CA Pooja Indani
Whether it can be said that Audit was pending as on 01.03.13, if Audit Para was not determined and/ liability was also not quantified till 01.03.13
In F.Y. 2013-14 Finance Minister P. Chidambaram, has announced the said Voluntary Compliance Encouragement Scheme (Amnesty Scheme) for the defaulters under Service Tax Law, through this scheme government has taken a good step in favor of defaulters.
All the defaulters under Service Tax Law has got excellent opportunity through this scheme which is unlikely to come up again in next 20 years.
Brief points regarding the said scheme is as under:-
Chapter VI inserted by the Finance Act 2013 w.e.f. 10.05.13 comprises of the provision related to the service tax Voluntary Compliance Encouragement Scheme,2013 which comprises 11 sections from sec.104 to sec .114.
Basically, this scheme is for giving immunity to the defaulters from payment of interest, penalty for non-filling of S.T. returns, non- payment of service tax as well as immunity from prosecution proceedings etc.
Persons who can applied for the said VCES Scheme:-
There can be two types of persons who can make declaration of tax dues under the Voluntary Compliance Encouragement Scheme 2013.
If any person who is not registered as service tax assesses, wishes to declare under the scheme, he can do so, but for the same first he has to comply with Rule 4 of the Service Tax Rules 1994.
Conditions required to be fulfilled to apply under the said VCES Scheme:- ( sec 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.
2) Where a declaration has been made by a person against whom-
a) An inquiry or investigation in respect of a service tax not levied 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 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
iv) 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.
One of the case which is pending before Commissioner (Appeals) for its decision is explained below to determine any violation of Sec 106 in the given case:-
BRIEF FACTS OF THE CASE:-
Appellant is proprietary unit holding a Service Tax registration number and engaged in erection, commissioning and installation service as defined U/S 65(19)(105)(zzb) of Finance Act,1994.
Appellant has filed a declaration dated 17.12.13 under 107(1) of Voluntary Compliance Encouragement Scheme, 2013 for availing the benefits of the said scheme.
The declarant has provided services i.e. design, test, supply, construction, erection, testing and commissioning of transmission, sub-transmission distribution lines etc and allied works on trunk basis to Maharashtra State Electricity Distribution Corporation Ltd.(MSEDCL). All these activities falls under erection, commissioning and installation services.
Declarant has filed a declaration under VCES-1 for the amount of Rs. 65,00,000 and 50% of amount has been paid by the declarant at the time of filing of Declaration in form VCES-1.
On 30.11.2012 Audit was initiated against the declarant’s unit and department has alleged that it was pending as on 01.03.2013 which is major violation of section 106 of VCES 2013.
MAJOR ALLEGATIONS MADE BY THE DEPARTMENT IN THE ORDER:-
1) In the order department has alleged that on the basis of Audit report, inquiry was initiated on 26.02.2012 and summons has also been issued on the basis of said Audit Report. final Audit Report was drafted on 16.03.2013(12-13) by Assistant Commissioner(Audit).
2) Audit was pending as on 01.03.2013 and hence assessee is not eligible for filing declaration.
3) SCN was issued to the declarant dated 29.03.2013.
Reply given by the declarant for the above allegations or grounds of appeal taken by the declarant:-
1) For the first and second allegation, if my audit was pending as on 01.03.13 as per departments view then how inquiry will be initiated and summons can be issued dated 26.02.2013 on the basis of pending Audit.
2) By taking wider interpretation of sec.106(1) of the VCES Scheme, major Audit (para) was not pending as on 01.03.2013 as liability itself was not determined till 16.03.2013 (date of draft Audit Report)
3) SCN was issued to declarant dated 29.03.13 which was immediately after 13 days of Audit Report dated 16.03.13. department has not given enough opportunity to the declarant to give reply to the said final Audit Report with the intention that declarant should not get any immunity from penalty and interest i.e. benefits of the said scheme.
4) Circular no.170/5/2013 ST Dated 08.08.2013 (Sr.No.19) has clarified that the pendency of audit as on 01.03.2013 means an audit that has been initiated before 01.03.2013 but has not culminated as on 01.03.2013.the audit process may culminate in any of the following manner:-
i) Closure of audit file if no discrepancy is found in audit;
ii) Closure of audit para by the Monitoring Committee Meeting (MCM);
iii) Approval of Audit Para by MCM & Payment of amount involved therein by the party in terms of the Finance Act,1994;
iv) Approval of audit para by MCM,& issuance of SCN, if party does not agree to the para so raised.
In the said case after raising Audit para on 16.03.2013, immediately SCN was issued on 29.03.2013 before giving opportunity to the declarant to give reply to the said audit para or to disagree with the para so approved.
Summary of Even Dates:-
VCES has basically announced for getting relief from burden of Interest and heavy penalties, but still government has finding so many loopholes so that assessee would not be eligible to take the benefits of the Scheme. Whether this scheme is for getting relief or else its call for a more departmental issues, clarifications and appeal proceedings which is in itself is a lengthy procedure will get to know in due course only.
It has also been observed that Letter has been issued by commissioner calling for Financial records for verification after cut off date of VCES 2013 i.e., 31.12.2013.