Custom, Excise & Service Tax Tribunal
Marvel Realtors & Developers Ltd vs Commisioner Central Excise And Service ... on 18 October, 2022
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
REGIONAL BENCH
Service Tax Appeal No. 87278 of 2015
(Arising out of Order-in-Appeal No. PUN-SVTAX-000-APP-0072-15-16 dated
27.07.2015 passed by the Commissioner of Service Tax (Appeals), Pune)
M/s. Marvel Realtors & Developers Ltd. Appellant
301/302, Jewel Tower, Lane No.5,
Koregaon Park, Pune 411 001.
Vs.
Commissioner of Service Tax-I, Pune Respondent
ICE House, 41/A, Sassoon Road,
Opp. Wadia College, Pune 411 001.
Appearance:
Shri Vinay Jain, Advocate with Shri Aditya Jain, C.A., for the Appellant
Shri Nitin M. Tagade, Joint Commissioner, Authorised Representative
for the Respondent
CORAM:
HON'BLE MR. SANJIV SRIVASTAVA, MEMBER (TECHNICAL)
HON'BLE DR. SUVENDU KUMAR PATI, MEMBER (JUDICIAL)
Date of Hearing: 18.10.2022
Date of Decision: 18.10.2022
FINAL ORDER NO. A/86148/2022
PER: SANJIV SRIVASTAVA
This appeal is directed against Order-in-Appeal No. PUN-
SVTAX-000-APP-0072-15-16 dated 27.07.2015 passed by the
Commissioner of Service Tax (Appeals), Pune. By the impugned
order, the Commissioner (Appeals) has held as follows:-
"ORDER
The Order-in-Original No. VGN(30)STC-3/VCES/Marvel
Real/51/2013/582 dated 31.12.2014 passed by the Assistant
Commissioner, Service Tax Division-I, Service Tax
Commissionerate Pune is upheld as legal and proper. This
appeal is rejected in toto."
1.2 The Assistant Commissioner has vide Order-in-Original No.
VGN(30)STC-3/VCES/Marvel Real/51/2013/582 dated
31.12.2014 has held as follows:-
2 ST/87278/2015
"ORDER
i. The VCES application No. P33A051 filed on 04/10/2013 is
rejected under the provisions of Section 106(2) of the Finance
Act, 2013 and the amount of Rs.81,94,283/- i.e. the declaration
made against Sl. No. 6 of the Form VCES-1 of the declarant is
made ineligible for benefits under Section 108 of the Finance
Act, 2013; and
ii. I order that the amount so declared under VCES shall be
recoverable along with interest and penalty at appropriate rate
under Section 87 of the Act, as per Section 110 of the Act."
2.1 Appellant had filed a declaration under VCES scheme and
has admitted the tax liability of Rs.1,69,55,212/-. They had
deposited Rs.87,60,929/- of the service tax liability. Hon'ble
Finance Minister on 20.02.2013 announced Voluntary
Compliance Encouragement & Settlement Scheme, 2013 and as
per the provisions of the scheme if the assessee makes full and
correct declaration of the service tax dues for the period October
2007 to December 2012 and makes payment of those dues
within a specified time frame, such declarant would be granted
immunity from payment of interest and penalty. Appellant filed
VCES-1 for the pending dues of Rs.81,94,283/- for the period
July 2010 to December 2012 and acknowledgment was issued in
Form VCES-2 on 11.10.2013. They deposited the entire
admitted liability under the VCES scheme and intimated to the
department on 12.12.2014.
2.2 However, vide letter dated 29.10.2013 a Notice of
Intention was issued to the appellant asking them to explain why
the VCES-1 declaration filed by them should not be rejected
under Section 106 of the Finance Act, 2013. Designated
Authority - Assistant Commissioner vide his order referred in
para 1.2 above rejected the VCES application filed by the
appellant on the ground that the same is hit by the provisions of
Section 106(2) of the Finance Act, 2013 relying upon the report
furnished by the Assistant Commissioner (HPU), Pune III
Commissionerate.
3 ST/87278/2015
2.3 Appellant challenged this order before Commissioner
(appeals) and the Commissioner (Appeals) by the impugned
order rejected the appeal filed by the appellant. Hence this
appeal.
3.1 We have heard Shri Vinay Jain, Advocate with Shri Aditya
Jain, Chartered Accountant, for the appellant and Shri Nitin M.
Tagade, Joint Commissioner, Authorised Representative for the
Revenue.
3.2 Arguing for the appellant, learned counsel submits that:-
The issue involved in the present case is in respect of their
eligibility under the VCES scheme. At the relevant time as
per the appellant, no enquiries/investigation were pending
against them. Accordingly the impugned order denying
the benefit admissible under VCES scheme is not legal and
proper.
