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2015 (11) TMI 170 - GUJARAT HIGH COURT

2015 (11) TMI 170 - GUJARAT HIGH COURT - 2015 (40) S.T.R. 1041 (Guj.) - Denial of benefit of VCES - Denial on the groud that the amount paid towards interest and penalty cannot be adjusted towards liability of tax dues under the Scheme - Section 107(4) - whether in the facts and circumstances of the present case, the petitioner can be said to have paid the entire tax dues declared amounting to ₹ 20,63,597/- so as to be entitled to the benefit of the VCE Scheme as contended by the petitione .....

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espondent authorities did not draw the attention of the petitioner to the fact that it could avail of the benefit of the Scheme. However, well within the time limit prescribed under the Scheme, the petitioner in due compliance with the provisions of the section 107 of the Act, submitted a declaration under sub-section (1) thereof and paid more than fifty per cent of the tax dues before 31st December, 2013 as required under sub-section (3) thereof and in order to comply with the provisions of sub .....

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spondents are not justified in denying the benefit of the Scheme to the petitioner only on the ground that the amount of ₹ 6,36,103/- had initially been paid towards the interest and penalty. The impugned communication/order which seeks to deny the benefit of the Scheme to the petitioner under such hyper technical plea, therefore, cannot be sustained. - Decided in favour of assessee. - Special Civil Application No. 9387 of 2015 - Dated:- 17-10-2015 - Harsha Devani And A. G. Uraizee, JJ. Fo .....

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ery narrow compass and with the consent of the learned counsel for the respective parties, the matter was taken up for final hearing today. 3. By this petition, the petitioner has challenged the legality of the letter/communication dated 20.03.2015 of the Designated Authority (VCES Cell), Service Tax, Ahmedabad holding that the petitioner is not eligible under VCES for the reason of not fulfilling the conditions of sub-section (4) of section 107 of the Finance Act, 2013. 4. The facts stated brie .....

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ioner did not accept the fifth revenue para and did not pay service tax amounting to ₹ 12,97,785/-. The details of the amount demanded in the audit report are reproduced herein below: Revenue para No. in audit report Service Tax (in INR) Interest (In INR) Penalty (In INR) Total Details of challan Para 1 4,86,045/- 1,86,584/- 52,566/- 7,25,195/- 219 & 224 dated 26.07.2013 Para 2 1,99,702/- 1,99,702/- 219 dated 26.07.2013 Para 3 48,100/- 48,100/- 219 dated 26.07.2013 Para 4 2,76,739/- 1, .....

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dated 13.05.2013. The rules prescribed the form and manner of declaration, form and manner of acknowledgment of declaration, manner of payment of tax dues and form and manner of issuing acknowledgment of discharge of tax dues under the VCES. 6. It is the case of the petitioner, a proprietary firm, that it did not have any knowledge of the service tax law and had been regularly filing ST-3 returns and paying service tax as per its understanding. Therefore, the petitioner had agreed with the four .....

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petitioner that its unit is exempted from central excise and therefore, service tax was not payable by it to any of its service provider. On the basis of the audit report, a show cause notice dated 18.10.2013 came to be issued to the petitioner demanding service tax amounting to ₹ 12,97,785/- along with interest and penalty. 8. The petitioner with a view to avail the benefit of VCES, filed the form VCES-1 on 05.12.2013 wherein, it was declared that the petitioner had not paid the service .....

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oner about the benefit of VCES scheme and hence, the petitioner continued with normal audit process instead of filing VCES application. The petitioner further informed the Commissioner of Service Tax that it had declared tax dues of ₹ 20,63,597/- under VCES and requested to consider payment of tax amounting to ₹ 7,62,784/- (paid under correct tax accounting code), ₹ 4,36,401/- (paid wrongly under interest code) and ₹ 48,100/- (paid wrongly under penalty code), totalling t .....

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,63,597/-, additional payment of ₹ 3,08,305/- has been made. Thus, a total amount of ₹ 15,55,590/- (75% of the tax dues declared) was paid by the petitioner and only an amount of ₹ 5,08,007/- was left to be paid. Therefore, the petitioner had fulfilled the mandatory condition of payment of 50% of the declared tax dues on or before 31.12.2013. By a letter dated 14.05.2014, the petitioner requested the third respondent for change in the accounting code of penalty and interest. Th .....

