The Central Board of
Excise and Customs (“CBEC”) has issued Circular No 170/5/2013 – ST dated August
8, 2013 (“Circular”) as well as a booklet containing “Frequently Asked
Questions” titled 'Service Tax VCES, 2013- FAQ’ (“FAQ”) clarifying various
aspects pertaining to the service tax Voluntary Compliance Encouragement Scheme
(“VCES”).
To recapitulate,
service tax VCES was announced as a part of Union Budget 2013 proposals as an
amnesty offering that enables disclosure of service tax dues (pertaining to the
period October 1, 2007 to December 31, 2012) without payment of interest and
penalty. For BMR’s earlier alert on VCES, click
here.
The present Circular
and the FAQ seek to address various doubts that arose as regards the scope and
intent of the scheme and inter alia provide the following
clarifications:
Circumstances where a
declarant shall be eligible to opt under the scheme
The eligibility of a
declarant to opt under VCES has been affirmed under the following
circumstances:
·
Where the
department has sought information under the provisions of law without requiring
any accounts, documents or other evidence under specific statutory provisions.
Further to the same, clear guidelines have been provided as to when an audit
would be considered to have been initiated and culminated.
·
Cases
where inquiry, investigation or audit is initiated after March 1,
2013.
·
Cases
where service tax has been paid by utilizing incorrect or irregular credit as
the same amounts to” non-payment” of service tax.
·
In
respect of issues not covered under audit paragraphs issued pursuant to a
departmental audit.
·
A
declaration can be filed under VCES for the period October 2007 to December 2012
even if a show cause notice/ order has been passed on the issue for a period
prior to October 2007.
Circumstances where a
declarant shall be ineligible to opt under the scheme
According to the
Circular and FAQ, a declaration cannot be filed/ shall not be entertained under
the following cases:
·
In cases
where the issue is being litigated for the period covered by the
scheme.
·
Where any
part of the “tax dues” for an issue has been paid prior to the date on which the
scheme was enacted.
·
A
declaration under VCES can be filed only in respect of “tax dues”; hence, cases
where service tax return has not been filed but tax has been paid shall not fall
within the ambit of the scheme.
·
In case
50 percent of the “tax dues” declared under the declaration has not been paid by
December 31, 2013, as mandated under the legal provisions.
CENVAT eligibility
Addressing concerns on
CENVAT eligibility, the following aspects have been clarified having regard to
the provisions and conditions under the CENVAT Credit Rules, 2004 (“CENVAT
Rules”):
·
While
CENVAT credit cannot be utilized for payment of “tax dues” under VCES, the
admissibility of CENVAT credit on any “inputs” and “input services” used for
provision of output services in respect of which declaration has been clarified
to be eligible.
·
Admissibility of
CENVAT credit in respect of the tax paid under VCES, ie, at the hands of the
service recipient of the declarant where declaration has been made in respect of
an output service and at the hands of the declarant where the declaration has
been made in respect of import of service/ domestic reverse charge, has been
affirmed.
In providing
affirmations as above, the Circular and FAQ state that CENVAT eligibility shall
be subject to the satisfaction of the conditions/ restrictions as well as
documentary requirements prescribed under the CENVAT Rules.
VCES process
According to the
Circular and FAQ:
·
Two
separately registered premises of a taxpayer will be treated as separate
taxpayers for the purpose of VCES whereby either of them can file separate
declaration(s) in their individual capacity.
·
While the
department will strive to provide an acknowledgement for the declaration, the
tax dues can be independently paid by the declarant as the scheme/ eligibility
is not linked to the acknowledgement.
·
A
declarant can suo moto amend the declaration already filed for a mistake
discovered in the declaration; however, the same shall be subject to the
discretion of the designated officer.
·
While the
declarant will be provided with an opportunity of being heard by the service tax
department before rejecting the declaration, there is no provision for filing an
appeal against the order rejecting a declaration.
·
In case
where a declaration is rejected, the amount paid by the taxpayer shall be
adjusted against any liability determined subsequently.
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