JANUARY 03, 2014

By S T Vishesh

A client approached us for settling his tax dues under the ST VCES. On 26/12/2013, he filed an application for Service Tax registration in form ST-1.

He waited for the form ST-2 but did not receive it. He contacted the officer concerned enquiring about the Registration Certificate but he did not express any concern .

The last date of filing Form VCES-1 was 31/12/2013 and so we filed it on that date and declared the "tax dues".

However, our client was unable to make online payment of tax for the reason that the service tax registration number was not reflected on the NSDL website. Incidentally, the ACES site shows that the application has been filed on 26/12/2013.

The advertisement issued on the last day of ST VCES, 2013 by the CBEC mentioned under the caption "For your convenience" the following - The designated banks will accept payment of VCES dues, against a copy of the ST-2 registration certificate, even if their registration number does not figure in the database of the designated banks/NSDL. Such transactions should, however, be regularized on the next working day, without fail .

The RBI had also issued an instruction RBI/2013-14/420, DGBA.GAD.No.H - 3800/42.07.001/2013-14 dated 30 th December, 2013 in this regard.

Obviously because our client had still not obtained the ST-2 Registration certificate there was no question of he having any copy of the same.

In fact, although my client could know the registration number immediately after filing the ST-1, the same could not be used by him in the absence of the ST-2 registration certificate. So also, though he wished to pay the 50% dues through a pay order/demand draft as permitted by the CBEC in its advertisement, the bank refused to acknowledge the GAR-7 challanas the Service Tax registration number was not reflected in the database of the designated banks/NSDL. Would it have sufficed had he handed over the DD/PO at the VCES counter along with the Form VCES-1?

The long and short is that my client could not make any payment of the tax dues declared under the ST VCES, 2013 although he very much wishes to - in fact, he is ready to make the entire payment in one go without opting for the split payment envisaged in the Scheme.

The following questions come to mind -

++ What is the way out now?

++ Will he be evicted out of the ST VCES scheme?

I found the following provisions of the VCES which may provide an answer -

Section 107(3)& 107(4) of the FA, 2013 mention the following -

(3) The declarant shall, on or before the 31 st day of December, 2013, pay not less than fifty per cent, of the tax dues so declared under sub-section (1) and submit proof of such payment to the designated authority.

(4) The tax dues or part thereof remaining to be paid after the payment under sub-section (3) shall be paid by the declarant on or before the 30 th day of June, 2014.

Provided that where the declarant fails to pay said tax dues or part thereof on or before the said date, he shall pay the same on or before the 31st day of December, 2014 along with interest thereon, at such rate as is fixed under section 75 or, as the case may be, section 73B of the Chapter for the period of delay starting from the 1st day of July, 2014.

In view of the usage of the words "tax dues" & "part thereof remaining to be paid" in the provisions of section 107(4), it would seem that even if the declarant had not made payment of the 50% of the "tax dues" by 31/12/2013, he still has time till 30/06/2014 to make the payment and in case he does not comply by that date too, he can pay the "tax dues" by the 31/12/2014 along with interest from 01/07/2014 to 31/12/2014.

There is also another angle by which the entire episode can be viewed in view of the provisions of section 110 of the FA, 2013 which reads -

Tax dues declared but not paid.

110. Where the declarant fails to pay the tax dues , either fully or in part, as declared by him, such dues along with interest thereon shall be recovered under the provisions of section 87 of the Chapter.

The usage of the words "either fully" would clearly indicate that there is an eventuality wherein the declarant has not paid any amount even after declaring the same under the Scheme.

But obviously, this "recovery" under section 87 of the FA, 1994 would be effected only after the last date of 31/12/2014.

Nonetheless, I came across the Board clarification given against Sr.no. 16 of the Board Circular 170/5/2013-ST dated 08 August, 2013 and which reads -

But, as analysed in the preceding paragraphs, the usage of the terms "tax dues" & "either fully or in part" in sections 107 & 110 do not support the Board view and probably this portion of the Circular too would have to be battled out in Court in a similar fashion as the clarification offered at serial no. 13 of the Circular. See 2013-TIOL-1016-HC-P&H-ST .

And by the way, there is noexpress provision in the ST VCES, 2013 which says that a declarant would not be eligible to avail of the benefit of the scheme if he does not pay the 50% by 31.12.2013.

Last but not the least, i n a money-spinning scheme like this, it was expected that there would be applicants waking up and gathering courage to file the ST VCES-1 on the last day and if this be so, the CBEC ought to have put in place the infrastructure enabling the declarant to get the registration, file the declaration and make payment on that very day.

I request that the Central Board of Excise & Customs which had gone into an overdrive in advertising the scheme, and for obvious reasons, comes out with a clarification which would be beneficial to all those "fence sitters" who tried to hitch on to the ST VCES, 2013 bandwagon on the last day but were sadly thrown off!