VCES declaration rejection upheld where pre-March 2013 summons initiated inquiry and circular could not override the statute

Section 106(2) of the Finance Act, 2013 bars a Voluntary Compliance Encouragement Scheme declaration where an inquiry or investigation had already been initiated by summons and remained pending on 01.03.2013. A summons seeking production of records for verification of service tax liability was treated as a substantive initiation of inquiry, not a mere roving communication, so rejection of the declaration was upheld. The Board circular was read only consistently with the statute and could not create a 30-day notice limit or override the Act. A circular contrary to statutory provisions has no legal force.

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Issues: Whether a declaration under the Voluntary Compliance Encouragement Scheme, 2013 was liable to be rejected under Section 106(2) of the Finance Act, 2013 when summons had been issued before 01.03.2013 and whether the Board circular could override the statutory scheme on the time limit for issuing notice.

Analysis: Section 106(2) bars a declaration where an inquiry or investigation has been initiated by, inter alia, issuance of summons under Section 14 of the Central Excise Act, 1944, and such inquiry or investigation is pending as on 01.03.2013. The summons in question sought production of records relevant to verification of service tax liability and was not a mere roving communication. The Board circular clarified the scope of the provision only to the extent consistent with the statute. The statutory scheme did not prescribe any mandatory 30-day time limit for issuance of notice, and a circular cannot override the Act. A circular contrary to statutory provisions has no existence in law.

Conclusion: The rejection of the VCES declaration was valid, and the appeals were not sustainable.

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