Tribunal overturns decision, grants relief under VCES Scheme for minor discrepancy in declaration

The Tribunal allowed the appeal in favor of the appellant, setting aside the decision of the Adjudicating Authority. The Tribunal found that the appellant's VCES declaration, despite a minor discrepancy, was true to a high extent, and the rejection of the VCES application for a technical lapse was deemed improper. The Tribunal noted that no substantial falsity was present in the declaration, as the difference between the declared and actual values was minimal due to a clerical error. Therefore, the appellant was granted relief under the VCES Scheme.

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Issues:
1. Calculation of service tax liability at incorrect rate.
2. Validity of VCES declaration.
3. Rejection of VCES application.

Analysis:
1. The appellant, a manufacturer of sponge iron, availed services of Goods Transport Agencies and discharged service tax under reverse charge mechanism. The appellant failed to pay service tax on GTA services due to financial constraints. After discrepancies were pointed out by the Audit Wing, the appellant filed a VCES declaration, declaring the gross value of goods and service tax dues. The department issued a show cause notice alleging short payment by the appellant. The Ld. Commissioner confirmed a duty demand against the appellant and imposed penalties under Sections 77 and 78 of the Finance Act, 1994.

2. The appellant contended that the service tax liability was mistakenly computed at 10% instead of the prescribed 12%. The differential amount was paid along with interest, making the VCES declaration true to 99.87%. The appellant relied on a CBEC Circular and a Supreme Court judgment to support the claim that a declaration should be considered false only if non-compliance exceeds 50%.

3. The Revenue, represented by the Ld. DR, supported the findings in the impugned order. Referring to a Delhi High Court judgment, it argued that as there were no provisions in the VCES Scheme to correct errors in the declaration, rejection of the VCES application and confirmation of the demand were in line with statutory provisions.

4. After hearing both sides and examining the records, the Tribunal noted that no show cause proceedings were initiated for the recovery of the unpaid service tax. The difference between the declared value and the actual value was minimal, attributed to a clerical error. As the declared value was true to a high extent, the Tribunal found no substantial falsity in the declaration, in line with CBEC Circular No.170/5/2013-ST. Denying benefits under the VCES Scheme for a technical lapse was deemed improper and unjustified.

5. Consequently, the Tribunal found no merit in the impugned order and allowed the appeal in favor of the appellant, setting aside the decision of the Ld. Adjudicating Authority.

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