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SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT
SCHEME, 2013 with RULES, 2013
SERVICE TAX VOLUNTARY COMPLIANCE
ENCOURAGEMENT SCHEME, 2013
with RULES, 2013
by
CA. ATUL KUMAR GUPTA B. Com (H), FCA, AICWA, MIMA
First Edition August 2013
© AUTHOR
PUBLICATION RIGHTS OF SUBSEQUENT EDITIONS WITH THE PUBLISHERS
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WITHOUT PERMISSION IN WRITING OF THE PUBLISHERS
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consequences of any action taken on the basis of this book
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Printed in India
With the Blessings of “MATA VAISHNO DEVI”
PREFACE
It has always been our endeavor to provide all the members of society
an updated knowledge of service tax. This helps not only in self
compliance but also assist all the stakeholders of the profession, may it be
peers, industry, clients.
Our earlier editions of book titled ‘Introduction of Service Tax’,
‘Comprehensive Guide on Service Tax’, ‘Convergence of Accrual System
of Taxation’ and ‘Do you Know Series’ have always tried to provide
quality advice and regular updation on service tax matters.
Now it gives us immense pleasure to bring out a book on “Voluntary
Compliance Encouragement Scheme” introduced by Finance Act, 2013. It
contains detailed analysis of the scheme, its rules along with frequently
asked questions.
The main objective of this book is to evaluate the provisions of the
VCES in detail so as to find out the impact on Assessee.
Hope, this part will add to the comprehensiveness and assist the
readers in their professional endeavours, and will, we doubt not, meet with
favour equal to that of the parts previously published.
The suggestions for advancement in this book are always welcome and
will be highly appreciated.
Atul Kumar Gupta
New Delhi
12 August, 2013
CONTENTS
Chapter 1 Introduction 9
Chapter 2 Amnesty Scheme 11
Chapter 3 How Amnesty Scheme Will Work — A Power
Point Presentation 15
Chapter 4 Service Tax Voluntary Compliance Encouragement
Scheme, 2013 20
Chapter 5 Service Tax Voluntary Compliance Encouragement
Rules, 2013 24
Chapter 6 Departmental Circular 169/4/2013 on the Amnesty
Scheme 29
Chapter 7 Frequently Asked Questions 32
Chapter 8 Departmental Circular on the Amnesty Scheme
Circular No. 170/5 /2013-ST 55
CHAPTER 1
INTRODUCTION
To achieve substantial growth in Service Tax Collection and to broaden tax base,
Central Government introduced Negative List Approach vide Finance Act, 2012.
However, even after one year, this step could not achieve its objective in totality;
main reason behind this could be non-compliance by tax payers. Therefore, to
encourage voluntary compliance and broaden the tax base, The Hon’ble Finance
Minister in the Budget 2013-14 has announced ‘Voluntary Compliance
Encouragement Scheme, 2013’ to provide one time amnesty by way of (i) waiver
of interest and penalty; and (ii) immunity from prosecution, to the Defaulters i.e.
stop filers, non-filers or non-registrants or service providers (who have not
disclosed true liability in the returns filed by them during the period from
October 2007 to December 2012), who make a truthful declaration of all his
pending “tax dues” (from October1, 2007 to December 31, 2012) and pay the
same.
The scheme is similar to ‘Extra-ordinary Taxpayer Friendly Scheme’ announced
in the Budget Year 2004-05 vide Board Circular No. 137/39/2004-CX4, dated
23-09-2004 to be operational upto 30-10-2004 for instant registration of Service
Tax providers. This scheme aimed to register all service providers on the basis of
their declaration with regard to his past liabilities towards the Service Tax and
interest payable and who had earlier failed to register themselves with the
department due to ignorance or any other reason with full waiver of penalty.
The new Amnesty scheme is, however, an improved one over the old scheme in
so far as assessee gets complete waiver not only of penalty but also of interest
obligation. Also, issue of registration is taken care of in an indirect manner unlike
old ‘Taxpayer friendly Scheme’ by ensuring that to make the declaration under
scheme, Declarant would be first required to get himself registered with Service
Tax Department.
While presenting their Budget Speech in Parliament for the session 2013-14 on
February 28th, 2013, The Hon’ble Finance Minister Shri P. Chidambaram in Para
183 stated that:
“While there are nearly 17,00,000 registered assessees under Service Tax, only
about 7,00,000 file returns. Many have simply stopped filing returns. We cannot
go after each of them. I have to motivate them to file returns and pay the tax
dues. Hence, I propose to introduce a one-time scheme called ‘Voluntary
Compliance Encouragement Scheme’. A defaulter may avail of the scheme on
condition that he files a truthful declaration of Service Tax dues since 1-10-2007
and makes the payment in one or two instalments before prescribed dates. In
such a case, interest, penalty and other consequences will be waived. I hope to
10 Introduction Chap. 1
entice a large number of assessees to return to the tax fold. I also hope to collect
a reasonable sum of money.”
In the nutshell, on one hand where the Amnesty Scheme would be benefiting the
certain tax-payers/defaulters to pay all their pending dues without any
consequential interest and penalty obligations, it would be contributing a lot
towards broadening the tax base of Government by bringing a large number of
assessees within the purview of Service tax not registered so far and
enhancement of Service Tax collection by inviting payment of long awaited dues
which could otherwise have escaped from being assessed.
CHAPTER 2
AMNESTY SCHEME
1.1 Scope of the Scheme and Date of its Applicability
The Scheme is applicable only for tax due or payable under the Chapter V of
Finance Act, 1994 or any other amount due or payable under section 73A
thereof, for the period beginning from the 1st day of October, 2007 and ending
on the 31st day of December, 2012 including a cess leviable thereon under any
other Act for the time being in force, but not paid as on the 1st day of March, 2013.
