Klarissa Property Developers Private Limited Vs Commissioner of CGST & Central Excise (CESTAT Mumbai)
The appeal before the CESTAT Mumbai challenged the rejection of the appellant’s declaration under the Service Tax Voluntary Compliance Encouragement Scheme (VCES), 2013. The appellant had declared a service tax liability of ₹5,15,000 in respect of construction of a residential complex for the period from October 2007 to December 2012. The declaration was rejected on the ground that an enquiry initiated against the appellant before 01.03.2013 was pending and had proceeded through adjudication and appeal before the Commissioner (Appeals).
The appellant submitted that it was a sister concern of M/s. Kamla Mills Ltd., where the Tribunal had allowed a similar appeal on identical facts. It was further contended that no show cause notice was issued within 30 days as contemplated in the CBEC Circular. Instead, a personal hearing notice in Form VCES-1 was issued on 18.08.2015, about one and a half years after filing of the declaration. The appellant also argued that Section 111(2) of the Finance Act, 2013 prohibited action against an allegedly false declaration after expiry of one year from the date of the declaration, rendering the rejection order unsustainable.
The Department relied upon the decisions in Commissioner of Central Excise, Bolpur Vs. Ratan Melting & Wire Industries and M/s. Pandhe Constructions Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-III. It was submitted that the CBEC Circular prescribing issuance of notice within 30 days could not override the statutory provisions, and that Section 106(2) entitled the designated authority to reject the declaration because an enquiry was pending.
The Tribunal observed that Section 106(2) provides for rejection of a VCES declaration where an enquiry, investigation or audit was pending as on the specified date. However, it found no documentary evidence establishing a pending enquiry or investigation in the manner contemplated under the relevant statutory provisions before the prescribed date. It noted that only a letter of authorisation dated 20.02.2013 had been issued authorising verification of the service tax liability of the Kamla Group and its associated companies. The Tribunal further observed that summons under Section 14 of the Central Excise Act, 1944 were issued only on 18.11.2013, after the statutory cut-off date.
The Tribunal held that, irrespective of the CBEC Circular regarding issuance of notice within 30 days, the limitation prescribed under Section 111(2) of the Finance Act, 2013 could not be ignored. It noted that the appellant had filed its VCES declaration on 18.12.2013 stating that no enquiry, investigation or audit was pending against it as on 01.03.2013. The notice proposing rejection of the declaration was issued only on 01.09.2015, more than one year after filing of the declaration. Consequently, the Tribunal held that the proceedings, including the rejection order, were unsustainable in law.
While addressing the Department’s submissions, the Tribunal observed that there is no distinction between orders passed by a Single Member Bench and a Division Bench of the Tribunal for appellate purposes. It further noted that the decision in M/s. Pandhe Constructions Pvt. Ltd. did not refer to the earlier decision in M/s. Kamla Mills Ltd., which had followed earlier Tribunal precedents. The Tribunal also observed that the CBEC Circular did not prohibit issuance of notice after 30 days but merely prescribed a timeline to avoid delay. It further held that the present decision was based on the statutory limitation under Section 111(2) rather than the CBEC Circular. The Tribunal also referred to Section 108 of the Finance Act, 2013, which provides immunity from proceedings except under Section 111, and observed that proceedings under Section 111 in the present case were time-barred.
Accordingly, the Tribunal allowed the appeal and set aside the Order-in-Appeal dated 08.08.2017 rejecting the appellant’s VCES declaration.
Cases Discussed
- M/s. Pandhe Constructions Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-III (CESTAT Mumbai), 2019 (4) TMI 1968 CESTAT-Mumbai
- M/s. Kamla Mills Ltd., 2018-TIOL-1607-CESTAT-MUM
- V. S. Enterprises Vs. Commissioner of Central Excise & Customs, Nagpur (CESTAT Mumbai), 2017 (52) STR 151 (Tri.-Mumbai) [2017-TIOL-299-CESTAT-MUM]
- Sidhi Vinayaka Enterprises Pvt. Ltd. Vs. Commissioner of Service Tax, Raipur (CESTAT Delhi), 2016 (43) STR 474 (Tri.-Del.) [2016-TIOL-1325-CESTAT-DEL]
- Abhi Engineering Corporation Vs. Commissioner of Central Excise & Customs, Nagpur (CESTAT Mumbai), [2015-TIOL-2197-CESTAT-MUM]
- Commissioner of Central Excise, Bolpur Vs. Ratan Melting & Wire Industries (Supreme Court), 2008 (231) ELT 22 (S.C.)
