Calcutta High Court
M/S Shanti Services vs Commissioner Of Service Tax I Kolkata … on 20 December, 2024
Author: T.S. Sivagnanam
Bench: T.S. Sivagnanam, Hiranmay Bhattacharyya
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od 3
IN THE HIGH COURT AT CALCUTTA
SPECIAL JURISDICTION (CENTRAL EXCISE)
ORIGINAL SIDE
CORAM:
THE HON'BLE THE CHIEF JUSTICE T.S. SIVAGNANAM
AND
THE HON'BLE MR. JUSTICE HIRANMAY BHATTACHARYYA
CEXA/46/2024
IA NO: GA/1/2024
M/S SHANTI SERVICES
VS
COMMISSIONER OF SERVICE TAX I KOLKATA AND ANR.
HEARD ON : 20.12.2024
DELIVERED ON : 20.12.2024
Appearance:
Ms. Micky Chowdhury, Adv.
Mr. B.N. Pal, Adv.
...for the appellant.
Mr. Kaushik Dey, Adv.
Mr. Tapan Bhanja, Adv.
...for the respondent.
(Judgment of the Court was delivered by T.S. Sivagnanam, C.J.)
1. This appeal filed by the assessee under Section 35G of the Central Excise
Act, 1944 read with Section 83 of the Finance Act, 1994 is directed
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against the order passed by the Customs, Excise and Service Tax
Appellate Tribunal, Kolkata in Service Tax Appeal No. 76005/2015 dated
26th August, 2024. The assessee has raised the following substantial
questions of law for consideration:–
i. Whether the Learned Tribunal erred in not appreciating that the
appellant is entitled to the benefit of VCES admittedly having been
made payment of entire principal tax dues of Rs.51,22,900/- after 1 st
March, 2013 being the permitted time frame under the scheme as
settled in several judgements including in case of Sadguru
Construction Co.-Vs-UOI reported in 2014(36)STR3(Guj.), Apna Awas
Construction Vs. Chief Commissioner of Customs reported in
2019(26) G.S.T.L 289 (Pat.), Dr. Yeshwant Dhume Vs. Assistant
Commissioner of Service Tax Panaji reported in 2019(369)
E.L.T.181(Bom.) and Premier Associates Vs. Assistant Commissioner
of Services reported in (2018) 49 GSTR1(Karn.) and the respondent
having no defence at all to the substantive entitlement of the
appellant under the VCES Scheme ?
ii. Whether the Learned Tribunal failed to appreciate that the
Government of India, Ministry of Finance, Department of Revenue,
Central Board of Excise and Customs, Circular no. 170/5/2013-ST
dated 8th August, 2013 informed the public that the rejection of
VCES, 2013 is not an appealable order?
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iii. Whether the Learned Tribunal erred in holding that the appellant
failed to challenge the rejection of VCES by appeal and the concerned
Government department is contesting the issue of appealability from
the order of rejection of VCES, 2013 before the Hon’ble Supreme
Court of India in the case of Dy. Commissioner v. Barnala Builders
and Property Consultants and the said matter is still pending for final
adjudication before the Hon’ble Supreme Court of India?
iv. Whether the Learned Tribunal erred in holding that the rejection of
VCES is appeal-able order inspite of the issue being pending before
the Hon’ble Supreme Court?
2. We have heard learned Advocate appearing for the appellant/assessee
and learned standing Counsel appearing for the respondent department.
3. The short issue which falls for consideration is whether the designated
authority under the provisions of the Service Tax Voluntary Compliance
Encouragement Scheme (hereinafter referred as the scheme) was justified
in rejecting the assessee’s declaration filed under the scheme on 23 rd
July, 2013, by a communication dated 25th July, 2014 on the ground
that certain sums of money were deposited by the assessee prior to
coming into force of the scheme. The adjudicating authority while
considering the submission made by the assessee opined that the sums
of money paid by the assessee prior to 10th May, 2013 when the scheme
was introduced cannot be reckoned as payment under the scheme and,
therefore, the declaration was deficient and cannot be considered. With
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this reasoning the assessing officer did not adjudicate the show-cause
notice but proceeded to confirm the demand made in the show-cause
notice alleging short payment of service tax and also appropriating the
amount already paid by the assessee and directing payment of interest
and penalty under Section 75 and 78 of the Finance Act, 1994, as
amended, respectively.
4. The learned Tribunal while considering the correctness of the order
passed by the adjudicating authority dated 4 th August, 2015 partially
agreed with the assessee and by the impugned order held that
adjudicating authority has gone beyond the scope of show-cause notice
and, therefore, the adjudication order was set aside and the matter was
remanded back to the adjudicating authority.