Details of the scheme are available in Chapter VI of the Finance Act, 2013 (17 of
2013) given in Chapter 3 and will become operational from 10th May, 2013 i.e.
date on which the Finance Bill, 2013 receives the assent of the President till 31st
December 2013.
1.2 Person who can apply for the Scheme
Any person may declare his tax dues in respect of which no notice or order for
determination has been issued or made under Section 72, Section 73 or Section
73A of Finance Act, 1994 before 1st March 2013 except
Any person who has furnished return under section 70 of the Chapter and
disclosed his true liability, but has not paid the disclosed amount of service
tax or any part thereof, shall not be eligible to make declaration for the
period covered by the said return;
Person on whom notice or order of determination has been issued in
respect of any period on any issues can not file declaration on such issue
for any subsequent period.
1.3 How to apply for Scheme
Any person eligible and wishing to apply for the Scheme shall take the following
steps:
(a) Take registration under rule 4 of the Service Tax Rules, 1994, if not
already registered;
(b) Make the declaration to the designated authority in Form VCES -1 on or
before the 31st day of December, 2013 in respect of his “tax dues”;
where “Designated Authority” shall be an officer not below the rank of
Assistant Commissioner of Central Excise as notified by the Commissioner of
Central Excise for the purposes of this Scheme.
1.4 Procedure on receipt of Declaration
On receipt of declaration from Declarant, the Designated Authority shall issue an
acknowledgment thereof, in Form VCES-2 with a period of seven working days
12 Amnesty Scheme Chap. 2
from the date of receipt of declaration. However, 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.
1.5 Payment of “Tax Dues” and Acknowledgment thereof
Where the declaration made by a person under Scheme has been accepted by
Designated Authority, Declarant shall proceed to make the payment of “Tax
dues” declared by him in VCES-1 as under:
To pay not less than fifty per cent of the “tax dues” so declared along
with submission of proof of such payment to the designated authority on
or before the December 31st, 2013.
Balance of the tax due declared but not paid shall be required to be paid
by the declarant on or before the June 30th, 2014.
However, in case a declarant fails to make the balance payment on or
before June 30th, 2014, shall pay the same on or before December 31st,
2014 along with the interest thereon for the period of delay starting from
1.7.2014.
No CENVAT credit shall be utilised for payment of “tax dues” under the
Scheme.
The declarant shall furnish to the designated authority details of payment
made from time to time under this Scheme along with a copy of
acknowledgement issued to him in the form VCES-2.
On furnishing the details of full payment of declared tax dues and the
interest, if any, the designated authority shall issue an acknowledgement
thereof, to the declarant in Form VCES-3 within a period of seven
working days from the date of furnishing of details of payment of tax
dues in full along with interest, if any, by the declarant.
No refund of amount paid under the scheme under any circumstances
Chap. 2 Amnesty Scheme 13
1.6 Immunity from penalty, interest and other proceeding.
The declarant, on receipt of acknowledgment from Designated Authority in the
Form VCES-3 shall get complete immunity from penalty, interest or any other
proceeding under the provisions of Finance Act, 1994 and no matter shall be
reopened thereafter in any proceedings under the Chapter before any authority or
court relating to the period covered by such declaration.
1.7 Tax dues declared but not paid
Where the declarant fails to pay the tax dues, either fully or in part, as declared
by him, such dues along with interest thereon shall be recovered under the
provisions of section 87 of the Finance Act, 1994 which reads as under.
Section 87. Recovery of any amount due to Central Government
Where any amount payable by a person to the credit of the Central Government
under any of the provisions of this Chapter or of the rules made thereunder is not
paid, the Central Excise Officer shall proceed to recover the amount by one or
more of the modes mentioned below:—
(a) the Central Excise Officer may deduct or may require any other Central
Excise Officer or any officer of customs to deduct the amount so payable
from any money owing to such person which may be under the control of
the said Central Excise Officer or any officer of customs;
(b) (i) the Central Excise Officer may, by notice in writing, require any
other person from whom money is due or may become due to such
person, or who holds or may subsequently hold money for or on
account of such person, to pay to the credit of the Central
Government either forthwith upon the money becoming due or being
held or at or within the time specified in the notice, not being before
the money becomes due or is held, so much of the money as is
sufficient to pay the amount due from such person or the whole of the
money when it is equal to or less than that amount;
(ii) every person to whom a notice is issued under this section shall be
bound to comply with such notice, and, in particular, where any such
notice is issued to a post office, banking company or an insurer, it
shall not be necessary to produce any pass book, deposit receipt,
policy or any other document for the purpose of any entry,
endorsement or the like being made before payment is made,
notwithstanding any rule, practice or requirement to the contrary;
(iii) in a case where the person to whom a notice under this section is
sent, fails to make the payment in pursuance thereof to the Central
Government, he shall be deemed to be an assessee in default in
respect of the amount specified in the notice and all the
consequences of this Chapter shall follow;
14 Amnesty Scheme Chap. 2
(c) the Central Excise Officer may, on an authorisation by the
Commissioner of Central Excise, in accordance with the rules made in
this behalf, distrain any movable or immovable property belonging to or
under the control of such person, and detain the same until the amount
payable is paid; and in case, any part of the said amount payable or of
the cost of the distress or keeping of the property, remains unpaid for a
period of thirty days next after any such distress, may cause the said
property to be sold and with the proceeds of such sale, may satisfy the
amount payable and the costs including cost of sale remaining unpaid
and shall render the surplus amount, if any, to such person;
(d) the Central Excise Officer may prepare a certificate signed by him
specifying the amount due from such person and send it to the Collector
of the district in which such person owns any property or resides or
carries on his business and the said Collector, on receipt of such
certificate, shall proceed to recover from such person the amount
specified thereunder as if it were an arrear of land revenue.
