2018 (5) TMI 1474 - HC - Service Tax

Court deems denial of benefits under Voluntary Compliance Encouragement Scheme unjust. Finance Act omission renders rejection unreasonable.

NEYYATTINKARA MUNICIPALITY Versus DEPUTY COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, ASSISTANT COMMISSIONER OF CENTRAL EXCISE AND Others.

The court held that denying the petitioner benefits under the Voluntary Compliance Encouragement Scheme, 2013 solely due to not submitting an amended ... Declaration made under Voluntary Compliance Entitlement Scheme - rejection on the ground that they have not submitted the amended declaration in accordance with the procedure prescribed in Circular No.170/5/2013-ST dated 8.8.2013 - Held that: - As per the said circular, in a case where a mistake is discovered in the declaration by the declarant, he has to approach the designated authority who, after taking into account the over all facts of the case, may allow amendments to be made in the declaration provided that the amended declaration is furnished by the declarant on or before 31.12.2013. The Scheme is one brought into force in terms of the provisions contained in the Finance Act, 2013. The Finance Act, 2013 does not deal with the amendments to be made to the declaration provided for under the Scheme. It is in terms of Circular No.170/05/2013-ST dated 8.8.2013, tax payers were permitted to amend the declaration without changing the date of payment. Insofar as the Finance Act, 2013, does not deal with the amendment of the declaration made under the Scheme - denial of the benefits of the Scheme to the petitioner merely for the reason that the petitioner has not furnished the amended declaration within the time stipulated in terms of the Circular is unjust, unfair and unreasonable. The first respondent is directed to consider whether the petitioner has paid the service tax payable in terms of the Scheme within the time stipulated and if found so, extend them the benefits of the Scheme - petition allowed. Issues:1. Rejection of declaration under the Voluntary Compliance Encouragement Scheme, 2013.2. Procedure for making declaration and payment of tax dues under the Finance Act, 2013.3. Denial of benefits of the Scheme due to failure to submit an amended declaration within the stipulated time.Issue 1: Rejection of declaration under the Voluntary Compliance Encouragement Scheme, 2013The petitioner, a Local Self Government Institution under the Kerala Municipality Act, was found liable to pay service tax for services rendered. The petitioner, upon learning of their obligation, participated in the Voluntary Compliance Encouragement Scheme, 2013 (the Scheme). The petitioner declared a service tax liability of &8377; 38,20,455 and paid 50% of the amount as per the Scheme. However, upon realizing an error, the petitioner corrected the liability to &8377; 33,25,642 and paid the balance within the stipulated time. Despite this, the first respondent rejected the declaration under the Scheme, citing the petitioner's failure to submit an amended declaration as per Circular No.170/5/2013-ST. The court found the denial of benefits unjust, as the Finance Act, 2013 did not address the amendment process, which was detailed in the Circular.Issue 2: Procedure for making declaration and payment of tax dues under the Finance Act, 2013Section 107 of the Finance Act, 2013 outlines the procedure for making a declaration for settling tax liabilities under the Scheme. The declarant must submit the declaration by December 31, 2013, pay at least 50% of the tax dues by the same date, and settle the remaining amount by June 30, 2014. The Act does not specify the amendment process for declarations under the Scheme. Circular No.170/5/2013-ST allowed declarants to amend declarations without altering payment dates. The court noted that the denial of Scheme benefits based on failure to submit an amended declaration within the Circular's timeframe was unreasonable.Issue 3: Denial of benefits of the Scheme due to failure to submit an amended declaration within the stipulated timeThe court held that denying the petitioner benefits under the Scheme solely due to not furnishing an amended declaration within the Circular's deadline was unjust and unfair. As the Finance Act, 2013 did not address amendment procedures for declarations under the Scheme, the court found the rejection of benefits based on this ground unreasonable. Consequently, the court allowed the writ petition, set aside the order rejecting the petitioner's declaration, and directed the first respondent to assess whether the petitioner fulfilled the service tax payment within the Scheme's timeline and grant benefits accordingly.This analysis of the judgment provides a detailed overview of the issues involved, the court's reasoning, and the ultimate decision rendered by the court in the case.