Letters dated 11.11.2011 and 13.03.2012 do not initiate any
enquiry or investigation against the appellant under
Section 106(2) of the Act. Hence these letters cannot be
the basis for rejection of VCES of the appellant.
They rely upon the Board Circular No. 169/4/2013-ST
dated 13.05.2013 and No. 174/9/2013-ST dated
25.11.2013. Vide the above circulars the Board has very
clearly clarified that a simple communication seeking
information/balance sheet which is roving in nature and
would not constitute enquiry/investigation for the purposes
of Section 106(2) of the Finance Act, 2013.
Since the letters referred above are only roving enquiries
and do not mean any investigation has been initiated
against the appellant. In this regard, appellant rely upon
the following decisions:-
Narasimha Mills Pvt. Ltd. [2015 (39) STR 795
(Mad.)]
Barnala Builders & Property Consultants [2014 (35)
STR 65 (P&H)]
Siddhi Vinayaka Enterprises Pvt. Ltd. [2016-TIOL-
1325-CESTAT-DEL]
4 ST/87278/2015
Abhi Engineering Corporation [2015-TIOL-2197-
CESTAT-MUM]
LV Construction & Company [2016-TIOL-159-
CESTAT-MUM] affirmed by Hon'ble Bombay High
Court as reported at [2017 (351) ELT 94]
Shri B.R. Ajit [2015-TIOL-1905-CESTAT-BANG.]
Abhay Cotex Pvt. Ltd. [2019 (22) GSTL 213 (Tri.-
Mum)].
The letter dated 28.08.2012 issued to Marvel Reality
cannot be said to be an inquiry/investigation against the
appellant.
The issue is squarely covered by the decision of this
Tribunal in the case of Marvel Landmarks Pvt. Ltd. [2019-
TIOL-1101-CESTAT-MUM] affirmed by Hon'ble Bombay
High Court reported at [2019-TIOL-960-HC-MUM-CX].
No recovery action can be initiated against the appellant in
terms of Section 87 of the Finance Act, 1994 read with
Section 110 of the Finance Act, 2013.
Once the declaration made by the appellant is rejected in
terms of section 106 of the Finance act, 2013 then the
provisions of section 110 ibid, cannot be invoked to
recover the interest etc in terms of Section 87 of the
finance Act, 1994.
As the appellants have made the deposit of entire admitted
tax liability before the due date, in terms of proviso to
Section 107 (4) no interest could be recovered from them.
No penalty could have been imposed in the manner it has
been stated in the order in original in terms of section 110
and recovered from them under Section 87.
Accordingly appeal may be allowed.
3.3 Learned Authorised Representative reiterates the findings
recorded in the impugned order and prays for rejection of the
appeal.
4.1 We have considered the impugned order along with the
submissions made in appeal and during the course of argument.
5 ST/87278/2015
4.2 For upholding the order-in-original, Commissioner
(Appeals) has stated as follows:-
"8. I find that the Application under VCES has been rejected
Respondent, in view of the provisions of Section 106(2) of the
Act of 2013. The same is re produced below for ready reference:
"Where a declaration has been made by a person against
whom,-
(a) an inquiry or investigation in respect of a service tax not or
not paid or short-levied or short-paid has been initiated by way
of
--
(i) search of premises under section 82 of the Chapter; or
(ii) issuance of summons under section 14 of the Central Excise Act. 1944 (1 of 1944), as made applicable to the Chapter under section 83 thereof; or
(iii) requiring production of accounts, documents or other evidence under the Chapter or the rules made thereunder; or
(b) an audit has been initiated, and such inquiry, investigation or audit is pending as on the 1st day of March, 2013, then, the designated authority shall, by an order, and for reasons to be recorded in writing, reject such declaration."
