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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 ..... ia, Mr. B. Narasimha Sarma, learned Senior Counsel appearing for the respondents 2 to 4 and Mr. P. Sri Harsha Reddy, learned counsel appearing for the 4th respondent/ Garnishee. 3. On the ground that there were 17 lakhs registered assesses of service tax, but only 7 lakhs assessees out of them were filing returns and that therefore, a step towards motivating the remaining assessees to file returns and to pay the taxes due, was essential, the Government introduced a one-time scheme known as VCES, in the budget of 2013. This scheme was introduced in the form of Chapter-VI of the Finance Act, 2013 (for short 'the Act'). This chapter comprised of Sections 104 to 114. Section 106 laid down the eligibility criteria for a person who can make a declaration under the Scheme. It reads as follows: "106. (1) Any person may declare his tax dues in respect of which no notice or an order of determination under section 72 or section 73 or section 73A of the Chapter has been issued or made before the 1st day of March 2013: Provided that any person who has furnished return under Section 70 of the Chapter and disclosed his true liability, but has not paid the disclosed amount of service tax o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... third installment of tax on 26.06.2014. The factum of payment was also intimated to the Department on 30.06.2014. 8. It is relevant to note that the taxes due as per the declaration, were claimed by the petitioner to have been paid partly by way of cash and partly by way of cenvat credit. Therefore, by a letter dated 14.12.2015, the respondents sought clarifications on cenvat credit details. The petitioner gave clarifications on 21.12.2015. 9. But, by a letter dated 10.02.2016, the Assistant Commissioner of Service Tax, who is the 3rd respondent herein informed the petitioner that the VCES declaration filed by the petitioner was not tenable, for the reasons stated therein. The main reason stated in the said communication dated 10.02.2016 was that the petitioner had failed to pay even the tax declared in ST-3 returns and that therefore, the three conditions stipulated in the proviso to Section 106(1) applied. As a result, it was claimed in the 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 resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 106 of Chapter VI of the Act entitles every person to declare his tax dues, if no notice or determination of the same had been made before 01.03.2013 under Sections 72 or 73 or 73A. Therefore, if the first proviso had not been there, all persons including (1) persons who never filed any returns (2) persons who filed returns which did not disclose the true liability and (3) persons who furnished returns and disclosed their true liability, but not paid the disclosed amount, would all be entitled to file a declaration. 15. 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47,29,385 Apr'2012 to Sep'2012 90,97,25,096 5,23,84,406 1,95,13,353 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 the period October 2010 to March 2011 is Rs. 3,30,43,821/-, the total payment made was only Rs. 3,27,09,979/-. 23. After receipt of the copy of the letter dated 03.12.2018, containing the aforesaid tabulation, the learned Counsel for the petitioner produced material to show that the tax liability for the period October 2010 to March 2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 December 2012, which works out to five years and three months, that could be covered by 10 half yearly returns and a part of the eleventh half yearly return. 28. In simple terms, this period of five years and three months will be covered by ten half yearly returns and a portion of the eleventh half yearly return. The ten half yearly returns that would cover the period to which the scheme relates are October 2007 to March 2008, March 2008 to September 2008, October 2008 to March 2009, March 2009 to September ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 relating to the period which falls within the exclusion clause and another relating to the period which falls within the eligibility criteria. 36. The only way we could understand and interpret the first proviso in sync with the main part of Sub-section (1) of Section 106 of the Act, is to hold (1) that the eligibility of a declarant is to be decided with respect to the whole of the period for which the declaration is filed and (2) that the applicability of the proviso will have to be determined with respect to each of the returns that cover the period in respect of which the declaration is filed. 37. This can be u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led 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 the period stipulated in Section 111 (2) of the Act. 43.But, the said argument does not hold water. 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 fall within the first proviso to Section 106(1) of Chapter VI of the Act. Therefore, this contention does not hold good. 44. In view of the above, the impugned order does not suffer from any illegality warranting interference. Hence, the Writ petition is dismissed. 45. The miscellaneous petitions, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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