought to be given by the learned counsel for the petitioner is accepted, a single composite declaration filed under the Scheme should be split into several fragments and the declaration could be accepted in respect of those fragments which do not fall within the first proviso. If this is done, a declaration under the Scheme will become acceptable in part and liable for rejection in respect of the other part. 35. While the three conditions laid down in the first proviso, namely, (1) filing of the return, (2) disclosure of true liability and (3) non-payment of the disclosed amount of service tax, may have to be applied return-wise, for the purpose of finding out the applicability of the exclusion clause, the declaration as such cannot be split up into two parts one rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, it is contended that the declaration could have been accepted at least in respect of the period from October 2010 to March 2011 and October 2011 to December 2012. 41. But, as we have already pointed out, the returns are divisible, but the declaration is indivisible. A declaration under the Scheme may have to be dealt with as a single sealed basket of apples and it may not be possible to accept the basket as a whole after throwing out those apples which are rotten. Therefore, we find that the order impugned in the writ petition is unassailable. 42. One more argument was advanced on the basis of Section 111 (1) of the Act. Under Section 111 (1) of the Act, the Commissioner is entitled to serve a notice on the declarant calling upon him to pay the taxes due, which are either not paid or short paid. But, sub-Section (2) of Section 111 of the Act makes it clear that no action under Sub-Section (1) shall be taken after the expiry of one year from the date of the declaration. Therefore, it is contended by the learned counsel for the petitioner that the rejection order passed on 10.02.2016 in respect of a declaration filed on 31.12.2013 was beyond t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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