CBEC has issued Circular No. 174/9/2013- ST dated 25.11.2013 to clarify various issues in regard to Voluntary  Compliance Encouragement Scheme (VCES). Following issues have been clarified by the circular :
  • If an inquiry, investigation or audit, pending as on 1.3.2013 was being carried out for the part period i.e. 2008-2011, benefit of VCES would be eligible in respect of ‘tax dues’ for the period not covered by the inquiry, investigation or audit i.e. for the year 2012.
  • If an inquiry or investigation, pending as on 1.3.2013 was in respect of a specific issue, say renting of immovable property, benefit of VCES would be eligible in respect of ‘tax dues’ concerning any other issue in respect of which no inquiry or investigation was pending as on 1.3.2013.
  • In case designated authority has reasons to believe that the declaration filed by declarant is covered by section 106(2), a notice of intention to reject the declaration will be given to the declarant within 30 days from the date of filing of  declaration stating reasons of rejection so as to give an opportunity of being heard before the rejection.
  • The designated authority may take a view on merit on the basis of facts and circumstances of each case as to whether the inquiry is of roving nature or whether the provisions of section 106 (2) are to be attracted.
  • Benefit of scheme would be available for payment of tax made after 10.05.2013 even though the declaration under the  scheme has been made later on.
  • Benefit of scheme would not be available for waiver from penalty and other proceedings where service tax pertaining to  the scheme along with interest has already been paid by the assessee.
Further CBEC has, videCircular No. F. No. B1/19/2013-TRU (Pt.) dated 11.12.2013, directed all the commissionerate, NOT to ask any assessee for any undertaking /declaration other than in Form VCES-1.
It has also been directed NOT to ask any frivolous/unnecessary queries. Only if the Commissioner has reason to believe  that the declaration filed by the declarant is substantially false he may, for reasons to be recorded in writing, serve notice on the declarant requiring him to show cause why he should not pay the tax dues not paid or short-paid.

F. No. B1/19/2013-TRU (Pt.), Dated : 11th December, 2013

Sub: The Service Tax Voluntary Compliance Encouragement Scheme – issues for clarification – reg

            The undersigned is directed to state that the  Board has issued clarifications on issues concerning various aspects of the VCES, vide circulars dated 13.05.2013, 8.08.2013 and 25.11.2013. A FAQ has also been issued on VCES.  However, certain instances have come to notice, as mentioned below, that the declarants under the VCES are still facing difficulties. 

2.         In one instance, the Designated Authority has asked a declarant, who has “tax dues” only for a part of the period covered by the Scheme, to furnish an undertaking that he had no unpaid “tax dues” for the remaining period covered by the Scheme. However, the Scheme does not envisage furnishing of any such undertaking. A declarant may have tax dues only for a part period covered by the Scheme. In terms of the Scheme a declaration of tax dues has to be made in Form VCES-I, which includes an undertaking that the information given in the declaration is correct and complete. Therefore, the Designated Authority should not ask for any other undertaking or declaration beyond what has been prescribed in the Scheme or Rules made there under.

3.         In another instance, the Designated Authority has objected to the payment of the first tranche of 50%, payable by 31.12.2013, in installments. It is clarified that the Scheme only prescribes that the declarant would pay a minimum amount of 50% of the tax dues by 31.12.2013. Rest of the payment may be made by 30.6.2014, without any interest, and any amount remaining unpaid on 30.6.2014 shall be paid by 31.12.2014, with interest for the period of delay beyond 30.6.2014. There is no bar to pay these amounts in installments. For example a declarant may pay the 50% amount that he is required to pay by 31.12.2013 in more than one installment. Therefore, payment of 50% “tax dues” in lump-sum may not be insisted to.

4.         In some instances, it has been observed that the Designated Authority has raised frivolous/unnecessary queries as regards the veracity and the manner of calculation of tax dues. While the designated authority may cause arithmetical check as regards the correctness of computation of tax dues, the Scheme does not envisage investigation by the designated authority into the veracity of declaration. Only if the Commissioner has reason to believe that the declaration filed by the declarant is substantially false he may, for reasons to be recorded in writing, serve notice on the declarant requiring him to show cause why he should not pay the tax dues not paid or short-paid.

Yours faithfully,

(S.Jayaprahasam)

Technical Officer (TRU)

Tel. No.: 2309 5547.

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