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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 statutory provision.
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 2nd proviso 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 audit para.
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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
'substantially false', 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" are Rs
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 para so raised.
The audit culminates
at a point when the audit paras 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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