1.8 Failure to make true declaration
Where the Commissioner of Central Excise has reasons to believe that the
declaration made by a declarant under this Scheme was substantially false, he
may, for reasons to be recorded in writing, serve notice on the declarant in respect
of such declaration, before the expiry of one year from the date of declaration,
requiring him to show cause why he should not pay the tax dues not paid or
short-paid. The power to issue notice is irrespective of declarant has been issued
VCES-3 for the period or not.
1.9 Payment of Service Tax liability for the period 1.1.2013 onwards
Any service tax which becomes due or payable by the declarant for the month of
January, 2013 and subsequent months shall be paid by him in accordance with
the provisions of the Chapter and accordingly, interest for delay in payment
thereof, shall also be payable under the Chapter.
CHAPTER 3
HOW AMNESTY SCHEME WILL WORK —
A POWER POINT PRESENTATION
Service Tax Voluntary Compliance
Encouragement Scheme, 2013 Scheme
Application and Benefit
Tax Due
Applicable from when?
Benefit available?
Who can apply?
What is the Procedure?
10th May 2013 till 31st December 2013
Only tax dues/payable can be deposited. Interest, Penalty and Prosecution will be waived off. Section 108(1)
Means the service tax due or payable under the chapter or any
other amount due or payable under Section 73A thereof, for the
period from 1st day of October 2007 and ending on the 31st
day of December 2012 including a cess leviable thereon under
any Act for the time being in force, but not paid as on the 1st
day of March 2013.
16 How Amnesty Scheme Will Work — A Power Point Presentation Chap. 3
Who Can’t Apply [Section 106(1)]
• Person who have filed the return u/s 70 and disclosed his true liability
but have not paid the disclosed amount of service tax or part thereof
can not made declaration for the period covered.
• Any Person against whom any notice or an order of determination u/s 72,
73 or 73A has been issued or made before 1st March, 2013.
• A person to whom a notice or an order or determination has been issued
in respect of any period or any issue, no declaration shall be made of his
tax dues on the same issue for any subsequent period.
Who Can Apply
Department shall reject recording reasons [Sec 106(2)]
• Search of premises under Section 82 of the Chapter.
• Issuance of Summon u/s 14 of CEA 1944.
• Requiring production of Accounts, documents or other evidence under
the chapter or the rules; or
• An audit has been initiated.
• And such inquiry, investigation or audit is pending as on 1st day of
March 2013.
Requiring production of Accounts, Documents or other Evidence under the
Chapter or Rule
Circular No 169/4/2013 dated 13th May Clarifies:
For the above terms only notice issued under Section 72 of the Finance Act and
under Rule 5A of the Service Tax Rules 1994 will invoke rejection of
declaration.
Section 14 of Central Excise Act, 1944
(1) Any Central Excise Officer duly empowered by the Central Government
in this behalf, shall have power to summon any person whose attendance
he considers necessary either to give evidence or to produce a document
Persons on whom any enquiry or investigation in respect of
service tax not levied, not paid or short levied or short paid has
been initiated by way of
SECTION 14: Power to summon persons to give evidence and
produce documents in inquiries under this Act. —
Chap. 3 How Amnesty Scheme Will Work — A Power Point Presentation 17
(a) fails to furnish the return under section 70;
(b) having made a return, fails to assess the tax in accordance with
the provisions of this Chapter or rules made there under, the
Central Excise Officer, may require the person to produce such
accounts, documents or other evidence as he may deem
necessary and after taking into account all the relevant
material which is available or which he has gathered, shall by
an order in writing, after giving the person an opportunity of
being heard, make the assessment of the value of taxable
service to the best of his judgment and determine the sum
payable by the assessee or refundable to the assessee on the
basis of such assessment.
or any other thing in any inquiry which such officer is making for any of
the purposes of this Act. A summons to produce documents or other
things may be for the production of certain specified documents or things
or for the production of all documents or things of a certain description
in the possession or under the control of the person summoned.
(2) All persons so summoned shall be bound to attend, either in person or by
an authorised agent, as such officer may direct; and all persons so
summoned shall be bound to state the truth upon any subject respecting
which they are examined or make statements and to produce such
documents and other things as may be required:
Section 72 – Best Judgment Assessment
Section 73
Recovery of Service Tax not levied or paid or Short –levied or Short-paid or
Erroneously Refunded
(1) Where any service tax has not been levied or paid or has been short-
levied or short-paid or erroneously refunded , the Central Excise
Officer may, within ‘eighteen months’ from the relevant date, serve
notice on the person chargeable with the service tax which has not been
levied or paid or which has been short-levied or short-paid or the person
to whom such tax refund has erroneously been made, requiring him to
show cause why he should not pay the amount specified in the notice.
If any person, liable to pay Service Tax
18 How Amnesty Scheme Will Work — A Power Point Presentation Chap. 3
Section 73A
Service Tax Collected from any person to be deposited with Central
Government
(1) Any person who is liable to pay service tax under the provisions of this
Chapter or the rules made thereunder, and has collected any amount in
excess of the service tax assessed or determined and paid on any taxable
service under the provisions of this Chapter or the rules made there under
from the recipient of taxable service in any manner as representing
service tax, shall forthwith pay the amount so collected to the credit of
the Central Government.
(2) Where any person who has collected any amount, which is not required
to be collected, from any other person, in any manner as representing
service tax, such person shall forthwith pay the amount so collected to
the credit of the Central Government.
(3) Where any amount is required to be paid to the credit of the Central
Government under sub-section (1) or sub-section (2) and the same has
not been so paid, the Central Excise Officer shall serve, on the person
liable to pay such amount, a notice requiring him to show cause why the
said amount, as specified in the notice, should not be paid by him to the
credit of the Central Government.
