By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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If the assessee was eligible for VCES and had taken benefit of VCES, recovery proceedings cannot be initiated until application under VCES is decided.
Facts:
On 31st May, 2013, a search was conducted wherein it was detected that the petitioners were liable to pay service tax. Consequently, an order was passed on 7th June, 2013 u/s. 87 of the Finance Act, 1994 which was challenged on the ground that they had filed declaration of such tax dues under Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) on 20th June, 2013. Having regard to section 106 of the Finance Act, 1994, it was pleaded that they were eligible for VCES since the date of notice or order of determination was not prior to 1st March, 2013 and therefore, the order was illegal and arbitrary without deciding the application. The department claimed their right to initiate recovery proceedings and argued that unless the application under VCES was found valid and in time, the petitioners were not entitled to any relief in the writ petition.
Held:
The petitioners had prima facie demonstrated that they were eligible to take benefit of VCES u/s. 106 and 107 of the Finance Act, 1994 and unless application under VCES was decided, proceeding u/s. 87 shall not be continued. The object of VCES would be defeated if the recovery was allowed to proceed. An interim order was passed directing Competent Authority to decide the application under VCES within 60 days of passing the Order.
