Karnataka High Court
Premier Associates vs The Assistant Commissioner Of Service ... on 28 November, 2017
Author: Vineet Kothari
Bench: Vineet Kothari
1/16 R
IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 28TH DAY OF NOVEMBER 2017
BEFORE
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
WRIT PETITION No.3824 OF 2016(T-RES)
BETWEEN:
PREMIER ASSOCIATES
REP. BY ITS PARTNER
MR S ARIVALAGAN
S/O SUBRAMANIAN
AGE: 47 YEARS
HAVING OFFICE AT 127/1 SAPNA HOUSE
NEAR MRPL GATE, BALA,
SURATKAL, MANGALORE - 575030. ...PETITIONER
(BY:MR. SUNIL P. PRASAD, ADVOCATE)
AND:
1. THE ASSISTANT COMMISSIONER OF SERVICE TAX
OFFICE OF THE ASSISTANT COMMMISSIONER
OF CENTRAL EXCISE & SERVICE TAX
SERVICE TAX DIVISION
5TH FLOOR, PUNJA BUILDING ANNEX
LALBAGH, MANGALORE - 575003.
2. THE COMMISSIONER OF CENTRAL EXCISE
OFFICE OF THE COMMISSIONER OF
CENTRAL EXCISE, VII FLOOR, TRADE CENTRE
BUNTS HOSTEL ROAD, MANGALORE - 575 003.
3. CENTRAL BOARD OF EXCISE AND CUSTOMS
REPRESENTED BY ITS CHAIRMAN
DEPARTMENT OF REVENUE, MINISTRY OF FINANCE
GOVERNMENT OF INDIA,
NORTH BLOCK, NEW DELHI - 110001.
Date of Order 28-11-2017 W.P.No.3824/2016
Premier Associates Vs. The Assistant
Commissioner of Service Tax & Others.
2/16
4. UNION OF INDIA
REP. BY ITS CHIEF SECRETARY
DEPARTMENT OF REVENUE
MINISTRY OF FINANCE
NEW DELHI - 110 001. ...RESPONDENTS
(BY:MR.JEEVAN J. NEERALGI, ADVOCATE)
THIS W.P. IS FILED UNDER ARTICLES 226 & 227 OF THE
CONSTITUTION OF INDIA PRAYING TO CALL FOR THE
RECORDS RELATING TO COMMUNICATION DATED 02.01.2014
AT ANNEXURE-H, COMMUNICATION DATED 10.03.2014 AT
ANNEXURES L OF R1 AND QUASH THE SAME AND SHOW
CAUSE NOTICE DATED 12.10.2015 AT ANNEXURES M OF R2
AND QUAASH THE SAME AND ETC.
THIS W.P. COMING ON FOR PRELIMINARY HEARING 'B'
GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER
Mr.Sunil P. Prasad, Advocate for Petitioner Mr.Jeevan J. Neeralgi, Advocate for Respondents The petitioner, M/s.Premier Associates is aggrieved by the rejection of its Declaration under Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES, 2013) by the respondent No.1- Assistant Commissioner of Central Excise and Service Tax, Mangalore, vide Annexure-L dated 10.3.2014 on the ground that the tax payable and due to the petitioner as declared under the said VCES, 2013 was Date of Order 28-11-2017 W.P.No.3824/2016 Premier Associates Vs. The Assistant Commissioner of Service Tax & Others. 3/16 paid before the date of promulgation itself on 10.5.2013. The reasons assigned in the impugned order by the said Assistant Commissioner is quoted below for ready reference:-
"5. I have gone through the declaration filed by the declarant in Form VCES-1 dated 31- 12-2013; worksheet; E-payment challans; reply dated 23-01-2014 and 11-02-2014 and the submission made during the personal hearing. The declarant had declared the tax dues of Rs.93,85,591/- pertaining to the period from April 2010 to December 2012 and made the payment of tax dues declared under VCES-1 before 10th May 2013 excepting challan No.00345 dated 24- 06-2013 for Rs.138/-.
6. I find from the payment details made towards the tax dues declared under VCES-1 that the declarant had paid the tax dues declared under VCES-1, before 10th May 2013, excepting challan No.00345 dated 24-06-2013 for Rs.138/-. The Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) has come into effect from 10.05.2013. The Central Board of Excise & Customs, vide Circular No.170/5/2013- ST dated 08-08-2013, has clarified that 'if any Date of Order 28-11-2017 W.P.No.3824/2016 Premier Associates Vs. The Assistant Commissioner of Service Tax & Others.4/16
'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. The immunity from interest and penalty is only for 'tax dues' declared under VCES'.
7. The declarant had made the payment towards tax dues declared under VCES, 2013 (excepting Rs.138/-), prior to the enactment of Service Tax Voluntary Compliance Encouragement Scheme, 2013, i.e. before 10th May 2013. The declarant had discharged their service tax liability before 10-05-2013 and therefore, there was no tax dues to be declared under VCES-1 as on the date of enactment of VCES, 2013. Therefore, in view of the statutory provisions and the clarification issued by the Board, referred above, I hold that the VCES-1 dated 31-12-2013, filed by the delcarant, is liable to be rejected.
