For those who have not
paid their service tax dues for the period from Oct 2007 to Dec 2012, the year
2013 is a time to rejoice. On February 28, 2013 Finance Minister in his Budget
speech[1]
spoke of a Voluntary Compliance Scheme, 2013 (for convenience herein after
referred to as VCES) whereby a defaulter can make his service tax payment from
the period 1/10/2007 provided he files a truthful declaration and his interest,
penalty and other consequences will be waived. True to his words, VCES came
into effect on 10th May 2013[2]
along with all the necessary Rules and Forms and clarifications. However what
everyone fails to take notice is the last two sentences in his speech which starts
as “I hope to entice a large number of assessees to return to the tax fold. I
also hope to collect a reasonable sum of money
[3]”.
The VCES comes along with
the similar riders as all the “buy one get one” offers we come across. The
conditions start off with the second proviso to Section 106 of the Finance Act
1994 whereby declarations are denied in case a notice or order of determination
has been issued before 01/03/2013 in respect of any period on any issue.
Meaning, if any issue is already noticed by the department, the defaulters
cannot make the declaration under VCES. Therefore if anyone has managed to
sneak out from the vision of department, they alone can make the payment. Also
there exists doubt regarding “same issue” used in the proviso. Neither this Scheme nor
the further clarification explains a situation where though the issue been
raised earlier, the period for the which the declarant making payment contains
a different issue also and it is not covered in the earlier period. Department
on finding that a similar case exist will reject the declaration and in the
absence of appeal provision the declarant will be subject to further litigation
with the issuance of Show Cause Notice even after the promise of no proceedings.
Further more he has already paid the service tax amount for the one and half
years which he need not have paid since Show Cause Notice can only be issued
for the earlier five years. However a clarification dated 8th August
2013[4] sl
no 14 says that amount so paid by the Scheme if rejected can be adjusted
against the liability that is determined by the department. Section 106 does
not stop with the proviso regarding notice or order of determination.
Subsection (2) goes on to include all the inquiry, investigation; audit which
remains pending as on the 1st day of March 2013.
Next rider that comes
into play is provided under Section 109 whereby no amount paid under the Scheme
shall be refunded under any circumstances. The matter does not end with this.
The Commissioner of Central Excise may serve notice if he has reasons to believe
that there exists “substantial” false payment. However the term “substantially false” is not
defined by the Scheme paving way for multiple interpretations and for substantial
misuse of the provision by the Department.
But one positive is this action cannot be taken after the expiry of one
year from the date of declaration.
Though the VCES seems
to help the Government in finding out who the defaulters are, it remains to be
seen as to whether VCES will help the assessee in the long run or will it drive
him to endless litigation running through years. Whatever be the situation,
even Finance Minister was sure of one thing that is this Scheme will help in
“substantially increasing” Indian treasury .
