VCES declaration rejection requires proof of pending enquiry and compliance with statutory limitation; circulars cannot override the Act.

A VCES declaration may be rejected only if the statutory preconditions under Section 106(2) of the Finance Act, 2013 are established, namely a pending enquiry, investigation or audit on the relevant date. The record did not show reliable documentary proof of such a pending proceeding; later verification activity and summons were insufficient. Action against a false declaration also had to be taken within the one-year limitation in Section 111(2), and the rejection notice was issued beyond that period. An executive circular could not override or extend the statutory time limit. The declaration was therefore not liable to rejection, and immunity under the scheme remained available subject to its express exceptions.

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Issues: Whether rejection of the VCES declaration was sustainable when the alleged pending enquiry was not established and action on the declaration was taken beyond the statutory period of one year.

Analysis: The declaration under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 could be rejected only if the conditions in Section 106(2) of the Finance Act, 2013 were satisfied. The record did not disclose reliable documentary proof of a pending enquiry, investigation or audit as on the relevant date. The materials relied upon showed verification activity and later summons, but not a pending proceeding of the kind contemplated by the scheme. Further, Section 111(2) of the Finance Act, 2013 prescribed a limitation of one year for taking action against a false declaration, and the notice proposing rejection was issued beyond that period. The circular prescribing a 30-day notice period could not control the statute, but the statutory limitation under Section 111(2) remained binding. Section 108 also supported immunity from other proceedings except those specifically provided in the scheme.

Conclusion: The rejection of the VCES declaration was unsustainable and the assessee was entitled to relief.

Ratio Decidendi: A VCES declaration cannot be rejected unless the statutory preconditions of pending enquiry, investigation or audit are established, and action against the declaration must be taken within the limitation period fixed by the governing statute; an executive circular cannot extend or override that statutory limit.

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