8. As the tax dues declared in the declaration dated 31-12-2013, had been paid before the enactment of Service Tax Voluntary Compliance Encouragement Scheme, 2013, I reject the declaration filed by the declarant, in Date of Order 28-11-2017 W.P.No.3824/2016 Premier Associates Vs. The Assistant Commissioner of Service Tax & Others.5/16
Form VCES-1 dated 31-12-2013, in terms of Section 106(2) read with Section 106(1) of Finance Act, 2013 (17 of 2013), Chapter VI, Service Tax Voluntary Compliance Encouragement Scheme, 2013."
2. Mr.Sunil P. Prasad, the learned counsel for the petitioner submitted that Clause 105(e) and Clause 106 of the Finance Act, 2013 (Act) of VCES, 2013 only stipulates that the tax due for the period from 1st October 2007 to 31st December 2012, which was due and not paid as on 1st March 2013, was required to be paid by the petitioner and that no notice or order of determination under Section 72 or Section 73 or Section 73A of the said Act would have been initiated against the petitioner. He submitted that both these conditions were admittedly fulfilled by the petitioner- assessee, yet the respondent - Assistant Commissioner has rejected the said declaration of the petitioner.
3. Drawing the attention of the Court towards Service Tax dues and payable by the petitioner for the Date of Order 28-11-2017 W.P.No.3824/2016 Premier Associates Vs. The Assistant Commissioner of Service Tax & Others. 6/16 aforesaid period amounting to `93,85,591/-, learned counsel for the petitioner submitted that the payment of this Service Tax due and payable was paid only after 1st March 2013 between 21.3.2013 and 24.6.2013 and there was no prohibition for the payment of Service Tax due and Payable as on 1.3.2013 after 1.3.2013, and there is no negative stipulation in the said VCES, 2013 that Service Tax due and payable for the said period could not be paid before 10.5.2013.
4. Mr.Sunil Prasad also relying upon the Division Bench judgment of Gujarat High Court in the case of SADGURU CONSTRUCTION CO. v. UNION OF INDIA [2014 (36) S.T.R. 3 (Guj)] submitted that the said judgment squarely covers the present case also. He also submitted that the alleged clarification issued by the Central Board of Excise & Customs, (CBEC) vide Circular, dated 8.8.2013 relied upon by the respondent-Assistant Commissioner did not adversely Date of Order 28-11-2017 W.P.No.3824/2016 Premier Associates Vs. The Assistant Commissioner of Service Tax & Others. 7/16 affect the case of the petitioner, as no determination of interest and penalty for the said period was made against the petitioner as per Chapter-V of the Finance Act, 1994, before rejecting the Declaration under VCES, 2013.
5. On the other hand, learned counsel for the Revenue, Mr.Jeevan J. Neeralgi, however tried to support the impugned order and submitted that the adjudication of liability of interest and penalty as envisaged in the said clarification issued by CBEC dated 8.8.2013 was later on taken up by the concerned Authorities.
6. Having heard the learned counsels for the parties, this Court is of the opinion that the present Writ Petition deserves to be allowed and the impugned order passed by the respondent-Assistant Commissioner, Annexure-L dated 10.3.2014 deserves to be quashed. The reasons are as follows:-
Date of Order 28-11-2017 W.P.No.3824/2016 Premier Associates Vs. The Assistant Commissioner of Service Tax & Others.8/16
(i) Firstly, there is no prohibition in VCES, 2013 itself for the Service Tax demand due, and payable for the period October 2007 to December 2012, which was due and payable as on 1.3.2013, and the same could be paid between the period 1.3.2013 and 10.5.2013, when the VCES Scheme itself was announced. In the absence of any such prohibition, the respondent-Assistant Commissioner could not reject the Declaration solely on this ground. The Circular of CBEC, dated 8.8.2013 also does not contain any such stipulation, except requiring the adjudication of liability of interest or penalty, if any, but that was never undertaken by the respondent Authorities when the application/ declaration, filed by the present petitioner was being considered by the respondent-Assistant Commissioner, before rejecting the same. The Date of Order 28-11-2017 W.P.No.3824/2016 Premier Associates Vs. The Assistant Commissioner of Service Tax & Others.9/16
clarification issued by CBEC that such adjudication can be made does not empower them to determine the same later on after rejecting the Declaration itself before hand.
(ii) The Clarification obviously could not go beyond the terms of VCES, 2013 itself. The Scheme clearly stipulates that the Service Tax due and payable and the remaining outstanding as on 1.3.2013, if paid, according to the terms of the declaration, which even permits the payment in installments, the Immunity from interest and penalty shall be given to the petitioner in terms of Clause 108 of VCES, 2013. Clause 109 of VCES, 2013 prohibits the refund of amount paid under the said declaration under any circumstances.
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(iii) The relevant definitions of 'Tax Dues' in Section 105(1)(e), definition of 'Person', who is eligible to make such declaration under Sections 106(1), 108 and 109 of the said Scheme, are quoted below for ready reference:-
"105(1)(e).-"tax dues" means the service tax due or payable under the Chapter or any other amount due or payable under section 73A thereof, for the period beginning including a cess leviable thereon under any other Act for the time being in force, but not paid as on the 1st day of March, 2013.