It is seen from the above provision, that the legal provisions governing the VCES provide for rejection of the declaration involving cases where an inquiry or investigation had been initiated by way of search/summons proceedings or audit by the Department against the Declarant as on 01.03.2013. In the present case, the Respondent has referred to letter dated 11.11.2011 issued by Superintendent (SIV-III), Service Tax, Pune-III Commissionerate. I have examined this letter dated 11.11.2011 and I find that it is addressed to 'M/s Marvel Realtors & Developer Ltd., 301/302, Lane No. 05, S. No. 25/1A, Koregaon 6 ST/87278/2015 Park, Pune-411001' and it covers the period 2008-09 to 2011-12 f October 2011). Thus, it is clear that this letter was issued to the Appellant and it also covered a part of the period involved in the appeal (from April 2010 to December 2012). Thus, firstly there is no doubt that this letter dtd 11.11.2011 is applicable to the Appellant and therefore is relevant to the issue involved in this appeal. I have also noticed that the said letter dated 11.11.2011 was replied by the Appellant vide their letter dated 15.11.2011 and they had requested the Department to keep the proceedings in abeyance. Thereafter, after examining the reply of the Appellant, another letter dated 13.01.2012 was issued to the Appellant by the Superintendent (SIV-III), Service Tax, Pune-III Commissionerate and specific information and documents were called and the said letter was issued invoking the powers vested in the said Officer under Section 14 of the Central Excise Act, 1944, as made applicable to Service Tax under Section 83 of the Finance Act, 1994. On perusal of this letter dated 13.03.2012 of the Superintendent, Service Tax it is noticed that the same was addressed to 'M/s Marvel Realtors & Developers Ltd, 301/302, Jewel Towers, Lane No. 5, Koregaon Park, Pune-411001'. Thus, it is clearly established that this letter dated 13.03.2012 was also addressed to the present Appellant. In view of the above factual position, I conclude that vide both these letters dated 11.11.2011 & 13.03.2012, the Department had initiated enquiry against the Appellant for their non-payment of Service Tax on 'Construction of Residential Complex service' and 'Renting of Immovable Property service'. Accordingly, I hold that invocation of provisions of Section 106(2) of the Act of 2013 in respect of the Appellant is correct.
9. It is an admitted fact that thereafter vide letter dated 28.08.2012, which issued under Section 14 of the Central Excise Act, 1944, as made applicable to Service Tax under Section 83 of the Finance Act, 1994, certain information/documents were called by the Deputy Commissioner (SIV) Service Tax Cell, Pune- Ill Commissionerate from M/s Marvel Reality. In this regard, I have noticed that the present appeal has been filed by the Appellant under letter dated 19.03.2015 which has the logo of a 7 ST/87278/2015 square with the word 'MARVEL' red in it printed at the top and the following printed at the bottom:
"MARVEL REALTORS, 301-302 Jewel Tower, Lane 5, Koregaon Park, Pune 411001 / T +91 20 26152920/21, 3025070 informarvelrealtors.com/www.marvelrealtors.com"
From this evidence also, it is clear that Appellant refer themselves to as 'Marvel Realtors'. On this ground, the letter dated 28.08.2012 of the Deputy Commissioner (SIV) Service Tax Cell, Pune-Ill Commissionerate, which was addressed to "Marvel Reality, 301-302 Jewel Tower, Koregaon Lane No. 5, Koregaon Park, Pune 411001" has to be accepted as having been addressed to the Appellant as the name and address on the said letter dated 28.08.2012 of the Deputy Commissioner was same as the name and address on the letter head under which the appeal has been filed by the Appellant vide their letter dated 19.03.2015. Accordingly, even on this ground, the forwarding letter of this appeal itself proves that the contention of the Appellant that the said letter dated 28.08.2012 was not addressed to them is devoid of merit and appears to be an afterthought. Thus, I reject the said argument of the Appellant and hold that they were not eligible for the benefit of VCES Scheme in view of the provisions of Section 106(2) of the Act of 2013, on the additional ground of the said letter dated 28.08.2012, as correctly held by the Respondent.
10. It is also an argument of the Appellant that vide the said letters, various documents/records for last three years and other relied upon documents had been called for and the said letter was for seeking information of general nature and no specific information was asked and hence cannot be a ground to invoke the provisions of Section 106(2) of the Finance Act, 2013, However, this contention of the Appellant is found factually incorrect on examination of the said letters, wherein specific documents relating to the taxable services. provided by the Appellant, like service-wise reconciliation statement of receipts & payment of Service Tax, tallying with their financial statements 8 ST/87278/2015 of the relevant period, month-wise details of amount billed and realized towards services rendered, etc. were called under Section 14 of the Central Excise Act, 1944, as specifically mentioned in the same. Further, the purpose of issuance of the said letters is also clearly mentioned therein an 'an enquiry regarding service tax liability in respect of various services provided'. Thus, I find that specific enquiries/investigations had been initiated against the Appellant before the cut-off date of 01.03.2013 mentioned in Section 106(2) of the Finance Act. 2013. Therefore, this contention of the Appellant is found devoid of merit & is accordingly rejected.
