Dated : 05.12.2013
Trade Notice No.05/2013-Service Tax/SH
Dated, Shillong the 4th December, 2013
1. Attention of the members of Trade Industry
and all others concerned are hereby invited to the Board’s Circular
No.174/9/2013–ST dated 25th
November, 2013 issued under
F.No.B1/19/2013-TRU by the Technical Officer,
TRU of Central Board of Excise & Customs, New Delhi relating to
clarification on Service Tax Voluntary Compliance Encouragement Scheme,
Service Tax Voluntary Compliance Encouragement Scheme (VCES) has come into
effect from 10.5.2013. Most of the issues raised with reference to the
Scheme have been clarified by the Board vide circular Nos. 169/4/2013-ST,
dated 13.5.2013 and No. 170/5/2013-ST, dated 8.8.2013. These
clarifications have also been released in the form of FAQs. Attention is
also invited to letter F. No. 137/50/2013-ST, dated 22.8.2013 as regards
the action to be taken by the field formations for effective
implementation of the Scheme. A number of interactive sessions have also
been held at various places to ascertain and address the concerns of trade
on any aspect of the Scheme.
3. In the
recently held interactive sessions at Chennai, Delhi and Mumbai, which
were chaired by the Hon’ble Finance Minister, the trade had raised certain
queries and also expressed some apprehensions. Most of these issues have
already been clarified in the aforementioned circulars/FAQs. Certain
issues raised in these interactive sessions, which have not been
specifically clarified hitherto or clarified adequately, are discussed and
clarified as below.
An instance was brought to
notice wherein a declaration was returned probably on the ground that
it was incomplete.
As has already been
directed by the Board, vide the said letter dated 22.8.2013 (para 2.4
of the letter), the designated authority shall ensure that no
declaration is returned. In all cases, declaration should be promptly
received and duly acknowledged. Request for clarification should be
dealt with promptly. Defects in the application, if any, should be
explained to the declarant and possible assistance be provided in
rectifying these defects. The effort must be to accept a declaration,
as far as possible, and recover the arrears of tax.
An apprehension was raised
that declarations are being considered for rejection under section 106
(2) of the Finance Act, 2013, even though the “tax dues” pertain to an
issue or a period which is different from the issue or the period for
which inquiry /investigation or audit was pending as on 1.3.2013.
Section 106(2) prescribes
four conditions that would lead to rejection of declaration, namely,
an inquiry or
investigation in respect of a service tax not levied or not paid or
short-levied or short-paid has been initiated by way of,-
(i) search of
premises under section 82 of the Finance Act,1994 ; or
(ii) issuance of
summons under section 14 of the Central Excise Act, 1944; or
production of accounts, documents or other evidence under the Finance
Act, 1994 or the rules made there under; or
(b) an audit
has been initiated,
and such inquiry,
investigation or audit was pending as on the 1st day of March, 2013.
These conditions may be
construed strictly and narrowly. The concerned Commissioner may ensure
that no declaration is rejected on frivolous grounds or by taking a
wider interpretation of the conditions enumerated in section 106(2).
If the issue or the period of inquiry, investigation or audit is
identifiable from summons or any other document, the declaration in
respect of such period or issue alone will be liable for
rejection under the said provision.
(1) If an inquiry,
investigation or audit, pending as on 1.3.2013 was being carried out
for the period from 2008-2011, benefit of VCES would be eligible in
respect of ‘tax dues’ for the year 2012, i.e., period not covered by
the inquiry, investigation or audit.
(2) If an inquiry or
investigation, pending as on 1.3.2013 was in respect of a specific
issue, say renting of immovable property, benefit of VCES would be
eligible in respect of ‘tax dues’ concerning any other issue in
respect of which no inquiry or investigation was pending as on
It is also reiterated 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 such reasons to reject the
declaration. Commissioners should ensure that this time line is
Whether benefit of VCES
would be available in cases where documents like balance sheet, profit
and loss account etc. are called for by department in the inquiries of
roving nature, while quoting authority of section 14 of the Central
Excise Act in a routine manner.
The designated authority/
Commissioner concerned may take a view on merit, taking into
account the facts and circumstances of each case as to whether the
inquiry is of roving nature or whether the provisions of section 106
(2) are attracted in such cases.
Whether the benefit of the
Scheme shall be admissible in respect of any amount covered under the
definition of ‘taxes dues’, as defined in the Scheme, if paid by an
assesses after the date of the Scheme coming into effect, (i.e.,
10.5.2013), but before a declaration is filed
Yes, benefit of the Scheme
would be available if such amount is declared under the Scheme
subsequently, along with the remaining tax dues, if any, provided that
Cenvat credit has not been utilized for payment of such amount.
A person has tax dues of
Rs 10 lakh. He makes a payment of Rs 2 lakh on 15.5.2013, without
making a declaration under VCES. He does not utilize Cenvat credit for
paying this amount. Subsequently, he makes declaration under VCES on
1.7.2013. He may declare his tax dues as Rs 10 lakh. Rs 2 lakh paid
before making the declaration will be considered as payment under VCES.
Whether declaration can be
made in such case where service tax pertaining to the period covered
by the Scheme along with interest has already been paid by the
parties, before the Scheme came into effect, so as to get waiver from
penalty and other proceedings?
As no “tax dues” is
pending in such case, declaration cannot be filed under VCES. However,
there may be a case for taking a lenient view on the issue of
penalties under the provision of the Finance Act, 1994. In this regard
attention is invited to section 73 (3) and section 80 of the Finance
No.174/9/2013–ST dated 25th
November, 2013 issued under
care has been taken to reproduce the text in its original form, in case of
any inadvertent mistake, the above mentioned Circular may be referred to.
(Dr. K. P. Mishra)