Court rules in favor of petitioner on tax compliance, quashes denial under VCES, emphasizes taxpayer awareness

Ask Me Enterprise Versus Union of India And 2

Ask Me Enterprise Versus Union of India And 2 - 2015 (40) S.T.R. 1041 (Guj.) Issues Involved:
1. Eligibility under the Service Tax Voluntary Compliance Encouragement Scheme (VCES).
2. Compliance with the provisions of Section 107 of the Finance Act, 2013.
3. Adjustment of payments made under the wrong accounting code.
4. Denial of benefits under VCES on technical grounds.

Detailed Analysis:

1. Eligibility under the Service Tax Voluntary Compliance Encouragement Scheme (VCES):
The petitioner challenged the legality of the communication dated 20.03.2015, which held that the petitioner was not eligible under VCES due to non-fulfillment of conditions under sub-section (4) of section 107 of the Finance Act, 2013. The petitioner argued that they had paid the required service tax, interest, and penalty for four revenue paras, but did not agree with the fifth revenue para and did not pay the service tax amounting to Rs. 12,97,785/-. The petitioner later filed a declaration under VCES for unpaid service tax amounting to Rs. 20,63,957/- for the period April 2008 to December 2012.

2. Compliance with the provisions of Section 107 of the Finance Act, 2013:
The petitioner contended that they had complied with the requirements of VCES by paying more than 50% of the declared tax dues before the stipulated date and requested the adjustment of amounts wrongly paid under interest and penalty codes to service tax. The respondents, however, argued that the petitioner failed to pay the full amount of Rs. 20,63,597/- within the stipulated time, as the amount of Rs. 6,36,103/- initially paid under interest and penalty could not be adjusted towards service tax dues.

3. Adjustment of payments made under the wrong accounting code:
The petitioner informed the authorities about the wrong accounting code and requested the adjustment of Rs. 6,84,203/- from interest and penalty to service tax. This adjustment was acknowledged and corrected by the e-Pay and Accounts Office, Service Tax, Mumbai, before 30.05.2014. The respondents, however, raised a technical objection, arguing that the amount initially paid under interest and penalty could not be considered as payment towards service tax.

4. Denial of benefits under VCES on technical grounds:
The court observed that the petitioner had paid the entire tax dues declared under VCES before the due date, including the corrected amount of Rs. 6,36,103/-. The respondents' argument that the initial payment under the wrong accounting code disqualified the petitioner from VCES benefits was deemed hyper-technical. The court emphasized that the authorities should inform assessees about such beneficial schemes and not deny benefits on technical grounds.

Conclusion:
The court held that the petitioner had duly paid the remaining amount of Rs. 6,36,103/- before 30th June 2014, in compliance with sub-section (4) of section 107 of the Finance Act, 2013. Consequently, the impugned communication dated 20.03.2015 was quashed, and the designated authority was directed to issue the acknowledgment of discharge of the declared tax dues by issuing Form VCES-3 in favor of the petitioner. The petition was allowed with no order as to costs.