Procedure 1/4
Person will apply in Form VCES 1 to designated authority (DA)
on or before 31st December 2013. Section 106(1)
DA will acknowledge within 7 days for receipt.
Section 106(2)
Declarant shall pay on or before 31st Dec 2013 not less than 50% so
declared and has to submit proof of such payment to DA.
Section 106(3)
Remaining Part to pay on or before 30th June 2014.
Section 106(4)
Chap. 3 How Amnesty Scheme Will Work — A Power Point Presentation 19
Procedure 2/4
Procedure 3/4
Procedure 4/4
Thank You and Your Query Please….
CA. Atul Kumar Gupta
www.servicetax.net
(M) 9810103611
In case fail to pay before 30th June 2014, then can pay till 31st Dec
2014 with interest as applicable under section 75 [Section 106 (4)]
Meaning thereby there is no interest provision for amount payable
till 31st December 2013
After furnishing details of full payment of declared tax and
interest if any, the DA shall issue an acknowledgment of
discharge of such dues. Section 106(7)
Once the acknowledgment of discharge of such dues Section
106(7), no matter shall be reopened thereafter in any proceedings to
the period covered by such declaration. [Section 108(2)]
Any amount paid in pursuance of declaration made shall not be
refundable under any circumstances. [Section 109]
Where declarant fails to pay due tax either fully or partly as
declared by him, such dues along with interest shall be recovered as
under Section 87 of the Act. [Section 110]
Where the CCE has reason to believe that the declaration made
was substantially false, he may issue Show cause notice, within
one year from date of declaration.
CHAPTER 4
SERVICE TAX VOLUNTARY COMPLIANCE
ENCOURAGEMENT SCHEME, 2013
THE FINANCE ACT, 2013 (17 of 2013)
CHAPTER VI
Service Tax Voluntary Compliance Encouragement Scheme, 2013
104. Short title. — This Scheme may be called the Service Tax Voluntary
Compliance Encouragement Scheme, 2013.
105. Definitions.—(1) In this Scheme, unless the context otherwise
requires,—
(a) “Chapter” means Chapter V of the Finance Act, 1994;
(b) “declarant” means any person who makes a declaration under sub-
section (1) of section 97;
(c) “designated authority” means an officer not below the rank of
Assistant Commissioner of Central Excise as notified by the
Commissioner of Central Excise for the purposes of this Scheme;
(d) “prescribed” means prescribed by rules made under this Scheme;
(e) “tax dues” means the service tax due or payable under the Chapter or any
other amount due or payable under section 73A thereof, for the
period beginning from the 1st day of October, 2007 and ending on the
31st day of December, 2012 including a cess leviable thereon under any
other Act for the time being in force, but not paid as on the 1st day of
March, 2013.
(2) Words and expressions used herein and not defined but defined in the Chapter or the rules made thereunder shall have the meanings respectively
assigned to them in the Chapter or the rules made thereunder.
106. Person who may make declaration of tax dues.—(1) 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 of the Chapter has been issued or
made before the 1st day of March, 2013:
Provided that any person who has furnished return under section 70 of the
Chapter and disclosed his true liability, but has not paid the disclosed amount of
service tax or any part thereof, shall not be eligible to make declaration for the
period covered by the said return:
Chap. 4 ST Voluntary Compliance Encouragement Scheme, 2013 21
Provided further that where a notice or an order of determination has
been issued to a person in respect of any period on any issue, no
declaration shall be made of his tax dues on the same issue for any subsequent
period.
(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.
107. Procedure for making declaration and payment of tax dues.—(1)
Subject to the provisions of this Scheme, a person may make a declaration to the
designated authority on or before the 31st day of December, 2013 in such
form and in such manner as may be prescribed.
(2) The designated authority shall acknowledge the declaration in such form
and in such manner as may be prescribed.
(3) The declarant shall, on or before the 31st day of December, 2013, pay not
less than fifty per cent. of the tax dues so declared under sub-section (1)
and submit proof of such payment to the designated authority.
(4) The tax dues or part thereof remaining to be paid after the payment
made under sub-section (3) shall be paid by the declarant on or before the 30th
day of June, 2014:
Provided that where the declarant fails to pay said tax dues or part thereof on
or before the said date, he shall pay the same on or before the 31st day of
December, 2014 along with interest thereon, at such rate as is fixed under section
75 or, as the case may be, section 73B of the Chapter for the period of delay
starting from the 1st day of July, 2014.
(5) Notwithstanding anything contained in sub-section (3) and sub-section
(4), any service tax which becomes due or payable by the declarant for the month
of January, 2013 and subsequent months shall be paid by him in accordance with
the provisions of the Chapter and accordingly, interest for delay in payment
thereof, shall also be payable under the Chapter.
22 ST Voluntary Compliance Encouragement Scheme, 2013 Chap. 4
(6) The declarant shall furnish to the designated authority details of
payment made from time to time under this Scheme along with a copy of
acknowledgement issued to him under sub-section (2).
(7) On furnishing the details of full payment of declared tax dues and the
interest, if any, payable under the proviso to sub-section (4), the designated
authority shall issue an acknowledgement of discharge of such dues to the
declarant in such form and in such manner as may be prescribed.
108. Immunity from penalty, interest and other proceeding.—(1)
Notwithstanding anything contained in any provision of the Chapter, the
declarant, upon payment of the tax dues declared by him under sub-section (1) of
section 97 and the interest payable under the proviso to sub-section (4) thereof,
shall get immunity from penalty, interest or any other proceeding under the
Chapter.
