Service Tax - Existence of a dispute before Tribunal on taxability for previous period is no bar on VCES : High Court
By TIOL News Service
NEW DELHI, MAR 31, 2014: THE petitioner carries out vocational training for Air Hostesses/Stewards and in the hospitality and management sector. It availed exemption from payment of Service Tax as a vocational training institutes imparting vocational education. But from 27.2.2010, even this became taxable and the petitioner was discharging the tax till 31.3.2012. Due to some unavoidable reasons, it could not pay the tax during the period from 1.4.2012 to 31.12.2012.
The petitioner took shelter under the Voluntary Compliance Encouragement Scheme, 2013 and filed the requisite declaration and deposited 50% of the amount due by 31.12.2013.
The Assistant Commissioner/ designated authority VCES rejected the VCES application of the petitioner on the ground that there is a dispute pending in the Tribunal regarding the taxability during the period between 10.09.2004 - 27.02.2010.
The petitioner is before the High Court in writ petition. It submitted that the subject matter of the controversy pending before the Tribunal was entirely different, i.e., pertaining to the exigibility of the petitioner to taxation given the provisions of the previous notification which existed up to 27.02.2010 and, therefore, the respondents could not have rejected the declaration. It is submitted that even the later period up to 31.03.2012 is not the subject matter of any controversy or proceeding and the petitioner had already deposited the service tax dues. In these circumstances, since the liability after that date, i.e., from 1.4.2012 to 31.12.2012 was in issue, it could legitimately seek recourse to the Scheme.
The High Court observed,
It is evident that the Scheme was introduced to give benefit of one time amnesty or relief to service tax defaulters or those who had not paid their dues fully. In its terms, the assessment as to the liability has to be made and if the declaration or application is found to be in order and compliant with the provisions, the authority would accept the application and grant immunity from prosecution and also exempt interest and penalty liability. Keeping in mind the spirit of the Scheme, certain safeguards and conditions have been indicated. The first and perhaps foremost one is that the applicant should deposit 50% of the admitted liability with the declaration itself on or before 31.12.2013 and the balance should be paid latest by 31.12.2014. The second is in respect of the subject matter that there should be no issue pending or determined before any of the tax authorities or Tribunals for adjudication. The object of this is to avoid multiplicity and reopening of settled matters. If one keeps this objective in mind, the second proviso is to be construed strictly. The main provision, i.e., Section 106 enables the filing of the declaration subject to the pre-condition of a pre-deposit. It is settled law that a proviso merely carves out an exception from the operation of the main provision. The second proviso of Section 106 (1) is no exception to that rule. This proviso when it alludes to 'any issue' must, therefore, mean that the issue as to service tax liability or quantum of liability itself for a particular period must be pending before the Tribunal or some of the tax authorities or should have been determined. As long as in respect of the particular distinct period, the subject matter of declaration or application is not pending or determined, the main part of Section 106 (1) would prevail.
In the present case, there is no dispute that the subject matter of the declaration or liability is for the period of 1.4.2012 to 31.12.2012. The order in question also does not show any different facts. Therefore, the view of the designated authority that the pendency of the issue or question of the petitioner's liability for a past period when it sought to avail the advantage of the exemption notification bars the remedy under Section 106 is clearly in error.
The High Court set aside the impugned order and directed the Revenue to proceed further and process the petitioner's application in accordance with law.
(See 2014-TIOL-396-HC-DEL-ST)