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ting head of interest and penalty to service tax. Thus, a total amount of ₹ 6,84,203/- came to be corrected from the accounting code of interest and penalty to service tax. The petitioner, by a communication dated 30.06.2014, informed the third respondent regarding final payment of tax dues declared under VCES. The third respondent by a letter dated 13.08.2014, called upon the petitioner to clarify as to how the amount of ₹ 48,100/- paid in respect of penalty for late filing of ST-3 .....

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he impugned letter/ communication dated 20.03.2015, refused to issue acknowledgment of discharge under form VCES-3 on the ground that the condition prescribed under sub-section (4) of section 107 of the Finance Act, 2013 with respect to full payment of tax dues declared under VCES by 31.12.2014 has not been fulfilled. The third respondent further observed that the amount of ₹ 6,36,103/- under the tax dues declared was liable to be recovered under section 87 of the Finance Act, 1994 without .....

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o the third respondent the contention of the declarant that since the accounting code of interest of ₹ 6,36,103/- had been wrongly paid under the head of interest and subsequently the accounting code of the same is changed and therefore the same is now "tax dues" and therefore may be adjusted against total tax dues declared under VCES-1 is not convincing as the said amount is nothing but interest only which has been confirmed by the Audit and also correctly quantified and mention .....

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and consequently the declared amount of ₹ 6,36,103 was liable to be recovered from the petitioner under the provisions of section 87 of the chapter as specified in section 110 of Finance Act, 2013 without immunity, that is, penalty and interest which was otherwise available under section 108 of the Finance Act, 2013 in respect of total tax dues of ₹ 20,63,597/- declared under VCES-1. Being aggrieved, the petitioner has filed the present petition. 11. Mr. Jigar Shah, learned advocate .....

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e petitioner has satisfied all the requirements of the scheme, the only reason why the benefit under the scheme is sought to be denied is on account of the fact that the petitioner has sought adjustment of the amount wrongly paid towards interest and penalty to the head of service tax. It was pointed out that the respondent pursuant to the request made by the petitioner, had also requested the e-Pay and Accounts Office, Service Tax, Mumbai to correct the accounting head of interest and penalty t .....

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he service tax. 11.1 In support of his submissions, the learned counsel placed reliance upon the decision of the Bombay High Court in the case of Hero Cycles Ltd. v. Union of India, 2009 (240) ELT 490 (Bom.) , wherein the court has held that if the petitioner on account of an inadvertent error chose not to apply for the benefit under the notification, the same would result in denial of the benefit. The court was of the opinion that there is a duty cast on the authority to assess the goods and im .....

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on the face of it erroneous. 11.2 Reliance was also placed upon the decision of this court in the case of S. R. Koshti v. Commissioner of Income Tax, (2015) 276 ITR 165 (Guj.) ,wherein the court has held thus: "18. The position is therefore that, regardless of whether the revised return was filed or not, once an assessee is in a position to show that the assessee has been over-assessed under the provisions of the Act, regardless of whether the over-assessment is as a result of assessee' .....

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not entitled to the relief under section 10(10C) of the Act. In fact, the said position is undisputed. The assessing officer himself had passed an order under section 154 of the Act, granting such relief. In the circumstances, even the order under section 264 of the Act made on 29th March 2004, cannot be sustained. 20. A word of caution. The authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If an assessee, under .....

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ourt has observed in numerous decisions, including Ramlal and Ors. v. Rewa Coalfields Ltd., AIR 1962 SC 361; The State of West Bengal v. The Administrator, Howrah Municipality and others, AIR 1972 SC 749, and Babutmal Raichand Oswal v. Laxmibai R. Tarte, AIR 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which pri .....

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he petition, Mr. Gaurang Bhatt, learned senior standing counsel for the respondents No.2 and 3 reiterated the contents of the affidavit-in-reply of the respondent No.3. It was submitted that the VCE Scheme is a voluntary scheme enabling the assessee - tax payer to avail the benefit thereunder and that the revenue is under no compulsion to inform and convey to the assessee the fact that he can avail of the benefit of the VCE Scheme which has been brought in force by a statutory amendment. It was .....

