The Service Tax Voluntary Compliance Encouragement Scheme, 2013 is made effective from 13.05.2013. The Finance Minister in his Budget speech laid stress upon the fact that majority of the assessees are either non filers or stop filers. He also candidly admitted that the machinery is not so well equipped to go after each and every defaulter. Thus he introduced this VCES to encourage those assessees who have not filed service tax returns or stopped filling returns for one or the other reasons or those persons who have not paid Service Tax. Any person who volunteers under said scheme can pay the tax and enjoy immunity from interest and penalty. The amnesty scheme is very attractive. The scheme has many conditions, limitations and certain riders which the assessee has to bear in mind before applying.
Firstly, the scheme grants the immunity from interest and penalty only for dues payable till 31.12.2012. In other words, any dues pertaining to a period after 31.12.2012, are not covered under the ambit of the said scheme. Secondly, if applicant has paid any amount towards the tax dues declared by him under VCES, such amount shall not be refundable under any circumstances. Thus, even in case of excess payment under this scheme, no refund can be availed. Thirdly as per Rule 6 of Service Tax Voluntary Compliance Encouragement Rules, 2013, the CENVAT credit shall not be utilised for payment of tax dues under the Scheme. In other words, all payments under VCES should be made through challans.
Further, every person is not eligible to apply for the scheme. As per the conditions laid down in the said scheme the benefit to opt for this scheme is not available if, the matter is pending under adjudication. In other words, for the period covered under the show cause notice the VCES scheme cannot be availed. For the same issue, if there is a periodical demand, in such cases too, the benefit is not available. Further, Circular No. 169/4/2013 – ST dated 13.05.2013 has clarified that in terms of section 106 (1) of the Finance Act, 2013 and second proviso thereto, the tax dues in respect of which any show cause notice or order of determination under section 72, section 73 or section 73A has been issued or which pertains to the same issue for the subsequent period are excluded from the ambit of the Scheme. However, any other tax dues could be declared under the Scheme subject to the other provisions of the Scheme.
Another restriction laid down by the scheme is that , any assessee cannot apply under the scheme against whom an inquiry or investigation is initiated in respect of service tax not levied or not paid or short-levied or short-paid by way of — (i) search of premises under section 82 of the Finance Act; or (ii) issuance of summons under section 14 of the Central Excise Act, 1944, as made applicable to Service Tax provisions under section 83 of the Finance Act; or (iii) requiring production of accounts, documents or other evidence under the Finance Act or the rules made thereunder or (iv) An assessee against whom audit has been initiated is barred from applying under the scheme.
It is pertinent to note that any communication from department seeking general information from the declarant will not make him ineligible to opt for the VCES. If an inquiry is initiated against the person, which is pending as on 1st March 2013, then in that case VCES is not available to him. However, that the relevant inquiry provisions which shall make the person ineligible are, Section 14 of the Central Excise Act, and Section 72 of the Finance Act, 1994. Therefore only those cases where accounts, documents or other evidences are requisitioned by the authorised officer from the declarant under the authority of any of the above stated statutory provisions the assessee shall become ineligible to apply for the VCES. Any other communication from the department would not lead to rejection of the declaration.
Further, if an assessee files a false declaration under the scheme, and where the Commissioner of Central Excise has reasons to believe that the declaration made by him under this Scheme is substantially false, he shall be served a notice in respect of such declaration requiring him to show cause as to why the tax dues not paid or short-paid should not be recovered from him. It is pertinent to note that the Commissioner has been given immense powers while deciding whether such application is “Substantially” false or otherwise. Such Show Cause Notice for recovery of the correct Service Tax liability can be issued within one year from the date of filing of the declaration. If an assessee files a false declaration under the scheme, he would be liable to interest and penalty as applicable.
It is of utmost importance that the assessee should adhere to various underlying conditions prescribed under VCES at the time of applying. In case one applies and subsequently the department establishes its inadmissibility, the assessee may face a recovery proceedings along with penalties and interest. It is advisable to be careful while sticking the neck out. Look before you leap.