VCES Declaration cannot be rejected on hyper-technical grounds - Amount paid under interest & penalty codes, corrected by PAO as ST on request by assessee - Not a case for rejection of VCES on ground that amount was initially paid as interest and penalty: HC
By TIOL News Service
AHMEDABAD, NOV 02, 2015: THE Petitioner's unit was audited by the officers of the department during June / July 2013. The Petitioner paid Service Tax along with interest and penalty in respect of some of the paras as they were not appraised of the VCES scheme. Subsequently, they filed VCES declaration in respect of the Service Tax dues pointed out by the audit.
The petitioner informed the Commissioner of Service Tax that it had declared tax dues of Rs.20,63,597/- under VCES and requested to consider payment of tax amounting to Rs.7,62,784/- (paid under correct tax accounting code), Rs.4,36,401/- (paid wrongly under interest code) and Rs.48,100/- (paid wrongly under penalty code), totalling to Rs.12,47,285/- to be considered as payment made in manpower service tax code as part compliance under VCES.
The petitioner requested the Assistant Commissioner for change in the accounting code of penalty and interest. The Assistant Commissioner of Service Tax, Ahmedabad, by a letter dated 21.05.2014, requested the e-Pay and Accounts Office, Service Tax, Mumbai to rectify the wrong accounting head selected by the petitioner for payment of service tax and change the accounting code of above paid interest and penalty to service tax. By a communication dated 30.05.2014, the e-Pay and Accounts Office, Service Tax, Mumbai informed the Assistant Commissioner of Service Tax, Ahmedabad regarding the correction of accounting head of interest and penalty to service tax. Thus, a total amount of Rs.6,84,203/- came to be corrected from the accounting code of interest and penalty to service tax.
However, the VCES declaration was sought to be rejected by invoking Section 107(4) of the Finance Act, 2013 on the ground that the amount in question to the tune of Rs.6,84,203/- had been paid towards the interest and penalty. Therefore, the amount paid towards interest and penalty cannot be considered as tax amount and consequentially, cannot be adjusted against the tax dues declared by the petitioner.
After hearing both sides, the High Court held:
+ It was after the introduction of the Scheme, that the petitioner in ignorance of the Scheme paid the amount payable towards service tax, penalty and interest in relation to four revenue paras. At that point of time, the respondent authorities did not draw the attention of the petitioner to the fact that it could avail of the benefit of the Scheme. However, well within the time limit prescribed under the Scheme, the petitioner in due compliance with the provisions of the section 107 of the Act, submitted a declaration under sub-section (1) thereof and paid more than fifty per cent of the tax dues before 31st December, 2013 as required under sub-section (3) thereof and in order to comply with the provisions of sub-section (4), viz. payment of the remaining amount, requested for adjustment of an amount of Rs.6,36,103/- paid under the wrong accounting code of interest and penalty to the correct code of service tax, which request was duly acceded to by the respondent authorities and such correction was made before 30th May, 2014. Under the circumstances, when the entire amount as contemplated under the Scheme stood paid before the due date and the petitioner satisfied all other requirements under the Scheme, the respondents are not justified in denying the benefit of the Scheme to the petitioner only on the ground that the amount of Rs.6,36,103/- had initially been paid towards the interest and penalty. The impugned communication/order which seeks to deny the benefit of the Scheme to the petitioner under such hypertechnical plea, therefore, cannot be sustained.
(See 2015-TIOL-2522-HC-AHM-ST)