5. The moot question which ought to have been considered was whether the
assessee was required to challenge the communication dated 25 th July,
2014 by which the declaration submitted by the assessee under the
scheme was held to be deficient inasmuch the payments made by the
assessee prior to 10th May, 2013 when the scheme came into force
cannot be taken as payment under the scheme. Firstly, we find that the
communication dated 25th July, 2014 cannot be construed to be an order
in the strict sense for an appeal to be preferred. That apart, the CBEC by
Circular dated 8th August 2013 issued certain clarifications with regard
to the implementation of the scheme and in Query No. 13 it has been
clarified that the scheme does not have a statutory provision for filing of
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an appeal against the order for rejection of declaration under Section
106(2) by the designated authority.
6. The clarification issued by the Central Board has not been modified and
revised by the Board but in fact reiterated by the Board while contesting
matters before the Hon’ble Supreme Court, which could be seen from the
decision in the case of Deputy Commissioner Vs. Barnala Builders and
Property Consultant, (2016) 44 STR J69 (SC) and page 70 of the stay
petition and Deputy Commissioner Vs. Barnala Builders and Property
Consultants 2015) 38 STR J424 (SC). Therefore, the respondent
department is stopped from taking a stand that the order of rejection
passed by the designated authority under Section 106(2) is an appealable
order. In any event, the adjudicating authority held that the declaration
filed by the assessee under the scheme was not maintainable on account
of non compliance of the condition and, therefore, proceeded to confirm
the demand made in the show-cause notice. This order of the
adjudicating authority was put to challenge before the learned Tribunal.
Thus in effect, the communication which was sent to the assessee
rejecting the declaration stood merged with the order passed by the
adjudicating authority which was the subject matter of challenge before
the Tribunal. Therefore, the assessee cannot be non-suited on the said
ground.
7. Having come to such a conclusion the only thing that requires to be
considered is whether the payment which was made by the assessee
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prior to 10th May, 2013 when the scheme came into force can be taken
into consideration for the purposes of considering whether the assessee
would be entitled to the benefit under the scheme. Going by the
clarification issued by the Central Board, we find that the Central Board
has made it clear that in terms of Section 106(2) of the Finance Act, 2013
the designated authority shall, by order, and for reasons to be recorded
in writing, rejected a declaration, if any, enquiry/investigation or audited
was pending against declarant as on the cut-off date i.e. 1 st March, 2013.
Thus, cut-off date under the scheme which is sacrosanct and cannot be
ignored by the department. In this regard, we are guided by the decision
of the Hon’ble Division Bench of the High Court of Gujarat at Ahmedabad
in the case of Sadguru Construction Co. Vs. Union of India 2014 (36) STR
3 (Guj.). The fact of the said case are more or less identical. In the said
case, the assessee had deposited the amount of tax after 1 st March,
2013, which was fixed as the cut-off date under the scheme. But this
deposit was made prior to 10th May, 2013 when the scheme was
modified. The department contended before the Court that such payment
cannot form part of the declaration of the scheme.
8. This argument made by the department was rejected by taking note of
the statutory provisions contained in the scheme of 2013 and more
particularly, the definition of the term “tax dues” as defined in Section
105(1)(e) of the Act. Under the said provision “tax dues” means service
tax due or payable under the chapter or any other amount due or
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payable under Section 73A thereof, for the period beginning from the 1 st
day of October 2007 and ending on the 31 st day of December 2012,
including a cess leviable thereon under any other Act for the time being
in force but not paid as on the 1 st March, 2013.
9. Thus, the cut-off date fixed under the scheme is the very crucial factor
and this aspect was noted in the case of Sadguru Construction (supra)
and it was held that if the intention of the legislature was to exclude any
tax deposited before framing of the scheme, the same could have been
provided in plain language. On the contrary, the legislature excluded
from the purview of declaration only those taxes which were already paid
by 1st March, 2013 and, therefore, the period between the 1 st March,
2013 and 10th May, 2013 would, by necessary implication of the
provision of the scheme, be covered for declaration under the scheme
itself.
10. We respectfully agree with the conclusion arrived at by the Hon’ble
Division Bench in the Sadguru Construction (supra).
11. As mentioned earlier, the two of the payments which were made by the
assessee were on 19th March, 2013, a sum of Rs.15,00,000/- in challan
No.00307 and Rs.7,12,00,000/- on 12th April, 2013 by challan no.
00280. Thus these two payments are to be reckoned the payments under
the scheme as these payments were made after the cut-off date namely
1st March, 2013.
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12. Therefore, we are of the view that the assessee is entitled to the benefit
under scheme and the declaration of the assessee should be accordingly
processed.
13. In the result, the appeal is allowed and the order passed by the learned
Tribunal is set aside, as well as the order passed by the adjudicating
authority be set aside and the communication dated 25 th July, 2014
passed by the designated authority rejecting the assessee’s declaration is
also set aside and the designated authority is directed to consider the
application and proceed to take a decision in accordance with the
scheme.
14. Accordingly, the substantial questions of law are answered in favour of
the assessee.
(T.S. SIVAGNANAM)
CHIEF JUSTICE
I agree.
(HIRANMAY BHATTACHARYYA, J.)
pkd/GH.