VCES declaration rejection upheld where pre-cut-off inquiry had already begun and no separate hearing was statutorily required.

Section 106 of the Finance Act, 2013 required rejection of a Voluntary Compliance Encouragement Scheme declaration where inquiry, investigation, summons, or requisition of documents had already been initiated before the cut-off date and remained pending. Departmental communications seeking ST-3 returns and accounts, together with the scrutiny referred to in the show cause notice, showed that the disqualifying inquiry had begun before 1 March 2013, so the declaration was rightly rejected. The absence of a separate pre-decisional hearing did not invalidate the rejection because the provision did not require one, and the prior communications had already put the assessee on notice of the scrutiny.

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Issues: Whether the assessee's declaration under the Voluntary Compliance Encouragement Scheme was liable to be rejected because inquiry or investigation had already been initiated before the statutory cut-off date, and whether absence of prior notice or hearing vitiated the rejection order.

Analysis: Section 106 of the Finance Act, 2013 bars declaration of tax dues where, before 1 March 2013, notice or determination had already been issued, and also requires rejection where inquiry, investigation, summons, or requisition of documents had been initiated and was pending. The assessee had received departmental communications seeking ST-3 returns and accounts before the cut-off date, and the show cause notice itself referred to scrutiny already undertaken on the basis of those communications. The statutory language made rejection obligatory once the disqualifying inquiry had commenced. The absence of a separate pre-decisional hearing did not invalidate the order, as the provision itself did not require such hearing and the departmental communications had already put the assessee to notice of the scrutiny.

Conclusion: The declaration was correctly rejected under Section 106 of the Finance Act, 2013, and the challenge based on procedural unfairness failed.

Final Conclusion: The rejection of the VCES declaration was sustained, and the appeal failed.

Ratio Decidendi: Where inquiry, investigation, or requisition of documents in respect of service tax dues had been initiated before the VCES cut-off date, the designated authority was bound to reject the declaration, and a separate pre-rejection hearing was not required unless the statute so provided.

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