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2016 (3) TMI 351 - CALCUTTA HIGH COURT

2016 (3) TMI 351 - CALCUTTA HIGH COURT - 2016 (41) S.T.R. 809 (Cal.) , [2016] 90 VST 117 (Cal) - Failure to deposit 50% under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) - Admittedly, the respondent nos. 1 and 2 made a declaration in VCES Form I declaring that a sum of ₹ 11,49,32,357/- was due as service tax and intended to make payment of 50% of the dues under VCES. However, by letter dated 24th December, 2014, the writ petitioners had indicated the manner in wh .....

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s under the VCES. Since VCES is a statutory scheme having a fixed time frame, we are of the view that Court by its observations cannot enlarge the time frame as has been done in the instant case. Rather non-payment of 50% of the declared tax dues or other dues under section 107(3) empowers the service tax authority to proceed under section 87 and also under section 89 of the Act, which in the instant case has been initiated. - Decided in favor of revenue. - M.A.T. No. 1122 of 2014 with C.A.N. No .....

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appears that the writ petitioner no. 1, a company incorporated under the Companies Act, 1956, having service tax registration under Chapter V of Finance Act, 1994 and the petitioner no. 2, a director of the petitioner no. 1, moved a writ petition affirmed on 31st March, 2014 upon notice to the appellant herein. Prayers in the writ petition, relevant for consideration, are as under: "(a) A writ and/or in the nature of Mandamus be issued commanding the respondents, their men, servants, agents .....

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nce Encouragement Scheme, 2013 and the Finance Act, 2013 and to be entitled to the benefits under the Scheme for payment of the balance 50% of the declared tax dues ; (iv) Declaration that the petitioner is entitled to adjustment and/or deduction of its Income Tax Refund from the payments to be made under the Scheme of 2013; (v) Direct the respondent No. 3 herein, to accept the payments to be made by the petitioner as payments towards the balance of the 50% of the tax dues under the Scheme of 20 .....

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l payment made by the petitioner towards the declaration of tax dues as payment under the Scheme of 2013. *** *** *** *** ** (d) An order of injunction be passed restraining the respondents, their men, agents, servants and assigns from giving any effect and/or further effect and/or taking any steps or further steps pursuant to the declaration given by the petitioner under the Scheme of 20132 and in directing the respondent No. 3 to accept all payment made by the petitioner towards the declaratio .....

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proceeded to decide the writ petition on the question of law agitated by the respective counsels. *** *** *** *** ** 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 chapter containing the service tax. Section 110 of the said Act clearly indicates that in the .....

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ntained 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 in .....

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only in respect of Sub-section (4) of Section 107 and cannot be stretched to Subsection (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 scheme. With these observations, this Court dispose of this writ petition. It is to be noted that Service Tax Voluntary Compliance Encouragement Scheme, 2013 (for short "VCES ), which came into effect from 10th May, 2013, was introduced to encourage disclosure of servic .....

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y be prescribed which, under section 107(2), the authority shall acknowledge in such form and in such manner as may be prescribed. Section 107(3) postulates that the declarant shall, on or before the 31st day of December, 2013 pay not less than fifty per cent of the tax dues so declared under section 107(1) and submit proof of such payment to the designated authority. Section 107(4) stipulates that the tax dues or part thereof remaining to be paid after payment made under subsection (3) shall be .....

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and the authorities are free to take action under the provisions of the Finance Act, 1994. Therefore, the direction of the learned Single Judge that the authorities can take action under section 87 of the Act is contrary to law. Submission was the learned Judge failed to appreciate that though the respondents herein declared their service tax liability, however, as they failed to pay 50% of the declared amount within 31st December, 2013, the authorities had applied before the appropriate forum .....

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ken by the authorities under section 89(1)(d) futile. Referring to the writ petition, a copy of which is annexed to the application for stay, it was submitted that it is evident from the letter dated 24th December, 2013, issued by the respondent nos. 1 and 2 herein, that the company did not pay 50% of the service tax dues and sought for adjustment with its income tax refund which was beyond the purview of the VCES. Thus, the issuance of VCES Form II acknowledging the declaration under VCES Form .....

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rit petitioners was rejected before the expiry of the of the VCES. Moreover, the letter dated 26th December, 2013 has gone unchallenged. Therefore, it was submitted that as the writ petition is without substance, the appeal may be allowed setting aside the impugned order. Mr. Mainak Bose, learned advocate for the respondent nos. 1 and 2/writ petitioners submitted that as prosecution was pending against the writ petitioners, they had filed a declaration under VCES Form I declaring to pay 50% of t .....

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2 made a declaration in VCES Form I declaring that a sum of ₹ 11,49,32,357/- was due as service tax and intended to make payment of 50% of the dues under VCES. However, by letter dated 24th December, 2014, the writ petitioners had indicated the manner in which the tax dues were to be paid and also prayed for adjustment with the income tax refund which, as evident from the letter dated 26th December, 2013, was rejected by the service tax authorities. The question is, whether the respondent .....

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larant to avail himself of the benefit of the VCES. Since 50% of the tax due was not paid, the writ petitioners did not come under the purview of the VCES. Consequently they are not entitled to the benefits under VCES. The argument of Mr. Bose that the appellant by issuing VCES Form II had accepted the mode and manner of payment of tax due cannot be accepted as nothing is on record from which it can be inferred that the service tax authority had accepted the declaration of the petitioners. Rathe .....

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ere not entitled to the benefits under the VCES. Since VCES is a statutory scheme having a fixed time frame, we are of the view that Court by its observations cannot enlarge the time frame as has been done in the instant case. Rather non-payment of 50% of the declared tax dues or other dues under section 107(3) empowers the service tax authority to proceed under section 87 and also under section 89 of the Act, which in the instant case has been initiated. There is another aspect of the matter. T .....

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