Taxes paid on or after Match 1, 2013 would be eligible for VCES even if paid before May 10, 2013 – Circular taking contrary view held invalid
We are sharing with you an important judgement of the Hon’ble Gujarat High Court, in the case of Sadguru Construction Co. Vs. Union of India [(2014) 51 taxmann.com 3 (Gujarat)]on following issue:
In the light of Circular dated August 8, 2013, whether taxes paid on or after Match 1, 2013 would be eligible for Voluntary Compliance Encouragement Service (“VCES”or “the Scheme”) even if paid before May 10, 2013?
Facts & background:
Sadguru Construction Co. (“the Petitioner”) is a partnership firm engaged in the business of construction. On March 8, 2013, preventive officers of the Service Tax Department conducted inquiry at the premises of the Petitioner regarding unpaid Service tax dues. Various post-dated cheques were taken from the Appellant (under duress). Against such post-dated cheques, during the period between March 9, 2013 to April 15, 2013, the Petitioner deposited total sum of Rs. 35.51 lakhs with the Department.
On August 24, 2013, the Petitioner filed a declaration under VCES declaring tax dues of Rs. 44 lakhs. Thereafter, the Petitioner filed a revised declaration on December 30, 2013 with revised tax dues of Rs. 46 lakhs. This amount included the sum of Rs. 35.51 lakhs deposited between March 9, 2013 to April 15, 2013. The Department, relying upon following extract of Circular No. 170/5/2013-ST, dated August 8, 2013 (“the Circular”),sought to reject VCES declaration to the extent of Rs. 35.51 lakhs(“Impugned amount”) arguing that these amounts were deposited before May 10, 2013 when the Scheme was promulgated and therefore, declaration of amount could not be a declaration under the Scheme:
“…..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….”
Thereafter, the Designated Authority acknowledged the declaration of the Petitioner only to the extent of tax dues to the tune of Rs. 10.50 lakhs and rejected the Impugned amount. Being aggrieved, the Petitioner filed a petition before the Hon’ble High Court of Gujarat.
The Hon’ble High Court of Gujarat, after analysing provisions of Section 105 and Section 106 of the Finance Act, 2013, held as under:
- Combined reading of Section 106 with Section 105(1)(e) of the Finance Act, 2013 would make it clear that the position of a declarant vis-a-vis his Service tax dues would have to be ascertained as on March 1, 2013. Accordingly, arrear of tax which could be declared in such declaration would be the Service tax due or payable for the period between October 1, 2007 to December 31, 2012 and which sum is not paid before March 1, 2013;
- It is well settled in law that an authority cannot, through a circular or clarification, override the provisions of the Statute. If the clarification thus runs counter to the statutory provision, the same would be invalid;
Hence, the Designated Authority was directed to issue a fresh acknowledgement or amend the acknowledgement forwarded to the Petitioner so as to include the said additional sum of Rs.31.51 lakhs as tax dues declared.
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