(2) Subject to the provisions of section 101, a declaration made under
sub-section (1) of section 97 shall become conclusive upon issuance of
acknowledgement of discharge under sub-section (7) of section 97 and no
matter shall be reopened thereafter in any proceedings under the Chapter before
any authority or court relating to the period covered by such declaration.
109. No refund of amount paid under the Scheme.—Any amount paid in
pursuance of a declaration made under sub-section (1) of section 97 shall not be
refundable under any circumstances.
110. Tax dues declared but not paid.—Where the declarant fails to pay the
tax dues, either fully or in part, as declared by him, such dues along with interest
thereon shall be recovered under the provisions of section 87 of the Chapter.
111. Failure to make true declaration.—(1) Where the Commissioner of
Central Excise has reasons to believe that the declaration made by a declarant
under this Scheme was substantially false, he may, for reasons to be recorded in
writing, serve notice on the declarant in respect of such declaration requiring
him to show cause why he should not pay the tax dues not paid or short-
paid.
(2) No action shall be taken under sub-section (1) after the expiry of one year
from the date of declaration.
(3) The show cause notice issued under sub-section (1) shall be deemed
to have been issued under section 73, or as the case may be, under section 73A
of the Chapter and the provisions of the Chapter shall accordingly apply.
112. Removal of doubts.—For the removal of doubts, it is hereby
declared that nothing contained in this Scheme shall be construed as conferring
any benefit, concession or immunity on the declarant other than the benefit,
concession or immunity granted under section 98. Immunity
113. Power to remove difficulties.—(1) If any difficulty arises in giving
effect to the provisions of this Scheme, the Central Government may, by order,
not inconsistent with the provisions of this Scheme, remove the difficulty:
Chap. 4 ST Voluntary Compliance Encouragement Scheme, 2013 23
Provided that no such order shall be made after the expiry of a period of
two years from the date on which the provisions of this Scheme come into force.
(2) Every order made under this section shall, as soon as may be after it is
made, be laid before each House of Parliament.
114. Power to make rules.—(1) The Central Government may, by
notification in the Official Gazette, make rules for carrying out the provisions of
this Scheme.
(2) Without prejudice to the generality of the foregoing power, such rules
may provide for all or any of the following matters, namely:—
(a) the form and the manner in which a declaration may be made
under subsection (1) of section 97;
(b) the form and the manner of acknowledging the declaration under
sub-section (2) of section 97;
(c) the form and the manner of issuing the acknowledgement of discharge
of tax dues under sub-section (7) of section 97;
(d) any other matter which is to be, or may be, prescribed, or in respect
of which provision is to be made, by rules.
(3) The Central Government shall cause every rule made under this Scheme
to be laid, as soon as may be after it is made, before each House of Parliament,
while it is in session, for a total period of thirty days which may be comprised in
one session or in two or more successive sessions, and if, before the expiry of the
session immediately following the session or the successive sessions aforesaid,
both Houses agree in making any modification in the rule or both Houses agree
that the rule should not be made, the rule shall thereafter have effect only in such
modified form or be of no effect, as the case may be; so, however, that any such
modification or annulment shall be without prejudice to the validity of anything
previously done under that rule.
CHAPTER 5
SERVICE TAX VOLUNTARY COMPLIANCE
ENCOURAGEMENT RULES, 2013
Notification No. 10/2013-ST, dated 13-5-2013
In exercise of the powers conferred by sub-sections (1) and (2) of section 114
of the Finance Act, 2013 (17 of 2013), the Central Government hereby makes the
following rules regarding the form and manner of declaration, form and manner
of acknowledgement of declaration, manner of payment of tax dues and form and
manner of issuing acknowledgement of discharge of tax dues under the Service
Tax Voluntary Compliance Encouragement Scheme, 2013, namely:—
1. Short title and commencement.—(1) These rules may be called the
Service Tax Voluntary Compliance Encouragement Rules, 2013.
(2) They shall come into force on the date of its publication in the Gazette of
India.
2. Definitions.—(1) In these rules, unless the context otherwise requires,—
(a) “Act” means the Finance Act, 2013;
(b) “Form” means the Forms annexed to these rules.
(c) “Scheme” means the Service Tax Voluntary Compliance Encouragement
Scheme, 2013 as specified in the Act;
(2) Words and expressions used but not defined in these rules but defined in
the Scheme shall have the meanings respectively assigned to them in the Scheme.
3. Registration.—Any person, who wishes to make a declaration under the
Scheme, shall, if not already registered, take registration under rule 4 of the
Service Tax Rules, 1994.
4. Form of declaration.—The declaration under sub-section (1) of section
107 of the Act, in respect of tax dues under the Scheme shall be made in Form
VCES -1.
5. Form of acknowledgment of declaration.—The designated authority on
receipt of declaration shall issue an acknowledgement thereof, in Form VCES -2,
within a period of seven working days from the date of receipt of the declaration.
6. Payment of tax dues.—(1) The tax dues payable under the Scheme along
with interest, if any, under section 107 of the Act shall be paid to the credit of the
Central Government in the manner prescribed for the payment of service tax
under the Service Tax Rules, 1994.
Chap. 5 ST Voluntary Compliance Encouragement Rules, 2013 25
(2) The CENVAT credit shall not be utilised for payment of tax dues under
the Scheme.
7. Form of acknowledgement of discharge.—(1) The designated authority
shall issue an acknowledgement of discharge under sub-section (7) of section 107
of the Act, in Form VCES-3.
(2) The acknowledgement of discharge shall be issued within a period of
seven working days from the date of furnishing of details of payment of tax dues
in full along with interest, if any, by the declarant.
