2018 (2) TMI 408 - HC - Service Tax

Karnataka HC allows writ petition challenging rejection of VCES 2013 declaration for service tax payment timing

Premier Associates Versus The Assistant Commissioner of Service Tax

Karnataka HC allowed writ petition challenging rejection of declaration under Voluntary Compliance Encouragement Scheme (VCES) 2013. Petitioner's ... Voluntary Compliance Encouragement Scheme (VCES) - rejection of declaration on the ground that the tax payable and due to the petitioner as declared under the said VCES, 2013 was paid before the date of promulgation itself on 10.5.2013 - Held that: - the petitioner admittedly has complied with all the relevant conditions of VCES, 2013 and therefore, its declaration, prima facie, deserved to be accepted and has been wrongly rejected by the respondent – Assistant Commissioner - there is no prohibition in VCES, 2013 itself for the Service Tax demand due, and payable for the period October 2007 to December 2012, which was due and payable as on 1.3.2013, and the same could be paid between the period 1.3.2013 and 10.5.2013 , when the VCES Scheme itself was announced. In the absence of any such prohibition, the respondent–Assistant Commissioner could not reject the Declaration solely on this ground. This Court is clearly of the opinion that the rejection of the Declaration of the petitioner under VCES, 2013 by the respondent– Assistant Commissioner was unjustified and cannot be sustained and the Writ Petition therefore deserves to be allowed and the same is accordingly allowed - the matter is remanded back to the said Assistant Commissioner, Mangalore for passing a fresh order in accordance with law - petition allowed by way of remand. Issues:1. Rejection of Declaration under Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES, 2013) by Assistant Commissioner.2. Interpretation of provisions of Finance Act, 2013 and VCES, 2013 regarding payment of tax dues.3. Compliance with conditions of VCES, 2013 by the petitioner.4. Comparison with Division Bench judgment of Gujarat High Court.5. Justification of rejection of Declaration by the Assistant Commissioner.Issue 1: Rejection of Declaration under VCES, 2013The petitioner, aggrieved by the rejection of its Declaration under VCES, 2013 by the Assistant Commissioner, challenged the rejection on the grounds that the tax dues declared were paid before the enactment of the scheme. The Assistant Commissioner rejected the declaration as the tax dues were paid before the scheme's promulgation on 10.5.2013, citing a circular clarifying that interest or penalty liabilities on tax dues paid before the scheme's enactment shall be adjudicated separately.Issue 2: Interpretation of Provisions of Finance Act, 2013 and VCES, 2013The petitioner argued that the Finance Act, 2013 and VCES, 2013 did not prohibit the payment of Service Tax dues before the scheme's announcement, and the circular did not restrict such payments. The Court noted that the scheme allowed payment of outstanding taxes between 1.3.2013 and 10.5.2013 without any negative stipulations. The Court emphasized that the circular did not empower the authorities to determine interest or penalty liabilities after rejecting a declaration.Issue 3: Compliance with VCES, 2013 ConditionsThe Court found that the petitioner had complied with all relevant conditions of VCES, 2013, making its declaration deserving of acceptance. The Court highlighted the definitions of 'tax dues' and eligibility criteria for making declarations under the scheme, emphasizing that the petitioner met these requirements.Issue 4: Comparison with Gujarat High Court JudgmentThe Court referenced a Gujarat High Court judgment that clarified the position of declarants under VCES, 2013. The Court noted that the Gujarat High Court held that taxes paid between 1.3.2013 and 10.5.2013 should be considered for declaration under the scheme, rejecting the argument that such payments should be excluded.Issue 5: Justification of Rejection by Assistant CommissionerAfter analyzing the arguments and legal provisions, the Court concluded that the rejection of the petitioner's declaration was unjustified. The Court quashed the Assistant Commissioner's order, remanding the matter for a fresh decision in accordance with the law and granting necessary immunity to the petitioner for the relevant period. Additionally, a subsequent Show Cause Notice was also quashed in light of the allowed Writ Petition.This detailed analysis of the judgment highlights the key issues, legal interpretations, compliance with statutory provisions, comparison with relevant judgments, and the justification for overturning the Assistant Commissioner's rejection of the petitioner's declaration under the VCES, 2013.