Service Tax - VCES - Default in payment of first payment by 31st December 2013 - out of the Scheme - High Court
AS per the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES), a declarant was required to pay 50% of the tax dues as declared in the prescribed form within December 31, 2013, the balance amount by June 30, 2014. There was a provision to pay the amount latest by December 31, 2014, with interest.
What happens if after the declaration, the first 50% is not paid by December 31 2013?
The Department's view is that the moment 50% of the ‘tax dues' is not paid on/or before December 31, 2013, the declaration itself becomes invalid and, therefore, the authorities are not bound to take action contemplated under Section 110 of the said Act. It is further submitted that once the conditions attached for availing the scheme framed by the appropriate authority are not fulfilled, the benefit under the said scheme cannot be extended to the petitioner. It is further contended that Section 109 of the said scheme postulates that any amount paid in pursuance of the declaration made under Sub-section (1) of Section 97 shall not be refunded under any circumstances meaning thereby that any payment made would not be treated to have been made under the said scheme .
The issue was before the High Court.
The High Court observed,
It is a settled proposition of law that the insertion of the proviso is made to regulate the enabling provision. The right conferred under the enabling provision is subject to the proviso and the conditions enshrined therein. On the meaningful reading of the proviso it appears that if the declarant fails to pay within 31st December, 2013 with interest thereof and the interpretation tried to be given by the petitioner is accepted, then the proviso would not have indicated that the interest would be calculated from 1st day of July, 2014. When there is clear indication in the proviso relating to the starting point of the limitation, there is no ambiguity to understand that such proviso is relatable to sub-section (4) of Section 107 and not sub-Section (3) thereof. The aforesaid proposition can be further fortified from sub-section (7) of Section 107 of the said Act which is in unequivocal terms says that on furnishing the details of full payment of declared tax dues and the interest, if any, payable under the proviso to sub-section (4), the designated authority shall issue an acknowledgement of discharge of such dues to the declarant in such form and in such manner as may be prescribed.
The legislature have clearly indicated that such proviso is appended to sub-Section (4) and by no stretch of imagination it would be conceived that the same can also apply in the eventuality contemplated under sub- Section (3) of Section 107 thereof.
My endeavour has failed to find out from the provision of the said scheme that once a default is committed for non-compliance of the provisions contained therein relating to the deposit, the declarant shall be thrown outside the ambit of the said scheme and shall be thrown in the pool of the chapter containing the service tax. Section 110 of the said Act clearly indicates that in the event of the default of the payment either fully or in part, the balance amount would be recovered by taking recourse to Section 87 of the Finance Act.
On meaningful reading of the provisions contained therein it appears that the immunity as to any benefit, concession or immunity granted under Section 96 shall not be available to the defaulting declarant. The aforesaid provisions have to be read conjointly with section 110 of the said Act. If default is committed under the scheme the consequences provided in the scheme is to be adhered to and the authority cannot travel beyond the boundaries set therein. The benefit under the scheme is provided to a person against whom no enquiry or investigation or other proceeding are initiated. Section 106 of the said Act makes the position clear and, therefore, the person who voluntarily declare his liability to pay service tax, if commits defaults in complying the provisions contained under the said scheme, the authorities are bound to take action under the provisions which provides for the steps to be taken for non-compliance of any of the provisions of the said scheme.
To sum up, this Court must conclude that the proviso is applicable only in respect of sub-section (4) of Section 107 and cannot be stretched to sub-section (3) of Section 107. The authorities can take recourse under Section 110 of the said Act, in the event any default is committed under the said scheme.
And the writ petition is disposed of.
INCIDENTALLY, the issue has already been decided by the High Courts of Gujarat & Delhi against the VCES applicant in the cases of Ramilaben Bharatbhai Patel [] and Teknow Overseas P. Ltd. [].