VCES 2013 - Asatyameva Jayate - Careless drafting of Law costs Revenue dear
THE first proviso to Section 106 of the Finance Act 1994 (the Service Tax Voluntary Compliance Encouragement Scheme, 2013) reads as:
Provided that any person who has furnished return under section 70 of the Chapter and disclosed his true liability, but has not paid the disclosed amount of service tax or any part thereof, shall not be eligible to make declaration for the period covered by the said return :
This would mean that a person who has filed his return and disclosed his true liability would not be eligible to file the declaration under the VCES and avail its benefits.
What about a person who had filed the return, but had not disclosed his true liability ? He is eligible!!!
Well, that's how they wrote the law.
Take an example.
A Service Provider - let's call him ISP declared in his ST-3 return a service tax liability of Rs. 31,51,010 for the period October 2007 to March 2012. Though he had declared the tax payable in his returns, he had not paid the tax.
When the VCE Scheme became operational, he filed a declaration under the Scheme claiming that he had not disclosed his true liability in the returns and he is now declaring the true liability as Rs.31,54,010 - that is just Rs.3000 more than what he had declared in his return.
The Designated Authority referred to the fact that on scrutiny of the annexures/calculation sheets submitted along with this application, vis-a-vis, the service tax-3 returns filed in the past in respect of the above services, it appeared that the tax dues of Rs.31,51,010/- claimed under the declaration for the above period has already been disclosed in the respective ST 3 returns, and the said disclosed dues of Rs.31,54,010/-, are not paid during the respective period. Therefore, the petitioner did not appear eligible to make declaration for the period, as envisaged under the first proviso to Section 106(1) of the Finance Act and his application was rejected.
Our ISP filed a writ in the High Court.
In the High Court, the Government's Counsel was unable to point out any provision by which parties like the petitioners are not eligible for the VCS scheme.
He has filed the return, but now he says in the amount payable there was a difference of Rs. 3000 which he had not paid and which he had disclosed as his true liability; so now he is eligible for the Scheme.
The High Court quashed and set aside the impugned order and directed that the declaration shall now be dealt with and scrutinized in terms of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 and the Service Tax Voluntary Compliance Encouragement Rules, 2013.
The whole litigation started because of the faulty drafting of the Law - Provided that any person who has furnished return under section 70 of the Chapter and disclosed his true liability, but has not paid the disclosed amount of service tax or any part thereof, shall not be eligible to make declaration for the period covered by the said return:
There was absolutely no need for writing those words (marked in red) or else they should have made it clear that the Scheme will not be applicable for the amount of tax already declared as payable, but not paid. In the above case, the Voluntary compliance was only for Rs. 3000/-, but he could claim the benefits of the Scheme for Rs. 31 lakhs - after all the 31.51 lakhs, the Government could any way recover even without this Scheme.
The Board should not consider that all the CBEC officers are competent to write laws; they should take the help of lawyers and retired judges who know the law - after all they don't teach you law writing in NACEN!
This is not a hypothetical case - we bring you the real High Court order today. Please see Breaking News.