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S No.
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Issues
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Clarification
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1
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Whether the
communications, wherein department has sought information of roving nature
from potential taxpayer regarding their business activities without seeking
any documents from such person or calling for his presence, while quoting the
authority of section 14 of the Central Excise Act, 1944, would attract the
provision of section 106 (2) (a)?
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Attention is invited to clarification issued at S. No. 4 of
the circular No. 169/4/2013–ST, dated 13.5.2013, as regards the scope of
section 106 (2) (a) of the Finance Act, 2013, wherein it has been clarified
that the provision of section 106 (2)(a)(iii) shall be attracted only in such cases where accounts,
documents or other evidence are requisitioned by the authorized officer
from the declarant under the authority of a statutoryprovision.
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.
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2
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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?
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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.
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3
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Whether a declaration
can be made under the Scheme in respect of CENVAT credit wrongly utilized for
payment of service tax?
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Any service tax that
has been paid utilizing the irregular credit, amounts to non-payment of service tax.
Therefore such service tax amount is covered under the definition of “tax
dues”.
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4
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Whether a party,
against whom an inquiry, investigation or audit has been initiated after
1.3.2013 (the cutoff date) can make a declaration under the Scheme?
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Yes. There is no bar
from filing of declaration in such cases.
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5
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There was a default and
a Show Cause Notice was issued for the period prior to the period covered by
the Scheme, i.e. before Oct 2007. Whether declaration can be filed for
default on the same issue for the subsequent period?
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In the context of the
Scheme, the relevant period is from Oct 2007 to Dec 2012. Therefore, the 2ndproviso
to section 106 (1) shall be attracted only in such cases where a show cause
notice or order of determination has been issued for the period from Oct 2007
to Dec 2012. Accordingly, issuance of a show cause notice or order of
determination for any period prior to Oct 2007, on an issue, would not make a
person ineligible to make a declaration under the Scheme on the same issue
for the period covered by the Scheme. Therefore, declaration can be made under VCES.
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6
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In a case where the assessee has been audited and an audit para has been issued, whether the assessee can
declare liability on an issue which is not a part of the audit para, under the VCES 2013?
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Yes, declarant can declare the
“tax dues” concerning an issue which is not a part of the auditpara.
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7
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Whether a person, who
has paid service tax for a particular period but failed to file return, can
take the benefit of VCES Scheme so as to avoid payment of penalty for non-
filing of return?
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Under VCES a
declaration can be made only in respect of “tax dues”. A case where no tax is
pending, but return has not been filed, does not come under the ambit of the
Scheme. However, rule 7C of the Service Tax Rules provides for waiver of
penalty in deserving cases where return has not been filed and, in such
cases, the assessee may seek relief under rule 7C.
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8
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A person has made part payment of
his ‘tax dues’ on any issue before the scheme was notified and makes the
declaration under VCES for the remaining part of the tax dues. Will he be
entitled to the benefit of non-payment of interest/penalty on the tax dues paid
by him outside the VCES, i.e., (amount paid prior to VCES)?
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No. The immunity from interest and
penalty is only for “tax dues” declared under VCES.
If any “tax dues” have been paid
prior to the enactment of the scheme, any liability of interest or penalty
thereon shall be adjudicated as per the provisions of Chapter V of the
Finance Act, 1994 and paid accordingly.
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9
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Whether an assessee, who, during a part of the period covered by
the Scheme, is in dispute on an issue with the department under an erstwhile
provision of law, can declare his liability under the amended provisions,
while continuing to litigate the outstanding liability under the erstwhile
provision on the issue?
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In terms of the second
proviso to section 106 (1), where a notice or order of determination has been
issued to a person in respect of any issue, no declaration shall be made by
such person in respect of “tax
dues” on the same issue for subsequent period. Therefore, if an issue is
being litigated for a part of the period covered by the Scheme, i.e., Oct,
2007 to Dec 2012, no declaration can be filed under VCES in terms of the said
proviso on the same issue for the subsequent period.
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10
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Whether upon filing a
declaration a declarant realizes that the declaration filed by him was
incorrect by mistake? Can he file an amended declaration?
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The declarant is
expected to declare his tax dues correctly. In case the mistake is discovered suo-moto by the declarant himself, he may approach the
designated authority, who, after taking into account the overall facts of the
case may allow amendments to be made in the declaration, provided that the
amended declaration is furnished by declarant before the cut off date for filing of declaration, i.e.,
31.12.2013.
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11
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What is the
consequence if the designated authority does not issue an acknowledgement
within seven working days of filing of declaration? Whether the declarant can
start making payment of the tax dues even if acknowledgement is not issued?
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Department would
ensure that the acknowledgement is issued in seven working days from the date
of filing of the declaration. It may however be noted that payment of tax dues under the
Scheme is not linked to the issuance of an acknowledgement. The declarant can
pay tax dues even before the acknowledgement is issued by the department.
