In The Palakkad District Co-Operative Bank Ltd v. The Deputy Commissioner of Central Excise, a division bench of the Kerala High Court held that the department should grant more time to assesse before denying the benefit of Service Tax Voluntary Compliance Encouragement Scheme on ground of inconsistency between the declaration and Returns.
The appellant, a Co-operative Society incorporated under the Kerala Co-operative Societies Act, 1969 approached the High Court challenging the order of the Deputy Commissioner of Central Excise denying the benefit of Service Tax Voluntary Compliance Encouragement Scheme, 2013 to them.
Under the CENVAT Credit Rules, 2004, a Co-operative Society engaged in providing services by way of extending deposits, loans or advances shall pay for every month an amount equal to 50% of the CENVAT credit availed on inputs and input services in that month. The appellant failed to make a true declaration of the said liability in their service tax returns filed during the period from April, 2011 to March, 2013.
The application filed by the appellant under the above scheme was rejected by the respondent by pointing out the inconsistency between the declaration and ST-3 returns. When a show cause notice in this regard was issued to them, they sought more time to reconcile the same, which was rejected by the officer as per the impugned order.
Subsequently, the Single Judge confirmed the order dismissing the writ petition.
On writ appeal, the division bench quashed the order. āwe feel that when a mistake in the returns filed by the appellant is pointed out and on that basis, the application made by the appellant was proposed to be rejected, the respondent ought to have considered the request of the appellant for more time for reconciliation and on that basis, should have afforded the appellant an opportunity to explain the inconsistency so pointed out. Having not done so, we are inclined to think that the matter needs to be re-considered by the respondent.ā
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