FULL TEXT OF THE CESTAT MUMBAI ORDER
Rejection of the application filed under the Service Tax Voluntary Compliance Encouragement Scheme (VCES), 2013 by the Appellant declaring Service Tax liability of Rs. 5,15,000/- in respect of construction of residential complex due for the period from October, 2007 to December, 2012 on the ground of pendency of enquiry initiated against it before 01.03.2013 that suffered an adjudication process and gone on appeal to the Commissioner of CGST & Central Excise (Appeals-II), Mumbai is assailed in this appeal.
2. I have heard submissions from both the sides and perused the case record as well as the relevant texts of the VCES, 2013 introduced vide Chapter 6 of the Finance Act, 2013. It has been submitted by the learned Counsel for the Appellant Mr. Aman Haria that Appellant is a sister concern of M/s. Kamla Mills Ltd. who had also undergone the similar process and received a favourable order from this Tribunal vide its order passed in appeal No. ST/87780/2017 as reported in 2018-TIOL-1607-CESTAT-MUM allowing the appeal for the period of dispute and the ground agitated therein, that had found acceptance by the Tribunal, is the same to that of the present appeal. He also submitted that in the instant case no show-cause notice was issued within 30 days as per CBEC Circular but personal hearing letter in form VCES-1 was sent to the Appellant on 18.08.2015 i.e. after laps of one and half years of filing of such declaration, which is contrary to Section 111 sub Clause 2 of the Finance Act, 2013 wherein it has been clearly stipulated that in case of failure to make true declaration no action shall be taken under sub-Section 1 of Section 111 after the expiry of one year from the date of such declaration, for which the order passed by the adjudicating authority that has been confirmed by the Commissioner (Appeals) is unsustainable in the eyes of law.
3. Per contra, learned Authorised Representative for the Respondent-Department Mr. Onil Shivadikar, in drawing attention to the judgment passed by the Hon’ble Supreme Court in the case of Commissioner of Central Excise, Bolpur Vs. Ratan Melting & Wire Industries reported in 2008 (231) ELT 22 (S.C.) and order passed by this Tribunal in the case of M/s. Pandhe Constructions Pvt. Ltd. Vs. Commissioner of Central Excise, Pune-III reported in 2019 (4) TMI 1968 CESTAT-Mumbai, had submitted that the grounds available in the order passed by the Single Member Bench of this Tribunal in M/s. Kamla Mills Ltd. supra had also been dealt by the Division Bench of this Tribunal in the above referred judgment of M/s. Pandhe Constructions Pvt. Ltd. and it was held therein that since no specific time limit was provided under the statute, CBEC Circular No. 170/5/2013-ST dated 08.08.2013 prescribing maintenance of uniformating in issuing notice within 30 days of such filing of declaration under the VCES cannot override the provisions of legislation, for which it cannot be considered as proper and justified. In passing such an order the Division Bench of this Tribunal had followed the ratio from the judgment of the Hon’ble Supreme Court pronounced in respect of Ratan Melting & Wire Industries (Res.) cited supra wherein it has been clearly held that Government Circular/Clarification issued are meant for the understanding of the statutory provisions which are not binding on the courts and it is for the court to declare which particular provision of the statute provides for what and looking at it from another angle, a Circular which is contrary to the statutory provisions has in reality no existence in law. Drawing attention of this Bench to the provisions contained in Section 106(2) of the Finance Act, 2013, he argued that since enquiry was pending against M/s. Kamla Group (including Appellant) the designated authority had rightfully rejected the declaration made by the Appellant under the Scheme that has been confirmed by the Commissioner (Appeals) in his above noted order, for which interference of the Tribunal is uncalled for.
