Sl No. |
Issues |
Clarification |
1 |
Whether the communications, wherein department has sought
information of roving nature from potential taxpayer regarding their
business activities without seeking any documents from such person
or calling for his presence, while quoting the authority of section
14 of the Central Excise Act, 1944, would attract the provision of
section 106 (2) (a)? |
Attention is invited to clarification issued at S. No. 4 of the
circular No. 169/4/2013–ST, dated 13.5.2013, as regards the
scope of section 106 (2) (a) of the Finance Act, 2013, wherein
it has been clarified that the provision of section 106 (2)(a)(iii)
shall be attracted only in such cases where accounts, documents
or other evidence are requisitioned by the authorized officer
from the declarant under the authority of a statutory
provision.
A communication of the nature as mentioned in the previous
column would not attract the provision of section 106 (2)(a)
even though the authority of section 14 of the Central Excise
Act may have been quoted therein. |
|
2 |
An
assessee has two units at two different locations, say Mumbai and
Ahmedabad. Both are separately registered. The Mumbai unit has
received a Show Cause Notice for non-payment of tax on a revenue
stream but the Ahmedabad unit has not. Whether the Ahmedabad unit
is eligible for VCES? |
Two
separate service tax registrations are two distinct assessees for
the purposes of service tax levy. Therefore, eligibility for
availing of the Scheme is to be determined accordingly. The unit
that has not been issued a show cause notice shall be eligible to
make a declaration under the Scheme. |
3 |
Whether a declaration can be made under the Scheme in respect of
CENVAT credit wrongly utilized for payment of service tax?
|
Any
service tax that has been paid utilizing the irregular credit,
amounts to non-payment of service tax. Therefore such service tax
amount is covered under the definition of “tax dues”. |
4 |
Whether a party, against whom an inquiry, investigation or audit has
been initiated after 1.3.2013 (the cutoff date) can make a
declaration under the Scheme? |
Yes. There is no bar from filing of declaration in such cases.
|
5 |
There was a default and a Show Cause Notice was issued for the
period prior to the period covered by the Scheme, i.e. before Oct
2007. Whether declaration can be filed for default on the same issue
for the subsequent period? |
In
the context of the Scheme, the relevant period is from Oct 2007 to
Dec 2012. Therefore, the 2nd proviso to section 106 (1)
shall be attracted only in such cases where a show cause notice or
order of determination has been issued for the period from Oct 2007
to Dec 2012. Accordingly, issuance of a show cause notice or order
of determination for any period prior to Oct 2007, on an issue,
would not make a person ineligible to make a declaration under the
Scheme on the same issue for the period covered by the Scheme.
Therefore, declaration can be made under VCES. |
6 |
In a case where
the assessee has been audited and an audit para has been issued,
whether the assessee can declare liability on an issue which is not
a part of the audit para, under the VCES 2013? |
Yes, declarant
can declare the “tax dues” concerning an issue which is not a part
of the audit para. |
7 |
Whether a person, who has paid service tax for a particular period
but failed to file return, can take the benefit of VCES Scheme so as
to avoid payment of penalty for non- filing of return? |
Under VCES a declaration can be made only in respect of “tax dues”.
A case where no tax is pending, but return has not been filed, does
not come under the ambit of the Scheme. However, rule 7C of the
Service Tax Rules provides for waiver of penalty in deserving cases
where return has not been filed and, in such cases, the assessee may
seek relief under rule 7C. |
8 |
A person has made
part payment of his ‘tax dues’ on any issue before the scheme was
notified and makes the declaration under VCES for the remaining part
of the tax dues. Will he be entitled to the benefit of non-payment
of interest/penalty on the tax dues paid by him outside the VCES,
i.e., (amount paid prior to VCES)? |
No. The immunity
from interest and penalty is only for “tax dues” declared under VCES.
If any “tax dues”
have been paid prior to the enactment of the scheme, any liability
of interest or penalty thereon shall be adjudicated as per the
provisions of Chapter V of the Finance Act, 1994 and paid
accordingly. |
9 |
Whether an assessee, who, during a part of the period covered by the
Scheme, is in dispute on an issue with the department under an
erstwhile provision of law, can declare his liability under the
amended provisions, while continuing to litigate the outstanding
liability under the erstwhile provision on the issue? |
In
terms of the second proviso to section 106 (1), where a notice or
order of determination has been issued to a person in respect of any
issue, no declaration shall be made by such person in respect of
“tax dues” on the same issue for subsequent period. Therefore, if an
issue is being litigated for a part of the period covered by the
Scheme, i.e., Oct, 2007 to Dec 2012, no declaration can be filed
under VCES in terms of the said proviso on the same issue for the
subsequent period. |
10 |
Whether upon filing a declaration a declarant realizes that the
declaration filed by him was incorrect by mistake? Can he file an
amended declaration? |
The
declarant is expected to declare his tax dues correctly. In case the
mistake is discovered suo-moto by the declarant himself, he may
approach the designated authority, who, after taking into account
the overall facts of the case may allow amendments to be made in the
declaration, provided that the amended declaration is furnished by
declarant before the cut off date for filing of declaration, i.e.,
31.12.2013. |
11 |
What is the consequence if the designated authority does not issue
an acknowledgement within seven working days of filing of
declaration? Whether the declarant can start making payment of the
tax dues even if acknowledgement is not issued? |
Department would ensure that the acknowledgement is issued in seven
working days from the date of filing of the declaration. It may
however be noted that payment of tax dues under the Scheme is not
linked to the issuance of an acknowledgement. The declarant can pay
tax dues even before the acknowledgement is issued by the
department. |
12 |
Whether declarant will be given an opportunity to be heard and
explain his cases before the rejection of a declaration under
section 106(2) by the designated authority? |
Yes. In terms of section 106 (2) of the Finance Act, 2013, the
designated authority shall, by an order, and for reasons to be
recorded in writing, reject a declaration if any
inquiry/investigation or audit was pending against the declarant as
on the cutoff date, i.e., 1.3.2013.
