The New Delhi bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that no bar to filing Voluntary Compliance Encouragement Scheme ( VCES ) declaration, even if there was an audit report alleging liability since it was not an order.
Federal-Mogul Goeteze India Limited, the appellant challenged the order passed by the Commissioner (Appeals) dated 12th December 2017. The appellant is a company engaged in the business of manufacturing automobile parts.
An audit of the records of the appellant was conducted for the period 2004 – 05 to 2007 to 2007– 08 resulted in an allegation of wrongful availment of Cenvat credit by the applicant in respect of Medical Insurance Services provided to its employees for the period 2007 – 08 to 2011 – 12.
The appellant submitted a VCES declaration under section 107 of the Finance Act 2013 and made a declaration of its service tax dues amounting to Rs. 7,22,89,051/- for the period 2007-08 to 2011-12. As per the condition of the VCES, 2013, the appellant deposited an amount of Rs. 3,61,44,524/- as service tax dues by 31.12.2013.
The appellant paid the remaining 50% of the declared amount of service tax dues equivalent to Rs.3,61,44,527/- as per the provisions of the said scheme. The Designated Authority partially rejected the VCES declaration vide order dated 24.05.2016 stating that once an audit paragraph is admitted by the Appellant, payment of tax dues amounts to the determination of tax dues as envisaged in the said scheme. The Commissioner (Appeals) upheld the order of the designated authority.
It was contended that the order of partial rejection of the designated authority is incorrect as section 106 of the Finance Act, 2013 specified conditions that rendered a declarant ineligible to declare his/her tax dues under the VCES, which is, that any person may declare his tax dues in respect of which no notice or an order of determination under section 72 or section 73 or section 73A has been issued before the 1st day of March 2013.
Further argued that an audit report is not an order, in Jaswant Sugar Mills Vs Laxmi Chand & Ors wherein it has been held that for any decision to be an order of determination, it must be judicial or quasi-judicial in nature and not an administrative decision.
A two-member bench comprising of Mr Justice Dilip Gupta, President and Ms Hemambika R Priya, Member (Technical) observed that a perusal of the list of services on which the appellant declared under the VCES does not include “Medical Insurance Services”. Further viewed that the Commissioner (Appeals) has rejected the appellant’s VCES declaration on the ground that the working of the audit through the Internal audit report was the determination of liability by the Central Excise Officer.
Section 106(1) stated that any person may declare his tax dues in respect of which no notice or order of determination under section 72 or section 73 or section 73A of the chapter has been issued or made before the 1st day of March 2013.
While allowing the appeal, the Tribunal held that the Commissioner (Appeals) has erred in holding that the audit report is akin to an order of determination under the relevant sections of the Scheme. The Tribunal held that the VCES declaration filed by the Appellant was correct and directed the jurisdictional authority to issue the VCES 2 for full and final settlement under the Scheme.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