11. Appellant have also stated that the Notice of Intention to reject the VCES Declaration was issued in a vague manner without specifying the reasons for the proposed rejection of their application under VCES, I have examined the Notice of Intention dated 29.10.2013 issued in respect of the Appellant and I find that the said Notice had invoked the provisions of Section 106 of the Act of 2013 and had specifically mentioned that inquiry/investigations were pending against the Appellant:
Section 106(2) of the Act of 2013 only stipulates that a reasoned Order has to be issued by the designated authority for rejecting the declaration and there is no stipulation in the Act of 2013 mandating issuance of Notice of Intention before rejecting a VCES application. The clarification vide answer to S.No. 12 in the CBEC Circular dated 08.08.2013 elaborates the need for following the principles of natural justice by giving a Notice to the declarant under VCES. In the present Appeal, it is seen that the Appellant were given opportunities to defend their case by way of issuing the Notice of Intention to reject the impugned VCES Declaration and were also granted Personal Hearings, which were duly availed by them, I have also noticed that all the documents (letters dated 11.11.2011, 13.03.2012 & 28.08.2012) relied upon by the Respondent for rejecting the VCES application were admittedly available with the Appellant and thus their rights were fully safeguarded, as all the documents which have been relied upon by the Respondent for rejecting the VCES application were available with the Appellant. Thus, there has been substantive compliance of principles of 9 ST/87278/2015 natural justice in respect of the Appellant, before passing the impugned Order-in-Original. Hence, I hold that the VCES declaration was rightly rejected by the Respondent after following the principles of natural justice and the contention of the Appellant in this regard is devoid of merit
12. Further. I find that the Appellant have argued that once they are considered to be outside the purview of the VCES, they should be granted refund of the amount they had paid in connection with their VCES application and that they are not covered by the provisions of Section 109 of the Act of 2013. They have also stated that they are separately filing a refund application under Section 11B of the Central Excise Act, 1944. The refund application, even if filed, is not subject matter of the impugned Order-in-Original and therefore no comments are required to be given on the same. The decisions relied upon by the Appellant for pressing their ease of refund are required to be considered and applied if and when their refund application is considered and that if the underlying facts are same. Accordingly, I reject the said prayer of the Appellant as pre- mature and beyond the scope of the appeal against the decision of the Respondent communicated vide impugned letter F. No. VGN(30)STC-3/VCES/Marvel Real/51/2013/582 dated 13-12- 2014. I am also in agreement with the contention of the Respondent that the amount paid by declarant under VCES is not refundable as per the provisions of Section 109 of the Act of 2013.
13. The Appellant have also contended that no recovery action can initiated against them in terms of Section 87 of the Finance Act 1994 read with Section 110 of the Act of 2013. Therefore, I proceed to examine the question whether the amount declared under VCES can be ordered to be recovered alongwith interest & penalty in the case wherein the applicant is found to be not eligible under Sections 106 of the Act of 2013, to avail the benefit of VCES scheme and his VCES application is rejected. The Respondent has invoked Section 87 of the Finance Act, 1994 read with Section 110 of the Act of 2013 to order recovery of the said declared tax dues, alongwith interest & penalty. The 10 ST/87278/2015 Appellant have also referred to Section 110 of the Act of 2013, which reads as under:
110 Tax dues declared but not paid. - Where the declarant fails to pay the tax dues, either fully or in part, as declared by him, such dues along with interest thereon shall be recovered under the provisions of section 87 of the Chapter, It is seen that the above Section empowers the Department to recover the amounts so declared by a declarant' along with interest under Section 87. The word Declarant' is defined under Section 105(b) of the Act of 2013 as:
"declarant" means any person who makes a declaration under sub section (1) of section 107;
The said Section 107(1) is as under:
107. Procedure for making declaration and payment of tax dues (1) 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.
It is not disputed that the Appellant had made the said VCE declaration under Section 107(1) of the Act of 2013 in VCES-1 Form. Thus as per Section 105(b) of the Act of 2013, the Appellant have fulfilled the condition for becoming a declarant. Accordingly, provisions of Section 10 of the Act of 2013 are applicable in this case. I find that from plain reading of the Sections of Act of 2013, as quoted above, it is clear that there is no legal provision that if a VCES declaration is rejected, the applicant does not remain declarant. As explained above, the definition of declarant is entirely dependent upon filing of VCES declaration and has no relation with its subsequent acceptance or rejection. Accordingly, I conclude that the Appellant were a declarant under VCES Scheme. Further, 1 also hold that the Respondent was correct in invoking the provisions of Section 87 of the Finance Act, 1994, read with Section 110 of the Act of 2013, for ordering recovery of the tax dues which were 11 ST/87278/2015 admittedly accepted & declared by the Appellant in their VCES-1 Form."