An
order under this section shall be passed following the principles of
natural justice.
To
allay any apprehension of undue delays and uncertainty, it is
clarified that the designated authority, if he has reasons to
believe that the declaration is covered by section 106 (2), shall
give a notice of intention to reject the declaration within 30 days
of the date of filing of the declaration stating the reasons for the
intention to reject the declaration. For declarations already filed,
the said period of 30 days would apply from the date of this
circular.
The
declarant shall be given an opportunity to be heard before any order
is passed by the designated authority. |
13 |
What is the appeal mechanism against the order of the designated
authority whereby he rejects the declaration under section 106 (2)
of the Finance Act, 2013? |
The
Scheme does not have a statutory provision for filing of appeal
against the order for rejection of declaration under section 106 (2)
by the designated authority. |
14 |
A
declarant pays a certain amount under the Scheme and subsequently
his declaration is rejected. Would the amount so paid by him be
adjusted against his liability that may be determined by the
department? |
The
amount so paid can be adjusted against the liability that is
determined by the department. |
15 |
Section 111 prescribes that where the Commissioner of Central Excise
has reasons to believe that the declaration made by the declarant
was ‘substantially false’, he may serve a notice on the declarant in
respect of such declaration. However, what constitutes a
‘substantially false’ declaration has not been specified.
|
The
Commissioner would, in the overall facts of the case, taking into
account the reasons he has to believe, take a judicious view as to
whether a declaration is ‘substantially false’. It is not feasible
to define the term “substantially false” in precise terms. The
proceeding under section 111 would be initiated in accordance with
the principles of natural justice.
To
illustrate, a declarant has declared his “tax dues” as Rs 25 lakh.
However, Commissioner has specific information that declaration has
been made only for part liability, and the actual “tax dues” are
Rs 50 lakh. This declaration would fall in the category of
“substantially false”.
This example is only illustrative. |
16 |
What is the
consequence if a declarant fails to pay atleast 50% of declared
amount of tax dues by the 31st Dec 2013? |
One of the
conditions of the Scheme [section 107 (3)] is that the declarant
shall pay atleast an amount equal to 50% of the declared tax dues
under the Scheme, on or before the 31.12.2013. Therefore, if the
declarant fails to pay atleast 50% of the declared tax dues by 31st
Dec, 2013, he would not be eligible to avail of the benefit of the
scheme. |
17 |
Whether the CENVAT credit is admissible on the inputs/input services
used for provision of output service in respect of which declaration
has been made under VCES for payment of any tax liability outside
the VCES?
|
The
VCES Rules 2013 prescribe that CENVAT credit cannot be utilized for
payment of “tax dues” under the Scheme. Accordingly the “tax dues”
under the Scheme shall be paid in cash.
The
admissibility of CENVAT credit on any inputs and input services used
for provision of output service in respect of which declaration has
been made shall continue to be governed by the provisions of the
Cenvat Credit Rules, 2004. |
18 |
(a) Whether the tax dues amount paid under VCES would be eligible
as CENVAT credit to the recipient of service under a supplementary
invoice?
(b)
Whether cenvat credit would be admissible to the person who pays tax
dues under VCES as service recipient under reverse charge mechanism?
|
Rule 6(2) of the Service Tax Voluntary Compliance Encouragement
Rules, 2013, prescribes that CENVAT credit cannot be utilized for
payment of “tax dues” under the Scheme. Except this condition, all
issues relating to admissibility of CENVAT credit are to be
determined in terms of the provisions of the Cenvat Credit Rules.
As
regards admissibility of CENVAT credit in situations covered under
part (a) and (b), attention is invited to rule 9(1)(bb) and 9(1)(e)
respectively of the Cenvat Credit Rules. |
19 |
In
terms of section 106 (2)(b), if a declaration made by a person
against whom an audit has been initiated and where such
audit is pending, then the designated authority shall by an
order and for reasons to be recorded in writing, reject such
declaration. As the audit process may involve several stages, it may
be indicated as to what event would constitute,-
(i)
initiation of audit; and
(ii) culmination of audit. |
Initiation of audit:
For the purposes of VCES, the date of the visit of auditors to the
unit of the taxpayer would be taken as the date of initiation of
audit. A register is maintained of all visits for audit purposes.
Culmination of audit:
The audit process may culminate in any of the following manner.-
(i)
Closure of audit file if no discrepancy is found in audit;
(ii) Closure of audit para by the Monitoring Committee Meeting (MCM);
(iii) Approval of audit para by MCM and payment of amount involved
therein by the party in terms of the provisions of the Finance Act,
1994;
(iv) Approval of audit para by MCM, and issuance of SCN, if party
does not agree to the para so raised.
The
audit culminates at a point when the audit paras raised are settled
in any manner as stated above.
The
pendency of audit as on 1.3.2013 means an audit that has been
initiated before 1.3.2013 but has not culminated as on 1.3.2013.
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