Pending audit disqualifies voluntary compliance benefit where undisclosed service is found before the statutory cut-off date.

A pending audit on the statutory cut-off date disqualifies a declarant from the Voluntary Compliance of Excise and Service Tax Scheme under Section 106(2) of the Finance Act, 2013. The audit bar operates independently of the clause relating to inquiry or investigation and is not confined to services already registered or disclosed by the assessee. Because the audit had already uncovered an undisclosed renting of immovable property service and remained pending on 01.03.2013, the declaration was correctly rejected. The rejection of the scheme benefit was upheld.

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Issues: Whether the appellant was entitled to the benefit of the Voluntary Compliance of Excise and Service Tax Scheme notwithstanding that an audit had been initiated and was pending on 01.03.2013, and whether the audit had to be confined only to the already registered services.

Analysis: Section 106(2) of the Finance Act, 2013 disqualifies a declarant where an inquiry, investigation, or audit has been initiated and is pending as on 01.03.2013. The condition in clause (b) operates independently of clause (a) and is not confined to a particular registered service. The clarification issued by the department, read strictly, does not support a narrow construction that would limit the pending audit to only the services already disclosed by the assessee. Once the audit had unearthed the unregistered renting of immovable property service and was pending on the cut-off date, the declaration was liable to be rejected. The scheme could not be invoked after the department had discovered the undisclosed service during the audit.

Conclusion: The appellant was not entitled to the scheme benefit, and the rejection of the declaration was justified.

Final Conclusion: The dismissal of the writ petition was correctly affirmed, and the appeal failed.

Ratio Decidendi: Under Section 106(2) of the Finance Act, 2013, a pending audit on the statutory cut-off date disqualifies a declaration under the voluntary compliance scheme, and the disqualification is not limited to audits concerning only already registered services.

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