FORM VCES-1
[In duplicate]
Declaration under sub-section (1) of section 107 of the Act
[See rule 4]
(Please read the instructions carefully before filling the form)
1. Name of the declarant
2. Address of the declarant
3. Telephone No.
4. E-mail id
5. Service Tax Code (STC No.)
6. Details of tax dues*
A Service tax `
B Education cess `
C Secondary & Higher Education
Cess
`
D Amount under section 73A
of the Finance Act, 1994
`
E Total Tax dues* [A+B+C+D] `
*Furnish a calculation sheet separately [for the purposes of calculation of tax
dues, the manner of calculation as prescribed in S. No. 3F(I), or as the case
may be, the Part “B‟ of Form ST-3, as existed during relevant period may be
used and calculation of tax dues may be furnished tax return period wise, and
service wise if the tax dues relates to more than one service.]
26 ST Voluntary Compliance Encouragement Rules, 2013 Chap. 5
VERIFICATION
I............(name in block letters) son/daughter of Shri........... solemnly declare that
I have read and understood the Service Tax Voluntary Compliance Encouragement
Scheme as contained in Chapter VI of the Finance Act, 2013, and to the best of my
knowledge and belief,—
(a) the information given in this declaration and the enclosures accompanying it are
correct and complete and the amount of tax dues and other particulars shown
therein are truly stated;
(b) the tax dues declared above do not attract the provisions of sub-section (1),
including the provisos thereto, of section 106 of the Act;
(c) no inquiry, investigation or audit is pending against the declarant as on the 1st
day of March, 2013 as envisaged in sub-section (2) of section 106 of the Act;
I further declare that I am authorised to make this declaration and verify it on behalf
of the declarant in the capacity as ..............................
Enclosures:
S. No. Details of enclosure/statement annexed
1 Calculation sheet in respect of tax dues (refer S. No. 6 above and the
instructions)
2 Any other documents (please specify)
Signature of the declarant/authorised person with stamp
Place: Date:
Declaration No. Date
(To be assigned by the department)
Instructions:
1. The Scheme has been prescribed in the Chapter VI of the Act. The provisions
contained therein may please be read carefully (refer www.cbec.gov.in).
2. This Form shall be submitted to the Central Excise Officer notified as designated
authority under section 105(c) of the Act.
3. The tax dues may be computed separately for each service if the tax dues relates to
more than one service during the period of declaration.
4. For calculation of tax dues, the manner as prescribed at S. No. 3F(I), or as the case
may be the Part “B” of the Form ST-3, as existed during the relevant period, may be
used and calculation of tax dues may be furnished tax return period wise
5. Calculation sheet showing the tax dues calculation may please be enclosed with this
declaration.
6. Obtain an acknowledgment from the designated authority in Form VCES-2.
7. The declarant may approach the designated authority for any clarification.
Chap. 5 ST Voluntary Compliance Encouragement Rules, 2013 27
FORM VCES-2
[Acknowledgment of declaration issued under sub-section (2) of section 107 of the
Act]
[See rule 5]
No.
Receipt of a declaration filed under sub-section (1) of section 107 of the Act, as per
the details below, is acknowledged.
1 Declaration No. Date
2. Name of the declarant
3. Address of the declarant
4. STC No.
5. Tax dues declared `
6. Schedule for payment of tax dues
A Minimum amount to be paid
on or before the 31st Dec, 2013
(50% of the tax dues)
`
B Remaining tax dues to be
paid on or before the 30th
June, 2014 [Amount at S. No.
5(-) Amount at S. No. 6A]
`
C Any tax dues remaining unpaid as on 1st day of July,2014 shall
be paid before the 31st December,2014 along with interest, as
prescribed under section 75 or as the case may b, section 73B
of the Finance Act, 1994 for the period of delay starting from
the 1st day of July, 2014
Signature, name and seal of designated authority
Place: Date:
————————————————————————————————————
Instructions:
1. This acknowledgment has been issued on the basis of declaration furnished by the
declarant and it does not certify the correctness of the declaration made. This
declaration does not certify payment of any tax dues.
2. Certificate of discharge in Form VCES -3 shall be issued only upon full payment
of tax dues along with interest if any, as per the details at S. No. 6 above.
3. If any amount declared as tax dues under the Scheme remain unpaid as on 1-1-2015,
the same shall be recoverable under section 87 of the Finance Act, 1994.
4. For any clarification, the declarant may get in touch with the designated authority.
28 ST Voluntary Compliance Encouragement Rules, 2013 Chap. 5
FORM VCES-3
Acknowledgement of Discharge
[Issued under sub-section (7) of section 107 of the Act]
[See rule 7]
No.
This acknowledgment of discharge has been issued under sub-section (7) of section
107 of the Act, to ACKNOWLEDGE that the tax dues declared under sub-section (1) of
section 107 of the Act have been paid, in respect of declaration so made as per the
following details.
1 Declaration No. Date
2. Name of the declarant
3. Address of the declarant
4. STC No.
5. Tax dues declared under the
Scheme
6. Payment of tax dues
A Tax dues paid on or before
31.12.2013
`
B Tax dues paid after 31.12.2013
but on or before 30.6.2014
`
C Tax dues paid after 30.6.2014 but
on or before 31.12.2014
`
D Interest paid under section 107
(4) on amount mentioned at ‘6C’
`
E Total amount paid (A+B+C+D) `
7. Details of challan(s)
Challan No(s)(CIN) Amount
Signature, name and seal of designated authority
Place: Date:
CHAPTER 6
DEPARTMENTAL CIRCULAR ON
THE AMNESTY SCHEME
Circular No. 169/4/2013-ST, dated 13-5-2013
The Service Tax Voluntary Compliance Encouragement Scheme —
Clarifications regarding
The Service Tax Voluntary Compliance Encouragement Scheme (VCES) has
come into effect upon enactment of the Finance Bill, 2013 on the 10th May,
2013. The Service Tax Voluntary Compliance Encouragement Rules, 2013 has
been issued to bring into effect the Scheme. Some references have been received
seeking clarification as regards the scope and applicability of the Scheme.