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impugned letter/communication, it was pointed out that in terms of the circular No.170/5/2013-ST dated 8th August, 2013, it has been clarified that if the declarant fails to pay at least 50% of declared amount of tax dues by 31st December, 2013, he would not be eligible to avail of the benefit of the scheme. Accordingly, on the same analogy, if the remaining amount is not paid upto 30.06.2014 without interest or upto 31.12.2014 with interest, the declarant would not be eligible to avail of the b .....

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ere is no warrant for interference by this court. 13. The controversy involved in the present case relates to the question as to whether in the facts and circumstances of the present case, the petitioner can be said to have paid the entire tax dues declared amounting to ₹ 20,63,597/- so as to be entitled to the benefit of the VCE Scheme as contended by the petitioner or whether the petitioner has failed to pay the said amount, inasmuch as, the amount of ₹ 6,36,103/- had initially bee .....

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introduced vide section 104 to 114 of Chapter VI of the Finance Act, 2013 in the Finance Act, 1994. Section 107 of the Finance Act, 1994 provides for the procedure for making declaration and payment of tax dues. Sub-section (1) of section 107 lays down that subject to the provisions of this scheme, a person may make a declaration to the designated authority on or before the 31st day of December, 2013 in such form and in such manner as may be prescribed. Sub-section (3) of section 107 provides t .....

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-section (3) of section 107 of the Act is concerned, there is no dispute. What is disputed is compliance with the provisions of sub-section (4) of section 107 of the Act, inasmuch as, it is the case of the respondents that the remaining tax dues have not been paid by the petitioner before 30th June, 2014. The proviso to section 107 of the Act provides for the payment of the declared amount on or before 31st December, 2014 along with interest thereof as prescribed thereunder. Sub-section (6) of s .....

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in such form and in such manner as may be prescribed. Under section 108 of the Act, the declarant, upon payment of the tax dues declared by him under sub-section (1) of section 107 and the interest payable under the proviso to sub-section (4) thereof, shall get immunity from penalty, interest or any other proceeding under the Chapter. Sub-section (2) thereof provides that subject to the provisions of section 111, a declaration made under subsection (1) of section 107 shall become conclusive upo .....

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e the due date, namely, 30th June, 2014. In relation to the remaining amount of ₹ 6,36,103/-, the petitioner by a letter dated 14.05.2014 informed the respondent authorities that it had deposited an amount of ₹ 6,84,203/- under the wrong accounting code for penalty and interest, and requested the respondent Assistant Commissioner of Service Tax, to adjust such amount against the correct accounting code. Pursuant thereto, the Assistant Commissioner of Service Tax, Ahmedabad requested .....

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he correct accounting head of service tax instead of penalty and interest before 30.05.2014. If the aforesaid amount of ₹ 6,36,103/- is taken into consideration towards the payment of the amount of ₹ 20,63,597/- payable by the petitioner under the declaration filed under the scheme, total amount stands paid. However, the respondents have raised a technical objection that such amount was initially paid under the accounting head of interest and penalty and therefore, cannot be consider .....

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, an amount of ₹ 6,36,103/- stood paid under the head of service tax. For the purpose of the provisions of subsection (3) of section 107 of the Act not less than fifty per cent of the tax dues declared under sub-section (1) have to be paid to the designated authority, the compliance of which is not disputed inasmuch as the petitioner had deposited an amount of ₹ 14,27,494/- pursuant to the declaration filed under the scheme. Under sub-section (4) of section 107 of the Act, the remain .....

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amount of ₹ 6,36,103/- had been paid initially under the head of interest and penalty and therefore, the same could not be considered as payment towards service tax, which cannot be countenanced. The respondent authorities cannot be permitted to deny the benefit of the Scheme to the petitioner by taking shelter behind a hyper-technical plea. When such a beneficial Scheme is introduced the respondent authorities in all fairness should inform assessees about the benefit thereof and the fact .....

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