2018 (3) TMI 274 - AT - Service Tax

Tax Tribunal Upholds VCES Benefit Despite Audit; Precedent Clarifies Eligibility Criteria

The Tribunal upheld the Commissioner's decision, allowing the respondent to benefit from the Voluntarily Compliance Encouragement Scheme, 2013 (VCES) ... Voluntary Compliance Entitlement Scheme - whether in the facts and circumstances of the case, the provisions of Section 106(1) of Finance Act, 2013 debars the respondent not to take benefit of the scheme or not? - Held that: - Admittedly, for the earlier period, during the course of audit an objection was raised and respondent immediately reversed the Cenvat credit along with interest proceedings against the respondent were closed. The issue raised by the Revenue is that as the order of determination of their service tax liability, therefore, the respondent are not entitled to avail the benefit of Section 106(1) of the Finance Act, 2013. The similar issue came up before the Honble High Court of Bombay in the case of Pace Setter Business Solutions Pvt. Ltd. [2017 (4) TMI 564 - BOMBAY HIGH COURT] wherein on the identical facts the Hon’ble High Court hold that the assessee is entitled to avail the benefit of the scheme. Appeal dismissed - decided against Revenue. Issues:Whether the respondent can avail the benefit of the Voluntarily Compliance Encouragement Scheme, 2013 (VCES) despite a prior determination of service tax liability for a different period.Analysis:The case involves a dispute over the eligibility of the respondent to benefit from the VCES 2013 due to a prior determination of service tax liability. The Revenue contended that Section 106(1) of the Finance Act, 2013 bars the respondent from availing the scheme if there was a determination of their service tax liability for a period prior to the one for which VCES was filed. The Revenue argued that the decision in Pace Setter Business Solutions Pvt. Ltd. case, relied upon by the Commissioner (Appeals), was not applicable to the present case. The Commissioner (Appeals) held that the audit objection raised against the respondent did not constitute an 'order of determination' under Section 73 of the Finance Act, 1994, as no show cause notice had been issued. The Commissioner emphasized that the VCES declaration could not be rejected solely based on similarity to an earlier audit observation.The Tribunal examined the Commissioner's findings and referred to a similar case before the Bombay High Court, Pace Setter Business Solutions Pvt. Ltd., where the court allowed the assessee to benefit from the scheme despite a prior audit observation. The Tribunal found no infirmity in the Commissioner's order and upheld the decision, dismissing the Revenue's appeal. The Tribunal highlighted that the VCES declaration could not be rejected solely on the ground of similarity to an earlier audit observation, as per the precedent set by the Bombay High Court. The Tribunal's decision was based on the interpretation of Section 106(1) of the Finance Act, 2013 and the application of relevant legal principles regarding the eligibility for the VCES scheme.In conclusion, the Tribunal's decision clarified that the respondent was entitled to avail the benefit of the VCES 2013 despite a prior audit observation, as the audit objection did not constitute an 'order of determination' under the Finance Act, 1994. The judgment emphasized the importance of considering the specific provisions of the VCES scheme and not rejecting applications based solely on past audit observations.