2. The issues have been examined and clarifications thereto are as follows:
S. No. Issues Clarification
1 Whether a person who
has not obtained service
tax registration so far can
make a declaration under
VCES?
Any person who has tax dues to declare can
make a declaration in terms of the provisions
of VCES. If such person does not already
have a service tax registration he will be
required to take registration before making
such declaration.
2 Whether a declarant shall
get immunity from
payment of late fee/
penalty for having not
taken registration earlier
or not filed the return or
for delay in filing of
return.
Yes. It has been provided in VCES that,
beside interest and penalty, immunity would
also be available from any other proceeding
under the Finance Act, 1994 and Rules made
thereunder.
3 Whether an assessee to
whom show cause notice
or order of determination
has been issued can file
declaration in respect of
tax dues which are not
covered by such SCN or
order of determination?
In terms of section 106 (1) of the Finance
Act, 2013 and second proviso thereto, the
tax dues in respect of which any show cause
notice or order of determination under
section 72, section 73 or section 73A has
been issued or which pertains to the same
issue for the subsequent period are excluded
from the ambit of the Scheme. Any other tax
dues could be declared under the Scheme
subject to the other provisions of the
Scheme.
30 Departmental Circular on the Amnesty Scheme Chap. 6
S. No. Issues Clarification
4 What is the scope of
section 106 (2)(a)(iii)?
Whether a
communication from
department seeking
general information from
the declarant would lead
to invoking of section
106 (2) (a)(iii) for
rejection of declaration
under the said section?
Section 106(2)(a)(iii) of the Finance Act,
2013 provides for rejection of declaration if
such declaration is made by a person against
whom an inquiry or investigation in respect
of service tax not levied or not paid or short-
levied or short paid, has been initiated by
way of requiring production of accounts,
documents or other evidence under the
chapter or the rules made thereunder, and
such inquiry or investigation is pending as
on the 1st day of March, 2013.
The relevant provisions, beside section 14 of
the Central Excise Act as made applicable to
service tax vide section 83 of the Finance
Act,1994, under which accounts, documents
or other evidences can be requisitioned by
the Central Excise Officer for the purposes
of inquiry or investigation, are as follows,-
(i) Section 72 of the Act envisages requi-
sition of documents and evidences by
the Central Excise Officer if any
person liable to pay service tax fails to
furnish the return or having made a
return fails to assess the tax in
accordance with the provision of the
Chapter or rules made thereunder.
(ii) Rule 5A of the Service Tax Rules,
1994 prescribes for requisition of
specified documents by an officer
authorised by the Commissioner for
the purposes specified therein.
The provision of section 106(2)(a)(iii) shall
be attracted only in such cases where
accounts, documents or other evidences are
requisitioned by the authorised officer from
the declarant under the authority of any of
the above stated statutory provisions and the
inquiry so initiated against the declarant is
pending as on the 1st day of March, 2013.
No other communication from the
department would attract the provisions of
Chap. 6 Departmental Circular on the Amnesty Scheme 31
S. No. Issues Clarification
section 106(2)(a)(iii) and thus would not
lead to rejection of the declaration.
3. Trade Notice/Public Notice may be issued to the field formations and tax
payers. Please acknowledge receipt of this Circular.
—————
Trade Notice No. 09/ST/2013, dated 21-5-2013
Notification of 'Designated Authority' for the purpose of Service Tax
Voluntary Compliance Encouragement Scheme — Reg.
Attention of all trade associations and stake holders is invited to the Trade Notice
No. 08/ST/2013, dated 21/05/2013 issued by the Commissioner, Service Tax,
Delhi, regarding Service Tax Voluntary Compliance Encouragement Scheme
2013.
Please refer to the details of Voluntary Compliance Encouragement Scheme 2013
(VCES). In terms of section 105 and section 107 of the Finance Act, 1994, as
amended, a declaration has to be made before the 'Designated Authority'.
The Commissioner, Service Tax Delhi, hereby notifies Sh. KARAN THAPAR,
Assistant Commissioner of Central Excise & Service Tax as the 'Designated
Authority' for the purpose of declaration under the VECS, 2013 amnesty scheme.
His official address is as 'IAEA HOUSE, 17-B, I.P. ESTATE M.G. MARG,
NEW DELHI-110 002" and Phone No. is 011-4078 5837.
All the Trade Associations are requested to give wide publicity to the contents of
this Trade Notice amongst their members and constitutes.
CHAPTER 7
FREQUENTLY ASKED QUESTIONS
Question 1: In what form to make declaration to apply for Amnesty
Scheme?
Answer: The Assessee has to file VCES-1 to Designated Authority with
relevant calculation of period covered under the scheme.
Question 2: Who is the designated officer for Submission of form VCES-
1? Is there any relevant notification for the same?
Answer: As per the scheme, every Commissionerate will appoint one
Designated Authority to receive the VCES-1 and issue necessary
Forms.
Question 3: Has Designated Authority been appointed under the scheme
till date?
Answer: Yes, In each Commissionerate the same has been appointed and
Trade Notice for the same is being issued.
Question 4: The assessee received summon u/s 14 of excise on 14.04.2013.
Can he go for the scheme?
Answer: Yes, since in the scheme it is mentioned that in case the assessee
has been served a notice under Section 14 of Central Excise Act
1944 which is pending on 1st March 2013, then declaration so
filed in the scheme will be rejected.
Question 5: Is the assessee required to get himself registered for availing
this scheme or he can avail the scheme and afterwards get
himself registered?
