Circular No.174/9/2013 - ST
F.No.B1/19/2013-TRU
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise & Customs
(Tax Research Unit)
North Block
New Delhi, 25
th
November, 2013
To,
Chief Commissioners of Central Excise and Customs (All),
Director General (Service Tax), Director General (Central Excise Intelligence), Director General (Audit),
Commissioners of Service Tax (All)
Commissioners of Central Excise (All),
Commissioners of Central Excise and Customs (All).
Madam/Sir,
Sub: The Service Tax Voluntary Compliance Encouragement Scheme - reg.
The Service Tax Voluntary Compliance Encouragement Scheme (VCES) has come into effect from 10.5.2013. Most of the
issues raised with reference to the Scheme have been clarified by the Board vide circular Nos. 169/4/2013-ST, dated
13.5.2013 and No. 170/5/2013-ST, dated 8.8.2013. These clarifications have also been released in the form of FAQs.
Attention is also invited to letter F. No. 137/50/2013-ST, dated 22.8.2013 as regards the action to be taken by the field
formations for effective implementation of the Scheme. A number of interactive sessions have also been held at various places
to ascertain and address the concerns of trade on any aspect of the Scheme.
2. In the recently held interactive sessions at Chennai, Delhi and Mumbai, which were chaired by the Hon'ble Finance Minister,
the trade had raised certain queries and also expressed some apprehensions. Most of these issues have already been
clarified in the aforementioned circulars/FAQs. Certain issues raised in these interactive sessions, which have not been
specifically clarified hitherto or clarified adequately, are discussed and clarified as below.
S.No. Issue raised Clarification
1
An instance was brought to notice wherein
a declaration was returned probably on the
ground that it was incomplete.
As has already been directed by the Board, vide the said letter dated
22.8.2013 (para 2.4 of the letter), the designated authority shall ensure that
no declaration is returned. In all cases, declaration should be promptly
received and duly acknowledged. Request for clarification should be dealt
with promptly. Defects in the application, if any, should be explained to the
declarant and possible assistance be provided in rectifying these defects.
The effort must be to accept a declaration, as far as possible, and recover
the arrears of tax.
2
An apprehension was raised that
declarations are being considered for
rejection under section 106 (2) of the
Finance Act, 2013, even though the "tax
dues" pertain to an issue or a period which
is different from the issue or the period for
which inquiry /investigation or audit was
pending as on 1.3.2013.
Section 106(2) prescribes four conditions that would lead to rejection of
declaration, namely,
(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 Finance Act,1994 ; or
( ii ) issuance of summons under section 14 of the Central Excise Act, 1944;
or
(iii) requiring production of accounts, documents or other evidence under the
Finance Act, 1994 or the rules made there under; or
( b ) an audit has been initiated,
and such inquiry, investigation or audit was pending as on the 1st day of
March, 2013.
These conditions may be construed strictly and narrowly. The concerned
Commissioner may ensure that no declaration is rejected on frivolous
grounds or by taking a wider interpretation of the conditions enumerated in
section 106(2). If the issue or the period of inquiry, investigation or audit is
identifiable from summons or any other document, the declaration in respect
of such period or issue alone will be liable for rejection under the said
provision.
Examples:
(1) If an inquiry, investigation or audit, pending as on 1.3.2013 was being
carried out for the period from 2008-2011, benefit of VCES would be eligible
in respect of 'tax dues' for the year 2012, i.e., period not covered by the
inquiry, investigation or audit.
(2) 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.
It is also reiterated 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 such reasons to reject the declaration. Commissioners
should ensure that this time line is followed scrupulously.
3
Whether benefit of VCES would be
available in cases where documents like
balance sheet, profit and loss account etc.
are called for by department in the inquiries
of roving nature, while quoting authority of
section 14 of the Central Excise Act in a
routine manner.
The designated authority/ Commissioner concerned may take a view on
merit , taking into account the facts and circumstances of each case as to
whether the inquiry is of roving nature or whether the provisions of section
106 (2) are attracted in such cases.
4
Whether the benefit of the Scheme shall be
admissible in respect of any amount
covered under the definition of 'taxes dues',
as defined in the Scheme, if paid by an
assesses after the date of the Scheme
coming into effect, (i.e., 10.5.2013), but
before a declaration is filed
Yes, benefit of the Scheme would be available if such amount is declared
under the Scheme subsequently, along with the remaining tax dues, if any,
provided that Cenvat credit has not been utilized for payment of such amount.
Example:
A person has tax dues of Rs 10 lakh. He makes a payment of Rs 2 lakh on
15.5.2013, without making a declaration under VCES. He does not utilize
Cenvat credit for paying this amount. Subsequently, he makes declaration
under VCES on 1.7.2013. He may declare his tax dues as Rs 10 lakh. Rs 2
lakh paid before making the declaration will be considered as payment under
VCES.
5
Whether declaration can be made in such
case where service tax pertaining to the
period covered by the Scheme along with
interest has already been paid by the
parties, before the Scheme came into
effect, so as to get waiver from penalty and
other proceedings?
As no "tax dues" is pending in such case, declaration cannot be filed under
VCES. However, there may be a case for taking a lenient view on the issue
of penalties under the provision of the Finance Act, 1994. In this regard
attention is invited to section 73 (3) and section 80 of the Finance Act, 1994.
3. Trade Notice/Public Notice may be issued to the field formations and tax payers. Please acknowledge receipt of this
Circular. Hindi version follows.
Yours sincerely,
(S. Jayaprahasam)
Technical Officer, TRU
Tel: 011-2309 2037
