By TIOL News Service

MUMBAI, APR 06, 2016: THE VCES, 2013 saga continues.

In this case, the CCE, Nagpur is thoroughly aggrieved with the order passed by the Commissioner (Appeals) accepting the payment of the first installment of 50% of the tax dues made by the applicant on 01/01/2014 although the law (section 107(3) of the Finance Act, 2013) mandated that it should be paid on or before 31/12/2013.

Inasmuch as the Commissioner (Appeals) accepted the justification offered by the applicant/appellant that having opted for the VCES, 2013 on 31/12/2013 and after obtaining service tax registration they attempted to deposit 50% of the declared dues of Rs.32.98 lakhs online but inspite of a number of attempts on the website the transaction could not be completed and what appeared on the screen was ‘Assessee code invalid' and that subsequently on 01/01/2014 they deposited the 50% amount of Rs.16.49 lakhs in the form of two bankers cheques of IDBI Bank.

The CCE, Nagpur , as mentioned, is not at all happy with this largesse and is, therefore, before the CESTAT. In the appeal filed, the Revenue has sought to derive support from the Delhi High Court decision in Teknow Overseas Ltd. - 2014-TIOL-471-HC-DEL-ST wherein it is held that if the applicant had not paid 50% dues on or before the 31/12/2013, they are not entitled for the benefit of VCES Scheme notified under Finance Act, 2013.

The appeal was heard recently.

The AR reiterated the grounds of appeal and prayed that the order passed by Commissioner(A) be set aside.

The respondent narrated the facts involved and submitted that it was due to the system failure that the 50% amount could not be deposited by them and, therefore, there is no fault on their part and hence their application under VCES could not have been rejected.

The Single Member Bench, after considering the submissions,while accepting the fact that there is no provision in the VCES Scheme for extension of the date by which the payment of 50% declared tax dues was to be deposited observed that it was due to the system fault that the amount could not be deposited and there is a report on record which showed that ‘assessee code invalid'.

The Bench further noted –

++ It is observed that on 31/12/2013 respondent's bank account in IDBI bank shows credit balance of more than 50% amount which was to be deposited. In view of these facts, respondent has scrupulously followed the procedure and complied with condition i.e. applied for registration and attempted to deposit the amount on the due date i.e. 31/12/2013 but only due to system fault online, the respondent could not deposit the amount which is beyond their control therefore, in the peculiar facts of this case it can be construed that there is no delay on the part of the respondent, hence though the payment finally made on 01.01.2014 the same can be treated as if payment was made on 31/12/2013.

The judgment relied upon by the Revenue in case of Teknow Overseas Ltd. (supra) was held to be not applicable on the ground that the facts involved are different. Inasmuch as, the Bench observed that in the said case, the assessee had knowingly asked for extension of time beyond 31/12/2013 for deposit of part of 50% dues and deliberately not deposited the amount on or before 31/12/2013 but in the present case, the respondent admittedly and bonafidely attempted to deposit an amount on 31/12/2013 but they were handicapped as the system had not accepted the payment.

Holding that the impugned order of Commissioner (Appeals) is proper and legal, the same was upheld and the Revenue appeal was dismissed.

In passing: The Order-in-Original no. IV(16)19-259/ST/AMT/2013/7383 is dated 27/11/2014 and the Order-in-Appeal No. NGP/EXCUS/000/APP/187/15-16 is dated 11/06/2015.

Interestingly, section 113 of the FA, 2013 [enacted on 10.05.2013] reads –

113. Power to remove difficulties . (1) If any difficulty arises in giving effect to the provisions of this Scheme, the Central Government may, by order, not inconsistent with the provisions of this Scheme, remove the difficulty: Provided that no such order shall be made after the expiry of a period of two years from the date on which the provisions of this Scheme come into force. (2) Every order made under this section shall, as soon as may be after it is made, be laid before each House of Parliament.

Hopefully, the applicant has deposited the balance amount …

Flashback: In the context of the KarVivadSamadhanScheme, 1998 (KVSS) and the objections raised by the CAG, in view of section 97 (similar to section 113 referred above), an amendment was made by the Finance Act, 2000 to the following effect –

121. Amendment of Act 21 of 1998 . - In the Finance (No. 2) Act, 1998, with effect from the 1st day of September, 1998,–

(b) in section 90, in sub-section (2), for the words “within thirty days of the passing of an order by the designated authority”, the words “within thirty days from the date of receipt of an order passed by the designated authority” shall be substituted and shall be deemed to have been substituted.

(See 2016-TIOL-812-CESTAT-MUM)