4.3 The same issue had come up before this Tribunal in the case of Marvel Landmarks Pvt. Ltd. & Ors. [2019-TIOL-1101- CESTAT-MUM]. Tribunal has vide its final order held as follows:-
"4. We have carefully considered the submissions made by both the sides. We find that the limited issue to be decided is that the letter dt. 28.8.2012 issued to M/s. Marvel Realtors can be considered as initiation of the inquiry contemplated under Section 106 of the Act. We find that all the appellants are private limited company and partnership firm in different names. Therefore the letter addressed to the M/s. Marvel Realtors cannot be considered as service of this letter to all the appellants. Even though the letter was issued, on this technical lapse on the part of the Revenue it cannot be said that the inquiry contemplated under Section160(2) of the Finance Act was initiated. Secondly this Tribunal in the case of M/s. L.V. Construction & Company relying on the Board Circular No.170/5/2013-ST dt. 08.08.2013 held that where the information is sought of roving nature even though communication regarding information quoted Section 14 of the Act. The provisions of Section 106(2)(a) shall not attract. The finding of the said order is reproduced below:
"5. I have carefully considered the submissions made by both sides.
6. The fact of the case is not under dispute that against both the appellants the DGCEI issued letter dated 17/1/2013 and 19/2/2013 asking for some information and documents related to their taxable activity. In the said letter it was mentioned that information is called for under Section 14 of the Central Excise Act, 1944, the said letters are reproduce below:
12 ST/87278/2015 It can be seen that same inquiry was made from various assesses of roving nature. The Board circular No. 170/5/2013-
ST dated 8/8/2013 and No. 174/9/2013-ST dated 25/11/2013 clarified the same issue as under :
S.No. Issues Clarification
1. Whether the Attention is invited to
13 ST/87278/2015
communications, wherein clarification issued at S.
department has sought No. 4 of the circular No.
information of roving 169/4/2013-ST, dated
nature from potential 13.5.2013, as regards
taxpayer regarding their the scope of section 106 business activities without (2) (a) of the Finance seeking any documents Act, 2013, wherein it has from such person or been clarified that the calling for his presence, provision of section 106 while quoting the (2)(a)(iii) shall be authority of section 14 of attracted only in such the Central Excise Act, cases where accounts, 1944, would attract the documents or other provision of section 106 evidence are (2) (a)? requisitioned by the authorized officer from the declarant under the authority of a statutory provision.
A communication of the
nature as mentioned in
the previous column
would not attract the
provision of section 106
(2)(a) even though the
authority of section 14
of the Central Excise Act
may have been quoted
therein.
The Board circular No. 174/9/2013-ST dated 25/11/2013 3 Whether benefit of VCES The designated authority/ would be available in cases Commissioner concerned where documents like may take a view on merit, balance sheet, profit and taking into account the facts loss account etc. are called and circumstances of each for by department in the case as to whether the inquiries of roving nature, inquiry is of roving nature or 14 ST/87278/2015 while quoting authority of whether the provisions of section 14 of the Central section 106 (2) are attracted Excise Act in a routine in such cases.
manner.
From the above clarification, it is clear that if the information is sought of roving nature even though communication regarding seeking information quoted Section 14 which shall not attract provisions of Section 106(2)(a). The cases of the appellants are squarely covered under the above clarification. It is settle position by the Hon'ble Courts in the various judgment with Board Circular binding on the departmental officers.
(i) Ranadey Micronutrients Vs. Collector[1996(87) ELT 19(S.C.)] = 2002-TIOL-184-SC-CX
(ii) Commissioner of C. Ex. Bhavnagar Vs. Ultratech Cement Pvt. Ltd[2014(302) ELT 334(Guj)]
(iii) Union of India Vs. Arviva Industries Ltd. [2007(209) ELT 5(S.C.)] = 2007-TIOL-12-SC-CX In view of the above judgments, The Ld. Adjudicating authority should have accepted the declaration filed by the appellants. As regard the judgments of Sadguru Construction Co & 1(supra) relied upon by the Revenue, on going through the said judgment I find that in the said judgment issue before the Hon'ble High Court is correct declaration of tax dues whereas in the present case, the issue is different and therefore the judgments is not applicable in the fact of the present case. In view of the above discussion, I am of the considered view that in light of Board instruction, inquiry initiated by the DGCEI in form of letter dated 19/2/2013 cannot be considered as the inquiry prescribed under Section 106(2)(a) of Finance Act, 2013. Therefore the impugned orders rejecting the declaration of the appellant are not sustainable. The impugned orders are set aside and appeals are allowed."