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12
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Whether declarant will
be given an opportunity to be heard and explain his cases before the
rejection of a declaration under section 106(2) by the designated authority?
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Yes. In terms of section 106 (2) of the Finance Act, 2013, the
designated authority shall, by an order, and for reasons to be recorded in
writing, reject a declaration if any inquiry/investigation or audit was
pending against the declarant as on the cutoff date, i.e., 1.3.2013. An order under this section shall be
passed following the principles of natural justice.
To allay any
apprehension of undue delays and uncertainty, it is clarified that the
designated authority, if he has reasons to believe that the declaration is
covered by section 106 (2), shall give a notice of intention to reject the
declaration within 30 days of the date of filing of the declaration stating
the reasons for the intention to reject the declaration. For declarations
already filed, the said period of 30 days would apply from the date of this
circular.
The declarant shall be
given an opportunity to be heard before any order is passed by the designated
authority.
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13
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What is the appeal
mechanism against the order of the designated authority whereby he rejects
the declaration under section 106 (2) of the Finance Act, 2013?
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The Scheme does not
have a statutory provision for filing of appeal against the order for
rejection of declaration under section 106 (2) by the designated authority.
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14
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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?
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The amount so paid can
be adjusted against the liability that is determined by the department.
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15
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Section 111 prescribes
that where the Commissioner of Central Excise has reasons to believe that the
declaration made by the declarant was ‘substantiallyfalse’, he may serve a notice on the declarant in
respect of such declaration. However, what constitutes a ‘substantially
false’ declaration has not been specified.
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The Commissioner
would, in the overall facts of the case, taking into account the reasons he
has to believe, take a judicious view as to whether a declaration is
‘substantially false’. It is not feasible to define the term “substantially
false” in precise terms. The proceeding under section 111 would be initiated in
accordance with the principles of natural justice.
To illustrate, a declarant
has declared his “tax dues” as Rs 25 lakh. However, Commissioner has specific information that
declaration has been made only for part liability, and the actual “tax
dues” areRs 50 lakh. This declaration would fall in the
category of “substantially false”.
This example is only
illustrative.
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16
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What is the consequence if a
declarant fails to pay atleast 50% of declared amount of tax dues by the 31st Dec 2013?
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One of the conditions of the
Scheme [section 107 (3)] is that the declarant shall pay atleast an amount equal to 50% of the declared tax dues under the
Scheme, on or before the 31.12.2013. Therefore, if the declarant fails to pay atleast 50% of the declared tax dues by 31st Dec, 2013, he would not be eligible to avail of the
benefit of the scheme.
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17
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Whether the CENVAT
credit is admissible on the inputs/input services used for provision of
output service in respect of which declaration has been made under VCES for
payment of any tax liability outside the VCES?
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The VCES Rules 2013
prescribe that CENVAT credit cannot be utilized for payment of “tax dues”
under the Scheme. Accordingly the “tax dues” under the Scheme shall be paid
in cash.
The admissibility of
CENVAT credit on any inputs and input services used for provision of output
service in respect of which declaration has been made shall continue to be
governed by the provisions of the Cenvat Credit Rules, 2004.
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18
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(a) Whether the tax dues amount paid under VCES
would be eligible as CENVAT credit to the recipient of service under a
supplementary invoice?
(b) Whether cenvat credit would be admissible to the person who
pays tax dues under VCES as service recipient under reverse charge mechanism?
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Rule 6(2) of the
Service Tax Voluntary Compliance Encouragement Rules, 2013, prescribes that
CENVAT credit cannot be utilized for payment of “tax dues” under the Scheme.
Except this condition, all issues relating to admissibility of CENVAT credit
are to be determined in terms of the provisions of the Cenvat Credit Rules.
As regards
admissibility of CENVAT credit in situations covered under part (a) and (b),
attention is invited to rule 9(1)(bb) and 9(1)(e) respectively of the Cenvat Credit Rules.
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19
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In terms of section
106 (2)(b), if a declaration made by a person against whom an audit has been initiated and where such audit is pending, then the designated authority shall by an order and for
reasons to be recorded in writing, reject such declaration. As the audit
process may involve several stages, it may be indicated as to what event
would constitute,-
(i) initiation of
audit; and
(ii) culmination of audit.
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Initiation
of audit: For the purposes of
VCES, the date of the visit of auditors to the unit of the taxpayer would be
taken as the date of initiation of audit. A register is maintained of all
visits for audit purposes.
Culmination
of audit: 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 and payment of amount involved therein
by the party in terms of the provisions of the Finance Act, 1994;
(iv) Approval of audit para by MCM, and issuance of SCN, if party does not
agree to the paraso raised.
The audit culminates at a point when the auditparas raised are settled in any manner as stated
above.
The pendency of audit as on 1.3.2013 means an
audit that has been initiated before 1.3.2013 but has not culminated as on
1.3.2013.
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