Person who may make declaration of tax dues.
106. (1) Any person may declare his tax dues in respect of which no notice or an order of determination under section 72 or section 73 or section 73A of the Chapter has been issued or made before the 1st day of March, 2013.
Provided that any person who has furnished return under section 70 of the Chapter and disclosed his Date of Order 28-11-2017 W.P.No.3824/2016 Premier Associates Vs. The Assistant Commissioner of Service Tax & Others.11/16
true liability, but has not paid the disclosed amount of service tax or any part thereof, shall not be eligible to make declaration for the period covered by the said return:
Provided further that where a notice or an order of determination has been issued to a person in respect of any period on any issue, no declaration shall be made of his tax dues on the same issue for any subsequent period.
Immunity from penalty, interest and other proceeding.
108. (1) Notwithstanding anything contained in any provision of the Chapter, the declarant, upon payment of the tax dues declared by him under sub-section (1) of section 97 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.
(2) Subject to the provisions of section 101, a declaration made under sub-section (1) of section 97 shall become conclusive upon issuance of acknowledgement of discharge Date of Order 28-11-2017 W.P.No.3824/2016 Premier Associates Vs. The Assistant Commissioner of Service Tax & Others. 12/16 under sub-section (7) of section 97 and no matter shall be reopened thereafter in any proceedings under the Chapter before any authority or court relating to the period covered by such declaration.
No refund of amount paid under the Scheme.
109. Any amount paid in pursuance of a declaration made under sub-section (1) of section 97 shall not be refundable under any circumstances.
(v) The petitioner admittedly has complied with all the relevant conditions of VCES, 2013 and therefore, its declaration, prima facie, deserved to be accepted and has been wrongly rejected by the respondent - Assistant Commissioner.
(vi) The Division Bench of Gujarat High Court dealt with almost a similar controversy and held in the case of Sadguru Construction Co. (supra), as under:-
Date of Order 28-11-2017 W.P.No.3824/2016 Premier Associates Vs. The Assistant Commissioner of Service Tax & Others.13/16
"11. Combined reading of section 106 with section 105(1)(e) would make it clear that the position of a declarant vis-a-vis his service tax dues would have to be ascertained as on 1.3.2013. If any proceedings for determination of the tax dues of a person have been initiated before 1.3.2013, declaration of such a person would not be accepted. Likewise, arrear of tax which could be declared in such declaration would be the service tax due or payable for the period between 1.10.2007 to 31.12.2012 and which sum is not paid before 1.3.2013. In plain terms, therefore, if any service tax is due and payable by a person for the aforesaid period, the same would be included in the definition of the expression "tax dues" if the same has not been paid as on 1.3.2013.
12. In the present case, admittedly the disputed amount of taxes were deposited by the petitioners with the department after 1.3.2013. However, the same having been deposited before 10.5.2013 that is the date on which the scheme was framed, the department contends that such amount cannot form part of the declaration under the Scheme.
Date of Order 28-11-2017 W.P.No.3824/2016 Premier Associates Vs. The Assistant Commissioner of Service Tax & Others.14/16
In our opinion, the contention ignores the statutory provisions contained in the Scheme of 2013. As we have noticed, the declaration can be made in terms of section 106 of tax dues. The term "tax dues" is defined in section 105(1)(e). If we accept the stand of the department that any tax which is deposited before 10.5.2013 cannot form part of a declaration, the same would substantially mutilate the definition of term "tax dues' contained in section 105(1)(e). If the intention of the legislature was to exclude any tax deposited before the framing of the scheme, the same could have been provided in plain language. On the contrary, the legislature excluded from the purview of declaration only those taxes which were already paid by 1.3.2013. The period between 1.3.2013 and 10.5.2013 would, by necessary application of the provision of the scheme, be covered for declaration under the Scheme itself. In our understanding, for a valid declaration two of the essential conditions were that the proceedings for either declaration or recovery of the tax dues should not be pending on 1.3.2013 and secondly that the tax should not have been deposited before the said date. In Date of Order 28-11-2017 W.P.No.3824/2016 Premier Associates Vs. The Assistant Commissioner of Service Tax & Others.15/16
the present case, both the conditions were fulfilled.
7. In view of the aforesaid, this Court is clearly of the opinion that the rejection of the Declaration of the petitioner under VCES, 2013 by the respondent-
Assistant Commissioner was unjustified and cannot be sustained and the Writ Petition therefore deserves to be allowed and the same is accordingly allowed.
8. The impugned order passed by the respondent-Assistant Commissioner of Central Excise & Service Tax, Mangalore, vide Annexure-L dated 10.3.2014 is quashed and the matter is remanded back to the said Assistant Commissioner, Mangalore for passing a fresh order in accordance with law as discussed above and grant the necessary immunity to the petitioner for the said period in respect of the declaration filed by it.
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9. In view of the Writ Petition being allowed, the subsequent Show Cause Notice, Annexure-M dated 12.10.2015 is also liable to be quashed and the same is also quashed.
No order as to costs.
Sd/-
JUDGE VGR