[2014] 36 STR 3 (Guj.) Sadguru Construction Co. vs. Union of India

Payments made under duress are in the nature of deposits till crystallisation of tax liability by way of passing an adjudication order, Circulars, contrary to statutory provisions, are bad in law.

Facts:
Petitioners faced an inquiry on 08-03-2013 and deposited some amount under duress between 09-03-2013 to 15-04-2013 in respect of service tax liability upto 31- 03-2013. To get immunity from interest, penalty and other proceedings, it was claimed that payments made between 09-03-2013 to 15-03-2013 were covered within the definition of “tax dues” and should be considered as made under VCES, since it remains unpaid as on 01- 03-2013. The department, following CBEC circular No. 170/5/2013-S dated 08-08-2013, contended that the amount deposited before enactment of VCES i.e. 10- 05-2013 cannot be included in the declaration under VCES. It was argued that the department cannot rely on a circular which overrides statutory provisions of the law i.e. definition of ‘tax dues’ under VCES.

Held:
Having regard to the definition of “tax dues” and provisions pertaining to the person eligible to make declaration, the Hon’ble High Court observed that the position of a declarant vis-à-vis his service tax dues would have to be ascertained as on 01-03-2013. If any proceedings were pending on 01-03-2013, then declaration cannot be accepted. Further, the arrears of tax dues between 01-10- 2007 to 31-12-2012, unpaid till 01-03-2013 could only be declared. Since there was no inquiry pending and the tax dues were unpaid as on 01-03-2013, the benefit of VCES could not be denied. The amount was under duress and was in the nature of deposit in absence of crystallisation of tax liability by passing an adjudication order. Further, clarification cannot override statutory provisions of the statute and if they are contrary to provisions, the clarifications would be invalid.