If the assessee was eligible for VCES and had taken benefit of VCES, recovery proceedings cannot be initiated until application under VCES is decided.

2014 (33) STR 142 (AII) K. Amand Cateres vs. Union of india

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 uls.  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 VCESwould be defeated if the recovery   was  allowed   to  proceed.   An  interim order  was  passed  directing   Competent   Authority    todecide  the  application under  VCES within   60  days of passing  the  Order.