In the facts of the present case also the information sought is of roving nature for the reason that the similar information was asked from more than one assessee and the same is not specific in relation to any particular assessee. Therefore the facts of the present case is identical facts of the above decision. Considering 15 ST/87278/2015 both the aspect that first there is no service of any inquiry letter to the appellants, secondly the information sought for by the department is of roving nature, the VCES declaration filed by the appellant is acceptable and the impugned order is correct and legal. As per our discussion made hereinabove, we set aside the impugned order and allow the appeals."
4.4 This decision was affirmed by Hon'ble Bombay High Court stating as follows:-
"3. Regarding question (i) :-
(a) The respondents had independently filed applications making a declaration under the VCES scheme in terms of the Finance Act, 2013. The original adjudicating Authority accepted the VCES declaration under the Finance Act, 2013 filed by the respondents.
(b) However, being aggrieved with declaration being accepted, the Revenue filed appeals before the Commissioner (Appeals) who by order dated 30th June, 2016 allowed amongst other, both the appeals of the Revenue in respect of these respondents.
(c) Being aggrieved in further appeal by the respondents, the Tribunal found the letter / Notice dated 20th August, 2012 issued to one M/s. Marvel Realtors being relied upon by the Revenue to reject the declaration under the VCES scheme, cannot be accepted. This for the reason that neither of the respondents before it are called M/s. Marvel Realtors. Thus, a notice issued to a nonexisting person cannot be considered to be commencement of any inquiry or an investigation in respect of the respondents as the letter / Notice dated 20th August, 2012 was not issued to the respondents. Thus, concluding that the inquiry contemplated under Section 106(2) of the Finance Act, 2013 cannot be said to have been initiated so as to deprive the respondents of the benefit of VCES declaration filed under the Finance Act, 2013.
(d) Mr. Kantharia, learned Counsel appearing for the appellant Revenue submits that both the respondents belong to Marvel group and even though there was no entity in the name of Marvel Realtors, the letter addressed to M/s. Marvel Realtors shall be deemed to be an inquiry being made in respect of the 16 ST/87278/2015 entire Marvel group. Therefore, the declarations filed under the VCES scheme can not be accepted as they are hit by Section 106(2) of the Finance Act, 2013.
(e) We find that before Section 106(2) of the Finance Act, 2013 can be invoked so as to reject the application under the VCES scheme, it is necessary that the declaration is made by a person against whom an inquiry / investigation for service tax not paid / short paid has been initiated. In this case, admittedly no inquiry / investigation has been initiated against the respondents but a Notice has been issued to M/s. Marvel Realtors, which admittedly is a nonexisting entity. Therefore, no proceedings have been initiated against the two respondents herein who had filed declaration under the VCES scheme so as to be hit by Section 106(2) of the Finance Act, 2013. Thus, the impugned order of the Tribunal allowing the appeal of the respondents before it, cannot be found fault with as the Authorities had no jurisdiction to reject the declaration filed under the VCES scheme by the two respondents. This is particularly so as no inquiry / investigation had been initiated in respect of them.
(f) In the above view, this question as proposed does not give rise to any substantial question of law. Thus, not entertained.
4. Regarding question (ii) :-
(a) In view of the fact that the appeal is liable to be dismissed for the reason given while dealing with question (i) above, this issue became academic. In any view, the Tribunal found that the enquiry being made in respect of the respondents were in nature of roving enquiry, not hit by Section 106(2) of the Finance Act, 2013. This was by following the decision of its coordinate bench in the care of L.V. Constructions & Co. Vs. Commissioner of Sales Tax, 2016 TIOL 159 (Mum) = 2016-TIOL-159-CESTAT-
MUM.
(b) The appeal of the Revenue in case of L.V. Construction (supra) had been dismissed by this Court reported as Commissioner of Central Excise Vs. L.V. Construction & Company 351 ELT 94 = 2016-TIOL-159-CESTAT-MUM.
(c) This finding of the Tribunal is one of facts and nothing has been shown to us to indicate that the same is perverse.
17 ST/87278/2015
(d) Therefore, this question as proposed also does not give rise to any substantial question of law. Thus, not entertained."
4.5 In the present case we do not find anything to show that the enquiries/investigation as contemplated under Section 106(2) of the Finance Act were initiated against the appellant. Hence in absence of any such enquiries/investigation, the order rejecting the claims made by the appellant under VCES scheme cannot be upheld.
4.6 While replying to the Notice of Intention, vide letter dated 29.11.2013 appellant has specifically stated as follows:-
"However, in our humble contention, no such enquiry or investigation or audit was pending a on 1 March 2013 as contemplated by the VCES Rules. Hence it is our humble submission/ that our application should be accepted which is as per law.
