2019 (4) TMI 815 - AT - Service Tax

Tribunal Invalidates Order, Upholds Validity of Appellant's Declaration Under 2013 Scheme

The Tribunal set aside the Principal Commissioner's order, determining that the appellant's declaration under the 2013 Scheme was valid and not ... Voluntary Compliance Encouragement Scheme - rejection on the ground that false declaration under Chapter VI relating to “Service Tax Voluntary Compliance Encouragement Scheme, 2013” made - appellant claims that it had submitted the declaration under Section 107(1) of the 2013 Scheme under a mistaken belief of law that reimbursement of expenses are liable to service tax under Business Support Services. Held that:- In the present case, the appellant had declared the service tax on reimbursement of expenses under “Business Support Service” even though in law, the appellant may not have been required to pay service tax in view of the decision of the Supreme Court in Union of India Vs. Intercontinental Consultants and Technocrats Private Limited [2018 (3) TMI 357 - SUPREME COURT OF INDIA] - It is also not in dispute that the Department has not found anything false much less substantially false, in the declaration made by the appellant on 30 December 2013 in regard to “Business Support Service”. The Show cause notice, however, proceeds on the footing that the appellant failed to disclose the services in regard to “Banking and Financial Services.’. The form requires a declarant to furnish a calculation sheet separately if service tax dues is in respect of more than one service. It is in such a situation, that the declarant has to furnish separate calculation sheets. It does not mean, under any circumstances, that a declarant must necessarily disclose ‘all the taxes dues’ to take the benefit of 2013 Scheme. The Commissioner committed an error in holding that any person who decides to declare tax dues under the scheme has to declare “all” service tax dues and there is no option to include some service and leave out some services - appeal allowed - decided in favor of appellant. Issues Involved:1. Entitlement to immunity under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (2013 Scheme).2. Validity of the declaration made under Section 107(1) of the 2013 Scheme.3. Allegation of substantially false declaration under Section 111 of the Finance Act, 1994.4. Recovery of remaining tax dues, imposition of penalty, and interest.Issue-wise Detailed Analysis:1. Entitlement to Immunity Under the 2013 Scheme:The appellant sought immunity under the 2013 Scheme by declaring tax dues for 'Business Support Services' and 'Manpower Recruitment Service' for the period from April 2011 to June 2012. The Principal Commissioner denied immunity, asserting that the appellant made a substantially false declaration by not disclosing tax dues for 'Banking and Financial Services' obtained from foreign service providers. The Tribunal emphasized that the 2013 Scheme aimed to encourage truthful declarations of tax dues for the period from October 2007 to December 2012, with immunity from penalties and interest upon compliance.2. Validity of the Declaration Made Under Section 107(1) of the 2013 Scheme:The appellant's declaration under Section 107(1) was challenged on the grounds of non-disclosure of tax dues for 'Banking and Financial Services.' The Tribunal highlighted that Section 106 allows declarations for tax dues not covered by prior notices or orders. The Circular dated 8 August 2013 clarified that declarations could be made for issues not part of an audit para. The Tribunal concluded that the appellant's declaration for 'Business Support Services' was valid, as it was not required to declare all services under the 2013 Scheme.3. Allegation of Substantially False Declaration Under Section 111 of the Finance Act, 1994:The Principal Commissioner invoked Section 111, alleging the appellant's declaration was substantially false due to the omission of 'Banking and Financial Services.' The Tribunal found that the appellant's declaration for 'Business Support Services' was not false, as the Department did not dispute this service. The Tribunal also noted that the appellant's non-disclosure of 'Banking and Financial Services' did not constitute a false declaration under Section 111, as the appellant was under a bona fide belief that no tax was payable for this service.4. Recovery of Remaining Tax Dues, Imposition of Penalty, and Interest:The Principal Commissioner ordered the recovery of Rs. 45,72,716/- as remaining tax dues, appropriated the amount already paid, and imposed penalties and interest. The Tribunal found that the recovery and penalties were based on the incorrect assumption that the appellant's declaration was substantially false. The Tribunal emphasized that the appellant's declaration for 'Business Support Services' was valid and not false, and thus, the order for recovery and penalties could not be sustained.Conclusion:The Tribunal set aside the Principal Commissioner's order, concluding that the appellant's declaration under the 2013 Scheme was valid and not substantially false. The Tribunal emphasized that the appellant was not required to declare all services and that the Department could initiate separate proceedings for any undisclosed services. The Tribunal's decision underscored the importance of the 2013 Scheme's objective to encourage truthful declarations and compliance.