ST - VCES - Words 'issued to person' used in sec 106 of FA, 2013 have to be construed as 'served to person' - To be able to decide whether one is disqualified as per law, notice must be put to knowledge of person: CESTAT
By TIOL News Service
BANGALORE, SEPT 10, 2015: THE appellant had opted for the VCES, 2013 and filed a declaration in respect of tax dues for the period December 2009 to November 2012. They also deposited 50% of the admitted tax liability of Rs.47,84,597/- before 31.12.2013 as required under the Scheme.
A SCN came to be issued on 31.12.2013 proposing rejection of the declaration citing the second proviso to Section 106(1) of the Finance Act, 2013 on the ground that a Show Cause Notice No. 28/2013-ST dated 22.02.2013 had already been issued to the appellant, demanding service tax of Rs. 40,01,067/- for the period April 2009 to December 2011, and therefore, the appellant cannot avail the option of VCES.
In reply, it was submitted by the assessee that the SCN dated 22.02.2013 was not received by the appellant before 01.03.2013, and hence the disqualification,as proposed,cannot be made applicable.
Perhaps, determined that the applicant should be evicted from the ST Voluntary Compliance Encouragement Scheme, come what may, another Show Cause Notice No. 19/2014-ST (VCES) dated 17.01.2014 was issued by the Assistant Commissioner proposing for rejection of the declaration on the ground envisaged in the main provisions of Section 106(1) of the Act.
Both the above referred Show cause Notices (dated 31.12.2013 and 17.01.2014) were adjudicated by the Assistant Commissioner vide Order-in-Original No. 12/2014-ST (VCES) dated 31.01.2014, holding that the declaration of tax dues filed by the appellant attracted disqualifications envisaged in the main part, as well as those contained in the proviso to Section 106(1) of the Finance Act, 2013.
The Commissioner (Appeal) followed the chartered course - uphold the order of the adjudicating authority.
And so, with a heavy heart the assessee is before the CESTAT.
Take a look at section 106(1) of the FA, 2013 -
Person who may make declaration of tax dues.
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 or any 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.
The appellant submitted that the show cause notice dated 22.02.2013 was not served to the appellant before 01.03.2013, and thus, the disqualification in terms of the main provision as well as the second proviso to Section 106(1) of the Finance Act, 2013 cannot be applied.
It is further emphasised that the SCN dated 22.02.2013 having been issued under Section 73 of the FA, 1994, which mandates that the notice has to be "served" on the person for recovery of the service tax not levied or paid, non-service of such notice within the stipulated time frame, cannot take away the substantive right of the appellant to avail the benefits under the VCES.
Inasmuch as since the SCN was not received by the appellant before 01.03.2013, the benefits provided in the VCES cannot be denied to the appellant on the ground that notice was 'issued'.
The AR, while reiterating the finding recorded in the impugned order further submitted that since the SCN was sent through postal department, that date of sending the notice is to be interpreted as the date of giving of notice and therefore, the SCN dated 22.02.2013 having been issued prior to 01.03.2013, that issuance of notice is sufficient compliance of service of notice. Suffice to say that the appellant is not entitled for the benefits of VCES, 2013 as per the embargo created in Section 106(1) of the Finance Act, 2013, the AR emphasised.
The Bench observed -
+ The only question to be considered is whether the date of the show Cause Notice or the date on which it was served on the parson, has to be taken into consideration for interpreting the provisions of Section 106 of the Act, which places an embargo to the effect, that no declaration shall be made for the tax dues where the notice has been issued to the person before 01.03.2013.
+ It is an admitted fact on record that the Show Cause Notice No. 28/2013 ST dated 22.02.2013 issued under Section 73 of the Finance Act, 1994 has not been received by the appellant before 01.03.2013. Section 73 of the Act mandates that in cases, where any service tax has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve notice on the parson chargeable with service tax which has not been levied or paid.
+ The law contained in Section 73 of the Act, makes it abundantly clear that the Show Cause Notice has to be served on the person concerned and mere 'issuance' of the same is not enough. In other words, if the Show Cause Notice was issued and posted by registered post before last date but received/served after the last date, then the demand notice under Section 73 of the Act is not sustainable, as it was not served within time.
+ The intention for incorporating such an embargo in Section 106 of the Finance Act, 2013 is to dissuade persons against whom proceedings have been initiated, from taking the shelter of VCES. A person who wants to avail the option/benefit of VCES should not be disqualified to make a declaration as laid in the said provisions of law. To be able to decide whether one is disqualified as per the law, the notice/order must be put to the knowledge of the person.
+ Any notice, which is merely 'issued' but not 'served' cannot be said to be within the knowledge of the person against whom it is 'issued' but not 'served'. In essence, if law prohibits a person with a particular disqualification from filing a declaration, then such disqualification should be established to be within the knowledge of the concerned person. To impute such knowledge, mere issuance of notice is not sufficient. The notice has to be served as provided under section 73 of Finance Act, 1994. Therefore, the words 'issued to a person' used in section 106, in my opinion, have to be construed as 'served to a person'.
Observing that the SCN dated 22.02.2013 issued u/s 73 of FA, 1994 has not been served on the appellant before 01.03.2013 and, therefore, the impediment of Section 106 of the Finance Act, 2013 regarding non-filing/non-consideration of declaration under VCES would have no application; and since the appellant otherwise fulfills the criteria , the Bench held that benefits envisaged therein for availing the waiver of interest and penalties would be available to the appellant.
The order passed by Commissioner(A) dismissing the VCES-1 declaration filed by the appellant was set aside and the appeal was allowed with consequential relief.
In passing: Ease of doing business…the harshest & hardest way!
(See 2015-TIOL-1905-CESTAT-BANG)