It may be noted that we have never received any notice u/s 72,73 or 734 of the Finance Act 1994, Further no summons been issued under sec. 14 of the Central Excise Act nor any formation pursuant to Rule 5A of the Service tax Rules, 1994 has been specifically asked for prior to 1 March 2013. We may further like to inform that a search action was cared on at our premises on 24th August 2013. Since this was after the date as specified in the ICES Rules, we would still be eligible for the benefit of the scheme.
We may further like to bring to your notice that letters of roving nature that have been issued would not tantamount to being any of the notices as specified above. This has been aptly clarified by the CBEC in its circular dated 8 August 2013 and 25 November 2013.
However, in case you have any documents which have missed our attention and which clearly tantamount to being one of the reasons for non acceptance of the VCES application, it would be helpful if the same can be provided and the reasons for non 18 ST/87278/2015 acceptance are specifically brought to our notice before the application is sought to be rejected."
4.7 Again vide their letter dated 02.12.2014 appellant has stated as follows:-
"2) On 28th August, 2012 one notice has been issued in the name of 'Marvel Reality' while the entity under consideration for application is as stated above. It is been contented that this notice is basis for enquiry contemplated above.
3) C.B.E.C. Circular no. 170/5/2013-ST dated 08th August, 2013, has clarified as under:
An assessee has two units at two different locations, say Mumbai and Ahmedabad. Both are separately registered. The Mumbai unit has received a Show Cause Notice for non-payment of tax on a revenue stream but the Ahmedabad unit has not. Whether the Ahmedabad unit is eligible for VCES?
Two separate service tax registrations are two distinct assessees for the purposes of service tax levy. Therefore, eligibility for availing of the Scheme is to be determined accordingly. The unit that has not been issued a show cause notice shall be eligible to make a declaration under the Scheme.
4) It may be noted that the intention of law as depicted in the circular is to even allow benefit to a different unit of the same entity if no investigation was carried against that unit. In our case we are a separate legal entity with separate service tax registration and hence clearly our application cannot be rejected merely because there is a probable enquiry in another name which has a prefix common to our entity."
4.8 For rejecting the claim made by the appellant, the adjudicating authority at para 20 observed as follows:-
"20 On going through the eligibility conditions stipulated under Section 106 of the Finance Act, 2013 and the facts mentioned in the above paras it is seen that the enquiry against the declarant 19 ST/87278/2015 was Initiated prior to 01/03/2013, which is evident the declarant has filed reply to these letter by HPU I have perused the verification Report dated 28/10/2013, issued by the Deputy Director DGCD Pune, It is seen that, during search operation in the registered premises of the said Marvel g certain documents were examined which suggest that the Service Tax Cell of Pune is Commissionerate has Initiated enquiry against the declarant. The said fact indicates that the wetter dated 28/08/2012 was found in the premises of the declarant's group of companies. Further as perse Board Circular No. 170/5/2013-ST dated 08/08/2013, where it was clarified that "two separate registrations are two distinct assessee for the purposes of Service tax levy. Therefore availing of the scheme is to be determined accordingly. The unit that has not been issued a show notice shall be eligible to make a declaration under the scheme." This clarification is given for Section 1061) for the Finance Act, 2013, for such cases where show cause notice is issued in the present o the declarant contravened the provisions of Section 106(2) of the Finance Act, 2013, therefore the said circular is not applicable in this case. Hence, the declarant's contention that no enquiry or investigation or audit was pending as on 01/03/2013 is not sustainable. In view of the above VCES application hit by the provisions of Section 106(2) of the Finance Act, 2013, and the verification report furnished by the Asstt. Commissioner (HPU), Pune-III Commissionerate, is proper and fit to reject the VCES application of the declarant."
4.9 He has referred to a letter dated 28.08.2012 for holding that certain investigations were pending against the declarant group of companies. However, he has not recorded as to how this letter was in reference to the present appellant. The text of the letter dated 28.08.2012 referred by the adjudicating authority in his order for rejecting the claim of the appellant is reproduced below:-
20 ST/87278/2015 4.10 In our view, this letter is not issued to the present appellant in question. Hon'ble High Court has in its order in the case referred above has specifically held that the letter issued to Marvel Realtors cannot be a reason for rejection of the claim made by any other appellant who is a part of the group companies.
4.11 An interesting observation has been made by the Commissioner (Appeal) in para 13 of the impugned order, for upholding the invocation of Section 110 of the Finance Act, 2013 read with Section 87 of Finance Act, 1994, for recovery of interest and penalty from the appellant. In view of the Commissioner (Appeal), the appellant continues to be declarant in terms of Section 107 (1) of the Finance Act, 2013 even when his declaration has been rejected for the reason that he is not eligible to file the declaration as per Section 106 ibid. Section 107 (1), starts with the phrase "Subject to the provisions of this scheme ....". The use of this phrase the makes the provision of this section, to be read by referring to the all other provisions of 21 ST/87278/2015 scheme. Thus if the person making the declaration 107 (1) is found ineligible to make the declaration and the designated authority passes the order holding him ineligible, to make declaration then the declaration made by the said person cannot be said to be a declaration made as provided under this section.
