By TIOL News Service

MUMBAI, JAN 24, 2017: THE appellant is in appeal against o-in-o dated 31 st December 2015 of CCE, Aurangabad which invoked section 111(1) of Chapter VI of Finance Act, 2013 (Voluntary Compliance Encouragement Scheme, 2013) empowering the Commissioner to place a declarant under the scheme on notice to be called upon to pay tax for filing a false declaration.

The impugned order proceeds on the factual matrix of appellant having declared Rs.39,03,995/- instead of Rs.40,80,693/-.

The declarant, in response to the notice intimated payment of the difference of Rs.1,76,699/- and also paid interest.

The impugned order imposed penalty of Rs.40,80,693/- u/s 78 of Finance Act, 1994 which appellant is aggrieved by.

In appeal before the CESTAT, the appellant submitted that they had miscalculated the tax liability as they were not aware of change in rates and that full payment of tax and interest had been made before issue of notice.

The Bench observed -

++ That full payment of tax and interest was made before issue of show cause notice is apparent. There is also no reason to attribute mala fide intent to evade tax as the shortfall was less than 3% of total dues. Surely, no prudent business entity would jeopardize their chances of amnesty by deliberate non-payment of such paltry amount.

++ The finding of suppression of fact with deliberate intent to evade tax appears to be erroneous. Considering the objective of the scheme and substantive compliance, imposition of penalty under section 78 of Finance Act, 1994 is unduly harsh and unwarranted.

The penalty imposed was set aside and the Appeal was allowed to that extent.

Quick reference:

Failure to make true declaration.

111. (1) Where the Commissioner of Central Excise has reasons to believe that the declaration made by a declarant under this Scheme was substantially false, he may, for reasons to be recorded in writing, serve notice on the declarant in respect of such declaration requiring him to show cause why he should not pay the tax dues not paid or short-paid.

(2) No action shall be taken under sub-section (1) after the expiry of one year from the date of declaration.

(3) The show cause notice issued under sub-section (1) shall be deemed to have been issued under section 73, or as the case may be, under section 73A of the Chapter and the provisions of the Chapter shall accordingly apply.

De minimis principle. See - 2016-TIOL-1382-HC-DEL-ST.

(See 2017-TIOL-213-CESTAT-MUM)