Court quashes order rejecting VCES application, petitioner eligible for benefits, remanded for fresh consideration

The court quashed the order dated 14.03.2014 rejecting the petitioner's application under the Voluntary Compliance of Excise and Service Tax Scheme (VCES) due to lack of audit initiation before the scheme's cut-off date. Subsequent orders dated 25.04.2014 and 28.05.2014 were affected by this decision. The petitioner was found eligible for VCES benefits as no pending audit existed before the scheme's commencement. The matter was remanded for fresh consideration with instructions for a personal hearing and unbiased decision-making by the second respondent.

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Issues: Whether the declaration under the Voluntary Compliance Encouragement Scheme was liable to be rejected on the ground that an audit had been initiated and was pending as on 01.03.2013.

Analysis: The scheme permits rejection where an inquiry, investigation or audit had been initiated and was pending on the relevant cut-off date. The record showed that there was no audit initiated against the petitioner or at its business premises before 01.03.2013. The communication relied upon by the department was only issued on 07.03.2013 and was not an intimation of an audit objection before the cut-off date. The petitioner had also acted promptly and disclosed its liability, which supported its plea that the statutory disqualification was not attracted.

Conclusion: The rejection of the declaration was unsustainable and the petitioner was entitled to fresh consideration of its VCES application.

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