Thus Section 107 (1) refers to the declaration filed confirming to all other provisions of the scheme. Once the declaration made by the declarant is held ineligible, in terms of the VCES, the person goes out of the scheme. A constitutional bench of Hon'ble Supreme Court has in the case of South India Corporation Pvt Ltd [AIR 1964 SC 207] observed as follows:
"18. With this background let us now consider the following two questions raised before ns:(1) Whether Art. 372 of the Constitution is subject to Art. 277 thereof; and (2) whether Art. 372 is subject to Art. 278 thereof. Article 872 is a general provision; and Art. 277 is a special provision. It is settled law that a special provision should be given effect to the extent of its scope, leaving the general provision to control cases where the special provision does not apply. The earlier discussion makes it abundantly clear that the Constitution gives a separate treatment to the subject of finance, and Art. 277 saves the existing taxes etc. levied by States, if the conditions mentioned therein are complied with. While Art. 372 saves all pre- Constitution valid laws, Art. 277 is confined only to taxes, duties, cesses or fees lawfully levied immediately before the Constitution. Therefore, Art. 372 cannot be construed in such a way as to enlarge the scope of the saving of taxes, duties, cesses or fees. To state it differently, Art. 372 must be read subject to Art. 277. We have already held that an agreement can be entered into between the Union and the States in terms of Art. 278 abrogating or modifying the power preserved to the States under Art. 277.
19. That apart, even if Art. 372 continues the pre-Constitution laws of taxation, that provision is expressly made subject to the other provisions of the Constitution. The expression "subject to" conveys the idea of a provision yielding place to another provision or other provisions to which it is made subject. Further Art. 278 opens out with a non-obstanate 22 ST/87278/2015 clause. The phrase "notwithstanding anything in the Constitution" is equivalent to saying that in spite of the other articles of the Constitution, or that the other articles shall not be an impediment to the operation of Art. 278 While Art. 372, is subject to Art. 278 , Art. 278 operates in it own sphere in spite of Art. 372 The result is that Art. 278 overrides Art. 372 that is to say, notwithstanding the fact that a pre-Constitution taxation law continues in force under Art. 372, the Union and the State Governments can enter into an agreement in terms of Art. 278 in respect of Part B States depriving the State law of its efficacy. In one view Art. 277 excludes the operation of Art. 372 and in the other view, an agreement in terms of Art. 278 overrides Art.
372. In either view, the result is the same, namely, that at any rate during the period covered by the agreement the States ceased to have any power to impose the tax in respect of "works contracts.""
4.12 The provisions of section 110 are in respect of the person whose declaration has been validly made and for some reason the declarant has not made the payment of the admitted tax dues in part or toto, then in that case as per this section entire amount of admitted liability can be recovered from the declarant by resorting to the provisions of Section 87 of the Finance act, 1994. Even CBEC has in response to Question No 18 of the Frequently Asked Questions, on VCES (Question No 15 in Circular No 170/5/2013-ST dated 08.08.2013) has clarified as follows:
Q18. A declarant pays a certain amount under the Scheme and subsequently his declaration is rejected. Would the amount so paid by him be adjusted against his liability that may be determined by the department?
The amount so paid can be adjusted against the liability that is determined by the department.
From the above clarification it is quite evident that once the declaration is rejected then the liability of the person needs to be determined in manner and in terms of the provisions of the 23 ST/87278/2015 Finance Act, 1994. Thus the observations made by the impugned order go contrary to the above clarification issued by the Board.
In the case before us we have been informed that no proceedings for determination of the tax liability of the appellant have been initiated consequent to rejection of the declaration made by the appellant. Thus imposition of penalty and interest on the appellant under Section 110 after rejecting the declaration filed under Section 107 (1) can be justified.
4.13 However we have earlier held that the appellant declaration made in terms of section 107 (1) cannot be rejected in terms of Section 106 as they are eligible to make this declaration. Accordingly having issued VCES-2 designated authority should issue the discharge certificate in prescribed format of VCES-3.
5.1 Accordingly we do not find any merits in the impugned order.
5.2 Appeal is allowed.
(Order pronounced in the open court) (Sanjiv Srivastava) Member (Technical) (Dr. Suvendu Kumar Pati) Member (Judicial) Tvu