(Prayer: Petition under Article 226 of the Constitution of India, praying for the issue of a Writ of Certiorarified Mandamus, to call for the entire records connected with the proceedings of the 4th respondent in pursuant to the order C.No.IV/16/80/2013/VCES/S.Tax/PF dated 03.10.2013 and to quash the same and consequently direct the 4th respondent to declare the petitioner is entitled to get benefit of the under Voluntary Compliance of Excise and Service Tax Scheme (VCES).)
1. M/s Hotel Southson Private Limited represented by its Director K.Murugan, assailing the impugned order passed by the Assistant Commissioner (Designated Authority) in C.No.IV/16/80/2013/VCES/S.Tax/PF dated 03.10.2013 informing the petitioner that the declaration in Form VCES-1 is rejected, has filed the present writ petition.
2. Mr.M.K.Kabir, learned senior counsel for the petitioner heavily contended that the petitioner company has been running the hotel business since 1988 by providing service of accommodation, restaurant and rental for their customers. In the course of business, they are regular in paying the taxes including service tax etc. The petitioner company has also registered with the Central Excise department for paying the service tax under the head of accommodation service and restaurant service and thereupon paying the taxes regularly without any complaint. While so, an audit was conducted on 23.2.2013 and 25.2.2013 by the officers attached to the Additional Commissioner (Audit), Salem in the premises of the petitioner company and after a month, the Superintendent of Customs, Central Excise and Service Tax sent a letter dated 16.4.2013 informing the petitioner to pay service tax under the category of renting of immovable property service for the period from 1.10.2010 to 28.2.2013 with a further direction to pay a sum of Rs.36,10,239/- with interest and the late fee thereon. Only thereafter, the petitioner company came to know that they failed to pay the service tax for the category of renting of immovable service. In the meanwhile, the Government of India introduced and notified the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) for all those persons who have failed to pay service tax dues for the period 1 October 2007 to 31 December 2012. In view of the said scheme, the petitioner submitted an application dated 21.6.2013 before the Assistant Commissioner, Salem, the fourth respondent herein requesting to allow them to pay the service tax of Rs.32,85,485/-, since the petitioner is entitled to get the benefit of VCES. The petitioner also agreed to pay a sum of Rs.16,42,750/- as the first instalment towards service tax under the head of renting of immovable property service on accepting their declaration. On receipt of the application from the petitioner, the fourth respondent sent a letter dated 8.8.2013 calling upon them for enquiry and personal hearing with regard to VCES. Accordingly, the petitioner appeared before the fourth respondent on 12.9.2013. But during the meeting, the petitioner was surprised to know that the fourth respondent had mistaken with the fact that the inspection for audit conducted on 23.2.2013 and 25.2.2013 in their premises under the category of accommodation service and restaurant service were not finalised on the cut-off date, namely, 1.3.2013, hence, on the sole ground that the audit was not completed, rejected their declaration, which is impermissible. The learned senior counsel for the petitioner submitted that the rejection of the declaration of the petitioner made by the fourth respondent is against the circular dated 25.11.2013 issued by the Government of India, Ministry of Finance, Department of Revenue clarifying the provisions of Section 106(2) of the Finance Act, 2013 that if an inquiry, investigation or audit pending as on 1.3.2013 was being carried out for the period from 2008-11, the benefit of VCES would be eligible in respect of tax dues for the year 2012, namely, period not covered by the inquiry, investigation or audit. Therefore, when the said circular makes it further clear that the benefit of VCES would be eligible in respect of tax dues concerning any other issue in respect of which no inquiry or investigation is pending as on 1.3.2013, the declaration of the petitioner would be liable for rejection only if the issue is identifiable from summons or letters, but no summons or letters were issued asking the production of details in respect of renting of immovable property service, therefore, the rejection of the declaration on frivolous grounds is prima facie liable to be set aside. Adding further, the learned senior counsel submitted that as the renting of immovable property service was not covered in the audit report and that the petitioner also has not obtained any service tax registration certificate for renting of immovable property service, the petitioner is entitled to file the declaration under VCES. Hence the declaration is within the parameters of the VCES and the same ought not to have been rejected.
3. Continuing his arguments, the learned senior counsel submitted that aggrieved by the proceeding passed by the fourth respondent dated 3.10.2013, an appeal was preferred before the Commissioner of Central Excise (Appeals), Salem under Section 85 of the Finance Act, 1994. But the second respondent, without considering any of the legal issues, has wrongly disposed of the appeal on 17.1.2014, returning the same to the petitioner, treating it as disposed off. As against the said order, a further appeal was also preferred in Appeal No.ST/41647/2014 before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), the first respondent herein and the same was pending. However, in view of the filing of the present writ petition, the same was also withdrawn, therefore, the petitioner is not having any remedy except the intervention by this Court with the impugned order. Concluding his arguments, Mr.Kabir submitted that when the legal issues raised by the petitioner with regard to the applicability of VCES is pending for consideration, the third respondent issued a show cause notice dated 25.3.2014 calling upon the petitioner to pay a sum of Rs.38,21,642/-, for which a detailed reply has been submitted on 2.12.2014. However, without even waiting for the outcome of the matter, the demand notice dated 15.12.2014 has been issued, therefore, it is just and necessary to declare that the petitioner is entitled to get the benefit of VCES, as the petitioner has no other legal remedy.