4. Upon going through the case record and relevant documents, it can be noticed that there is a stipulation under Section 106(2) that if any enquiry, investigation or audit is pending on 01.01.2013, VCES declaration shall be rejected. However, no such documentary evidence/proof of such pending enquiry as define in Section 2(g) of the CrPC or investigation under Section 2(h) of the CrPC was found to be available in its true sense that would empower invocation of jurisdiction by the Central Excise Officer under Section 14 of the Central Excise Act except that a letter of authorisation bearing no. 6/2013 was issued on dated 20.02.2013 by the Assistant Commissioner authorising the Superintendent of Anti-evation Consideration Cell to carryout necessary verification of service provided by M/s. Kamla Group or its associated company and Service Tax liability that has been discharged by them before the deadline prescribed in the scheme i.e. before 01.03.2013. On verification of the documents submitted by the Appellant, at the instance of learned Authorised Representative, it is further noticed that summons under Section 14 of the Central Excise Act, 1944, equally applicable to Service Tax matters, was being issued to the Manager of M/s. Kamla Group by the same authorised Superintendent of Anti-evation Construction Cell on dated 18.11.2013, which is much after the deadline prescribed under the Act. Be that as it may, without reference to the Circular that had stipulated the time limit of 30 days, which can be taken as an advisory note since no instruction was available therein that after the laps of 30 days no notice can be issued for violation of Section 106(2) of the Finance Act, 2013, the stipulation contained in Section 111(2) with a limitation period of one year to take action against any false declaration cannot be bypassed by the designated authority, since it is the dictate of the Statute itself. Further Appellant had also made declaration on 18.12.2013 stating that no enquiry investigation or audit was pending against it as on 1st day of March, 2013 as evidence in sub-Section 2 of Section 106 of the Act (Exhibit at page 78 of the appeal memo). In the instant case notice for personal hearing proposing rejection of application filed under VCES was issued to the Appellant on 1st September, 2015 (page 80 of the appeal memo) which is admittedly after laps of one year of filing of the VCES application on 18.12.2015 and therefore such a proceeding including rejection order is liable to be quashed as unsustainable in law.
5. At this juncture it is worthwhile to answer to the submissions of learned Departmental Representative on the points agitated by him. The answers can be inferred from the following points:-
(i) In the CESTAT there is no difference between an order passed by the Single Member Bench or by a Division Bench in view of the fact that unlike the High Court procedure under the Later Patent Act, no Single Member Bench’s order is appealable before the Division Bench.
(ii) The order of M/s. Kamla Mills Ltd. was passed on dated 22.03.2018 while the order in M/s. Pandhe Constructions Pvt. Ltd. was passed on 30.04.2019 and no reference is made to the judgment passed in M/s. Kamla Mills Ltd. that had followed the judicial precedent set by this Tribunal in the following cases:-
a. Abhi Engineering Corporation Vs. Commissioner of Central Excise & Customs, Nagpur – [2015-TIOL-2197-CESTAT-MUM],
b. Sidhi Vinayaka Enterprises Pvt. Ltd. Vs. Commissioner of Service Tax, Raipur – [2016 (43) STR 474 (Tri.-Del.)] [2016-TIOL-1325-CESTAT-DEL],
c. V. S. Enterprises Vs. Commissioner of Central Excise & Customs, Nagpur [2017 (52) STR 151 (Tri.-Mumbai)] [2017-TIOL-299-CESTAT-MUM], Apparently for the reason that it was not placed or argued before the Division Bench.
(iii) CBEC Circular dated 08.08.2013 referred above clearly stipulated that to avoid undue delay and uncertainty, the designated authority shall give notice of intention to reject the declaration within 30 days of filing of such declaration or from the date of issue of such Circular. It has never prohibited the competent authority to issue notice after 30 days of such filing of declaration that would entail application of the ratio set by the Hon’ble Supreme Court in the judgement of Ratan Melting & Wire Industries (Res.) cited supra which had clearly held that only Circular which is contrary to the statutory provision has no existence in the eye of law.
iv. Further reference to the judgment of Ratan Melting & Wire Industries (Res.) would clarify that the Court and not the Executive has been empowered to declare what a particular provision of statute said and on the instant issue a series of decisions, referred in para-5(ii) above, have said that 30 days period is to be strictly and scrupulously followed.
v. In the event of contradictory decisions by the different Benches of the Tribunal, the normal practice followed here is to refer the matter to the Hon’ble President for constitution of a Larger Bench. In the instant case there arise no such requirement in view of the fact that this finding is based on the limitation prescribed under Section 111(2) of the Finance Act, 2013 and not on the Circular of the CBEC dated 08.08.2013.
vi. Section 108 of the Finance Act, 2013 also provides immunity to the Appellant from any other proceeding under this Chapter except under provision of Section 111, which in the instant case is time barred and inapplicable. Hence the order.
ORDER
6. The appeal is allowed and the order passed by the Commissioner of CGST & Central Excise (Appeals-II), Mumbai vide Order-in-Appeal No. PK/30/MC/17-18 dated 08.08.2017 rejecting the VCES application filed by the Appellant is hereby set aside.
(Order pronounced in the open court on 20.05.2022)
