By TIOL News Service

MUMBAI, MAR 16, 2015: THE petitioner gave its commercial premises on leave and licence to various occupants for carrying out commercial activity. These occupants challenged the levy of service tax on Renting of Immovable Property services, but that challenge failed.

The petitioner filed an application under the VCES, 2013 on 04.12.2013 disclosing the liability for the period October 2007 to March 2012. They declared tax dues of Rs.31,54,010/- and Rs.2,65,431/- pertaining to two services rendered and paid the entire service tax in one installment.

The designated authority referred to the fact that on scrutiny of the annexures/calculation sheets submitted along with the application, vis-a-vis the ST-3 returns filed in the past in respect of the above services, it appeared that the tax dues of Rs.31,51,010/- claimed under the declaration for the above period in respect of renting of immovable property service had already been disclosed in the respective ST-3 returns, and the said disclosed dues of Rs.31,54,010/-, were not paid during the respective period. Therefore, the petitioner did not appear eligible to make declaration for the period, as envisaged under the first proviso to Section 106(1) of the Finance Act. Therefore, a notice dated 26th December, 2013 proposing rejection of this declaration relating to renting of immovable property service for the tax dues of Rs.31,54,010/- was issued.

Thereafter, the designated authority rejected the application/declaration.

Against this order, a Writ Petition was filed before the Bombay High Court.

It is submitted that there is nothing in the scheme nor in the statue which would enable the third respondent to partly reject the VCES-1 declaration; that the third respondent has given a treatment to the service tax liability as if the third respondent was not considering any such scheme, but computing the tax liability, so as to pass an adjudication order; that the writ petition be allowed and a direction be issued to the Authority to reconsider the application in accordance with the scheme and law.

The counsel for the Revenue inter alia submitted that the Designated Authority is given the power to administer the scheme and its' views should not be substituted by the Court unless they are found to be totally erroneous in law or arbitrary and perverse.

The High Court observed -

+ The respondent no.3 undertook the task of preparing tables and making a comparative analysis and these two tables which have been referred by him …would indicate as to how he arrived at the conclusion that it is only in some ST 3 returns that the figures disclosed therein do not match with the declaration under the scheme. How he could have omitted the figures indicated in the scheme or make his own calculation so as to bifurcate the declaration or the liability in terms thereof, has not been indicated in the impugned order at all.

+ If the persons like the petitioner can make the declaration and in terms of the scheme, then, there should be something in the enactment and namely the Finance Act so as to make the bifurcation or a breakup of the liability to pay tax. The respondent no.3 has referred to Section 106(1) of the Finance Act and the proviso therein to arrive at the conclusion that any person who has furnished return under Section 70 of Chapter and disclosed his true liability but has not paid the disclosed amount of service tax or any part thereof, then he is not eligible for the declaration for the period covered by the said return.

+ We do not understand as to how merely because what has been disclosed as true liability in the returns filed pertaining to service tax by parties like the petitioner that the amount not paid in furtherance of such disclosure would disable the parties like the petitioner from presenting the declaration in the scheme. Mr. Jetly was unable to point out any provision by which parties like the petitioners are not eligible for the VCS scheme.

+ What has been indicated by clause 106 is that any person may declare his tax dues in respect of which no notice or order of determination under Sections 72 or 73 or 73(a) of the Chapter has been issued or made before the 1st day of March 2013, provided any person who has furnished return under Section 70 of the Chapter and disclosed his true liability but had not paid his tax amount for the service tax or part thereof, shall not be eligible to make declaration for the period covered by the said return. This proviso, therefore, disables such a person from making a declaration for the period covered by the return. That is a distinct eventuality then that is dealt with in the impugned order.

+ Here, the authority undertakes the task of bifurcating or computing the liability by showing some disparity or difference in the figures of the service tax returns, and the disclosures or the declarations filed in a prescribed form pursuant to this scheme. We have no provision therefore before us which would enable us to sustain the exercise and which is carried out by the respondent no.3.

+ We do not see how therefore the clauses of the scheme would enable the authority to come to this conclusion. It may be that the eventual order or direction would uphold the declaration or while upholding it issue such other orders and directions, as are permissible in the scheme. However, to reject the scheme outright by the exercise undertaken was not permissible.

The order was quashed and set aside & the Writ Petition was allowed.

The designated authority was directed to deal with the declaration afresh.

The High Court also added - Beyond interfering with the exercise undertaken and in our limited jurisdiction, we have not expressed any opinion on the merits of the declaration or the contentions in relation thereto.

(See 2015-TIOL-633-HC-MUM-ST)