VCES – Dear FM, your officers are trying hard to defeat Scheme
DDT 2197 - 25.09.2013, commented, "THE Voluntary Compliance Encouragement Scheme (VCES) is heading for a huge failure and prospective applicants are scared to approach the Department as the declarants are being targeted by the Preventive Wing of the Department."
Many thought this to be an exaggeration, but actually it was a gross understatement. See what happened in Noida recently.
On the basis of a declaration made by an assessee under the VCES, the Service Tax Department issued a notice to the clients of the assessee informing them that the assessee owes an amount of Rs. 60 lakhs and the Department wanted the clients to pay the amount. The Department also issued notices to the bankers of the assessee.
The assessee approached the High Court with the plea that he was liable to pay the Service Tax, but as he had made an application under the Service Tax Voluntary Compliance Encouragement Scheme he can deposit 50 percent of the tax by December 31 2013 and the balance latest by 31 December 2014. The Recovery action by the Department was a little too premature.
The Department argued before the High Court that it was well within its rights to initiate recovery proceedings in spite of a pending application under VCES!!!!!.
The High Court held that the object of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 may be defeated, if the recovery is allowed to proceed. The High Court suspended the recovery proceedings and ordered release of the bank accounts.
We bring you this judgement today. Please see Breaking News
A Consultant asked me, if this is the position when the scheme is still on – imagine what would be the situation post December 2013?.
The FM wants the scheme to be a success, but his officers are determined to frustrate his efforts. It is nothing but perverted brilliance that would make an officer attach the properties of a declarant under a voluntary compliance scheme passed by Parliament and enthusiastically promoted by the Finance Minister! In fact the Department is spending huge money for advertising the scheme and if this is the attitude of the officers, the Government will not be able to recover even the cost of advertisements.
The message that the officers seem to be sending is - Beware of VCES; Come at your own risk, survivors will be prosecuted.