By TIOL News Service

NEW DELHI, APR 08, 2016: IT was only two days back, while reporting the CESTAT, WZB decision in Cityland Associates, Amravati [2016-TIOL-812-CESTAT-MUM] we had mentioned that the VCES, 2013 saga continues.

In that case the Bench had held thus -

ST - 50% amount of tax dues under VCES deposited on 01.01.2014 as applicant could not make payment on 31.12.2013 due to system fault - No infirmity in order of Commissioner (A) accepting such payment towards compliance of first tranche of VCES, 2013: CESTAT.  

In the present case dealt by the Delhi High Court, the short question that arose was whether the date on which the Petitioner made the payment of 50% of the service tax due for the purposes of availing of the Voluntary Compliance Encouragement Scheme, 2013 should be taken to be the date on which the Petitioner deposited the cheque for the requisite amount in the bank designated for that purposes OR on the date on which the cheque was in fact encashed in the account of the Government of India?

The facts are as under -

+ The Petitioner opted to avail of the VCES, Scheme 2013 and filed an application dated 30th December 2013 wherein it declared the service tax dues of the sum of Rs.2,93,41,336/- for the period between April, 2012 to December, 2012.

+ The Petitioner deposited Rs.1,46,70,668/- being 50% of the aforementioned declared tax dues by way of a cheque drawn on Axis Bank Ltd. UdyogVihar, Gurgaon, Haryana Branch bearing the stamp of Axis Bank of 31st December, 2013. Axis Bank was a designated bank for the purposes of payment of service tax.

+ It is stated by the Department that the cheque deposited on 31st December 2013 was realized only on 8th January, 2014. According to the Department, Axis Bank informed that the cheque could not be processed immediately upon being deposited for want of funds in the Petitioner's account.

+ It appears that a show cause notice dated 30th January 2014 was issued to the Petitioner by the Department since according to the Department the service tax purportedly paid by the Petitioner had not been received by 31st December, 2013.

+ It is, therefore, stated that the Petitioner's plea for a declaration under the VCES Scheme was rejected under Section 107 (3) of the Finance Act, 2013 as the Petitioner had failed to deposit the first installment of 50% of the declared amount of service tax on or before 31st December, 2013.

+ An order to this effect was passed on 15th August 2014 and this order has been challenged in the present writ petition.

The High Court extracted the following Rules -

Rule (6) of the Service Tax VCES, 2013.

6. Payment of tax dues.-

(1) The tax dues payable under the Scheme along with interest, if any, under the Scheme along with interest, in any, under section 107 of the Act shall be paid to the credit of the Central Government in the manner prescribed for the payment of service tax under the Service Tax Rules, 1994.

(2) The CENVAT credit shall not be utilised for payment of tax dues under the Scheme.

Rule 6 of the Service Tax Rules, 1994:

6. Payment of service tax. -

(2A) For the purpose this rule, if the assessee deposits the service tax by cheque, the date of presentation of cheque to the bank designated by the Central Board of Excise and Customs for this purpose shall be deemed to be the date on which service tax has been paid subject to realization of that cheque.

The High Court observed that Rule 6(2) of the ST Rules requiring payment through electronic banking was introduced only with effect from 1st October, 2014 by Notification No. 9/2014-Service Tax dated 11th July, 2014 and, therefore, at the time when the Petitioner made the payment of 50% of the service tax due by cheque, i.e., on 31st December, 2013, the system of payment through a physical challan was in vogue.

An explanation was offered by the Petitioner in the rejoinder that Axis Bank initially proceeded on the mistaken belief that the payment of service tax had to be made online. However, it was later realised that online payment became mandatory only with effect from 1st October 2014. Thereafter, the Bank processed the payment made by cheque by the Petitioner the physical challan. This led to the cheque being realised only on 8th January 2014.

The High Court, therefore, observed -

++ Rule 6(2A) of the ST Rules provides a complete answer in favour of the Petitioner. It makes it clear that where an assessee deposits the service tax by cheque then the date of presentation of cheque to the bank designated by the Central Board of Excise and Customs for this purpose shall be deemed to be the date on which service tax has been paid subject to realization of that cheque. It is not in dispute that the Petitioner deposited the cheque constituting 50% of the service tax dues in terms of the VCES Scheme 2013 on 31st December 2013 and it was realised on 8th January, 2014. With the cheque having been realized, the date on which the service tax should be taken to have been paid, is deemed to be the date of presentation of the said cheque in terms of Rule 6(2A) of the ST Rules.

Holding that the impugned order dated 15th August 2014 cannot be sustained, the rejection of the Petitioner's plea for a declaration under the VCES Scheme, 2013 was, therefore, held as bad in law.

The Respondents were directed to pass the necessary orders issuing a declaration in favour of the Petitioner under the VCES, 2013 within two weeks.

Funds (in)sufficient: The balance 50% was deposited by the Petitioner by three challans dated 17th May, 2014, 19th June, 2014 and 21st June, 2014. Now, for some KARsamadhan…

(See 2016-TIOL-714-HC-DEL-ST)