By TIOL News Service

MUMBAI, APRIL 07, 2017: THE petitioners are inter-alia engaged in the business of providing "Auxiliary services".

Call center services were provided to various clients located in India resulting in the petitioners raising invoices for their service charges alongwith service tax thereon in terms of Rule 4A of the STR, 1994.

The petitioner claims that certain expenditure is incurred by them for their clients which is reimbursed by the clients. The petitioners' were of the view that such reimbursement is not subject to service tax.

Pursuant to an audit conducted by the department for the period 2005-2006 to 2007-2008, the petitioners were called upon to pay service tax and an amount of Rs.13,33,972/- along with interest was paid. This was accepted by the monitoring committee and the matter was closed.

Later, upon the advent of the ST VCES, 2013, the petitioner filed an application on 21st October 2013 declaring and voluntarily paying the entire sum of Rs.47,33,476/- for the period from April 2008 to December 2012.

The petitioners received a show-cause notice and appeared for a personal hearing on 1st September 2015.

Their VCES application was rejected.

It is submitted before the High Court that the reason that the petitioner has again failed to pay service tax on the same issue cannot be legally sound for rejecting the application . The argument is that the application is not rejected on the ground of non-compliance with paragraph 106(2). It is stated that by Paragraph 106(1) any person may declare his tax dues in respect of which no notice or an order of determination under Sections 72 or 73 or Section 73A of Chapter VI of the Finance Act, 2013 has been issued or made before the first day of March 2013; that an audit objection cannot be a show-cause nor an order.The petitioners also rely upon the paragraphs in the scheme which further clarify that it is not just a notice but an order of determination under Sections 72, 73 or 73A of Chapter which is a pre requisite. Inasmuch as since there is no determination, then, no reliance could have been placed upon an observation during the course of an audit.

The High Court observed -

"17. Upon hearing both sides and perusing the impugned order, we are of the view that the payment which has been made and for a past audit objection, for an earlier period cannot be utilized to reject the application as is now made by the present writ petitioner. The application invoking VCES has to be considered and if at all rejected, it must be on the touchstone of the paragraphs of the VCES, 2013 and the wording thereof. The scheme itself cannot be defeated by holding that on the earlier occasion, parties like the petitioners have accepted their liability.

19. The authorities need not be so anxious to protect the government revenue and reject the applications, as are made in the present case by closing the files instantaneously. They have to apply their mind. They must consider the application in accordance with the paragraphs of the scheme. They must pass an order in accordance therewith. In the circumstances, finding that the conclusions reached are unsustainable in law, we quash and set aside the impugned order…"

The authorities were directed to consider the application in accordance with law, as expeditiously as possible.

The Writ Petition was allowed.

(See 2017-TIOL-670-HC-MUM-ST)