4. Per contra, Mr.V.Sundareswaran, learned senior panel counsel for the respondents, refuting all the above contentions, urged this Court to dismiss the writ petition, on the ground that the petitioner is not entitled to file the declaration for the services which are found by the initiation of audit, but can file the declaration voluntarily for the one which was not covered by the audit, inasmuch as the scheme of the Act is clear and manifest in itself that the disclosure should be voluntary and self before the initiation of the audit and not thereafter. This apart, in the present case, the provision of renting of immovable property service was unearthed during the course of audit on 25.2.2013 and 28.2.2013. The said audit has not been completed on the cut-off date, namely, 1.3.2013. Since the renting of immovable property service was also under the scrutiny of audit, the petitioner is not entitled to file the declaration, hence it was rejected. Adding further, he submitted that originally internal audit had visited the premises of the petitioner for the service tax audit and conducted audit inspection on 25.2.2013 and 28.2.2013. Since the petitioner/assessee had taken service tax registration certificate for accommodation service and restaurant service, they were paying service tax only for these services. However, during the course of audit, the audit authority noticed that the assessee was also providing renting of immovable property service, but had not taken any registration for this service nor had included this service in the service tax registration certificate taken earlier and equally not paid the service tax for the renting of immovable property service. The matter was noted and the same was under consideration of audit as on 1.3.2013. Subsequently, the objection given by the petitioner was also finalised by audit and was placed in the Monitoring Committee Meeting (MCM) held on 27.3.2013. Accordingly, the service tax payable by the service provider was worked out by the internal audit as Rs.36,10,239/- for the periods 2010-11, 2011-12 and 2012-13 (upto February 2013) and the same was also communicated to the petitioner in the Commissioner's letter C.No.III/10/87/2013-IA dated 9.4.2013. Pursuant thereto, the Range Officer, Salem in his letter dated 16.4.2013, asked the petitioner to pay the service tax on renting of immovable property provided by them as per the audit objection. Only thereafter, the petitioner has come up with the VCES declaration. But the Assistant Commissioner, Salem Division, who is the designated authority under the VCES, issued notice to the petitioner/assessee on 8.8.2013 and after granting personal hearing on 12.9.2013, finding no merit in the reply, rejected the declaration filed by them by the impugned order, on the ground that on the reckoning date, namely, 1.3.2013, an audit was pending in respect of the assessee, hence the declaration was not eligible for VCES. Since the impugned order of rejection is in order making it clear that once the audit is initiated, the petitioner is not entitled to file the declaration for the service which are found by the initiation of audit and more particularly, the provision of renting of immovable property service was unearthed during the course of audit and that the renting of immovable property service was also under the scrutiny of audit on the cut-off date i.e., 1.3.2013, no interference is called for with the impugned order, as the fourth respondent has passed the order in fine tune with Section 106(2) of the Finance Act, 2013, he pleaded.
5. Heard both sides.
6. The question that needs to be answered in the present case is whether the petitioner, who is an assessee for the service tax payable for the years 2010-11, 2011-12 and 2013-13, is entitled to file the declaration on 21.6.2013 before the fourth respondent seeking to declare that the petitioner is entitled to get the benefit of VCES in the light of Section 106(2) of the Finance Act, 2013. In this context, it is relevant to extract Section 106(2) of the Finance Act, 2013, as follows:-
106.(2) Where a declaration has been made by a person against whom,--
(a) an inquiry or investigation in respect of a service tax not levied or not paid or short-levied or short-paid has been initiated by way of--
i. search of premises under section 82 of the Chapter; or
ii. issuance of summons under section 14 of the Central Excise Act, 1944, as made applicable to the Chapter under section 83 thereof; or
iii. requiring production of accounts, documents or other evidence under the Chapter or the rules made thereunder; or
(b) an audit has been initiated,
and such inquiry, investigation or audit is pending as on the 1st day of March, 2013, then, the designated authority shall by an order, and for reasons to be recorded in writing, reject such declaration. ?
7. A close reading of the above provisions would clearly show that if a declaration is made by a person against whom an inquiry or investigation in respect of a service tax not levied or not paid or short-levied or short-paid has been initiated by way of search of premises or an audit has been initiated, during the pendency of such an inquiry as on the first day of March, 2013, the designated authority shall by an order reject such declaration with the reasons to be recorded therein. In the present case, admittedly the premises of the petitioner came to be visited by the internal audit section of the respondents and an audit was conducted on 25.2.2013 and 28.2.2013. During the course of audit, the audit party noticed that the assessee was also providing renting of immovable property service, but had not taken registration for this service nor had included this service in the service tax registration certificate and also not paid the service tax for the renting of immovable property service. Hence the matter was under consideration of audit as on 1.3.2013, which is not yet being over. Therefore, as per Section 106(2) of the Finance Act, the petitioner is not entitled to get the benefit of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES), hence the fourth respondent, rightly in this case, has rejected the application dated 21.6.2013 holding that the petitioner is not entitled to get the benefit of the VCES. Moreover, after the issuance of notice, the petitioner was also heard personally. Hence, this Court is not inclined to interfere with the impugned order of rejection of the declaration filed by the petitioner. Accordingly, the writ petition fails and it is dismissed. Consequently, M.P.No.1 of 2015 is also dismissed. No costs.