Friday, June 27, 2014

Declaration under Service tax Amnesty Scheme is maintainable if issues therein aren’t pending before authorities

As long as in respect of particular period, subject matter of declaration under service-tax amnesty scheme is not pending or determined, main part of Section 106 would prevail and its second proviso would not apply.


a)The assessee was providing vocational training for Air Hostesses/Stewards and in the hospitality and management sector. It claimed exemption for the period prior to 27-2-2010 but said matter was in dispute before Tribunal.

b)With effect from 27-2-2010, law was amended and, accordingly, assessee started paying service tax for period upto 31-3-2012. But due to some reasons, for period from 1.4.2012 to 31.12.2012, assessee did not deposit the service tax.

c)Accordingly, for the said period it applied for service tax Voluntary Compliance Encouragement Scheme, 2013 (‘VCES’). The Department rejected the said application on the ground of existence of the dispute concerning the previous period between 10-9-2004 to 27-2-2010 before CESTAT.

d)Thus, the issue before High Court was: Whether declaration under Service Tax Voluntary Compliance Encouragement Scheme would be admissible ?

The High Court held in favour of assessee as under:

1)The VCES was introduced to give benefit of one time amnesty or relief to service tax defaulters or those who had not paid their dues fully. Keeping in mind the spirit of the Scheme, certain safeguards and conditions had been indicated.

2)One of the conditions of VCES was that in respect of the subject matter there had to be no issues pending or determined before any of the tax authorities or Tribunals for adjudication (Second proviso to Section 106). The objective is to avoid multiplicity and reopening of settled matters.

3)The main provision, i.e., section 106 enables the filing of the declaration subject to the pre-condition of a pre-deposit. It is settled law that a proviso merely carves an exception out of the operation of the main provision.

4)The second proviso to section 106 (1) is no exception to that rule. This proviso when it alludes to 'any issue' must, therefore, mean that the issue as to service tax liability or quantum of liability itself for a particular period must be pending before the Tribunal or some of the tax authorities or should have been determined.

5)Thus, as long as in respect of a particular period, subject matter of declaration or application is not pending or determined, main part of section 106 would prevail and second proviso would not apply. Hence, declaration in this case was maintainable – FRANKFINN AVIATION SERVICES (P.) LTD. V. ASSISTANT COMMISSIONER, DESIGNATED AUTHORITY, VCES, SERVICE TAX [2014] 46 39 (Delhi)