Answer: Yes, as mentioned in Rule 3 of Service Tax Voluntary
Compliance Encouragement Rules, 2013 and further clarified in
Circular No 169/4/2013 dt. 13.5.2013, the assessee has to obtain
the registration to opt for the scheme and deposit tax under the
scheme.
Question 6: Is service tax to be paid by an assessee who wishes to avail
benefit of the scheme, before filing VCES-1 or after filing
VCES-1 but before receiving acknowledgement in VCES-2?
Answer: It is on the option of Assessee to pay during the pendency of
VCES 2. It is provided that assessee has to pay more than 50%
of tax due before 31st December 2013.
Chap. 7 Frequently Asked Questions 33
Question 7: Is it necessary to deposit the entire tax liability for period
covered in declaration or even a partial deposit will work to
obtain proportional benefit. Say the actual liability is Rs. 50
Lacs but client is disclosing liability of only Rs.40 Lacs. What
will be the consequence?
Answer: No, there is no scheme for proportional benefit. Assessee has to
pay entire amount of tax due to avail for the scheme.
Question 8: I have paid some tax on 28 Feb, 2013 which was relatable to
Jan and Feb, 2013. Can the department refuse me the
scheme benefit saying that you have made some payment of
the dues as on Dec 12 in Feb’13?
Answer: No, If the assessee can prove that the amount so deposited relates
to Jan and Feb 2013 and the tax due pertaining upto December
2012 is still due after 1st March 2013, then he can go for this
scheme.
Question 9: Is it necessary that the return of Oct’12 to Mar’13 should be
of only Jan- Mar’13 for an assessee availing benefit of
scheme?
Answer: The same is not a pre requisite rather will be a consequential.
Question 10: If a person has taken registration in F.Y. 12-13 but has not
charged service tax for previous 5 years (when he was
supposed to charge) so will he be able to take the benefit of
this scheme?
Answer: Yes, he can opt for this scheme.
Question 11: An Assessee has received an inquiry from the department for
Non filing of return for the F.Y 2011-12 before 1st of March,
2013 and The Assessee does not filed any return since Oct
2007. Is it open for the assessee to apply for the scheme for
the period since Oct, 2007?
Answer: Yes, in case the Notice is not issued under Section 14 of Central
Excise Act, Section 72 of Finance Act 1994, or under Rule 5A of
the Service Tax Rules 1994, then assessee can opt for this
scheme. One has to check the Notice and Section cited on the
same.
Question 12: Whether NIL tax returns, not filed earlier, can be filed now
for the period covered under the scheme.
Answer: The scheme is not for the filing of Service tax return in arrears.
To opt for the scheme assessee must have some of the tax due in
the relevant period. Rather he may use Para 6.1 of Circular No
97/2007 to claim relief from penalties.
34 Frequently Asked Questions Chap. 7
Question 13: An assessee has Export turnover of Rs. 60,00,000/-. Is he
liable to get registration? If yes, can he now take registration
and file returns for past years under VCES without penalties
and interest? He has no local business at all.
Answer: No, the benefit under VCES scheme is available only to those
assessee who have not paid or have short paid service tax. Only
non-registration or non filing defaulters are not eligible to avail
benefit under VCES scheme.
Question 14: Assessee has NIL tax dues and has not filed any returns. Can
he opt for VCES scheme?
Answer: The assessee who are liable to pay tax and have not paid for the
period October 2007 to December 2012 can avail this scheme. If
the service tax liability is nil, he shall not be eligible for the
scheme for non filing of returns.
Question 15: A person who has paid service tax dues and filed late return
was issued a demand letter for the late filing Penalty &
interest. Can he go for VCES now?
Answer: Mere non-filing of return will not allow an assessee to opt for
VCES. However, if there is some part of Service Tax due which
still needs to be paid and no demand letter issued before
1.3.2013, he can go for VCES now.
Question 16: Whether an assessee who has paid service tax, but has not
filed return for a part of the period covered by the scheme,
can he claim waiver of additional fees/ penalty payable on
delayed return filing under this scheme?
Answer: No, since the VCES scheme is introduced for giving benefit of
penalty and interest only in the cases where the service tax has
not been paid/short paid.
Question 17: Can an assessee opt for the scheme where the assessee has
paid tax mistakenly on cash basis and not on accrual basis?
Answer: Yes, provided Service Tax amount disclosed In ST-3 had been
fully paid and there is some amount of tax short paid consequent
to payment of service tax on cash basis rather than accrual basis.
Question 19: If service tax for 2010-11 is paid in March, 2013 without
interest and penalty, whether assessee can go for the amnesty
scheme. Returns are still not filed.
Answer: Yes, the assessee can opt for the scheme, if the tax was unpaid
upto 1st March 2013 and after Scheme came into force.
Chap. 7 Frequently Asked Questions 35
Question 20: Till date no notice is issued, but if the service provider has
not filed declaration and before December 2013 Department
issued some notice or audit is conducted, still can he file this
declaration now?
Answer: Yes, declaration can be filed at any time on or before
31.12.2013.
Question 21: A letter is issued for filling of return for the period covered
under Amnesty Scheme but no section is quoted in the said
letter. Can it be considered as an enquiry? Is it open to go for
the scheme now?
Answer: Yes, VCES can be opted in case of just routine enquiry.
Question 22: How does one identify/ differentiate a routine enquiry and an
enquiry for anti-evasion?
Answer: As per Section 106(2) read with Circular 169/4/2013-ST dt.
13.5.2013, only inquiry or investigations initiated (i) u/s 14 of
Central Excise Act, 1994, (ii) u/s 72 and u/s 82 of Finance Act,
1994, and (iii) under Rule 5A of the Service Tax Rules, 1994
will be considered under VCES scheme and rest other enquiries
will be considered as routine enquiries.
Question 23: Can an assessee wherein the notice for audit has been issued
in February and the audit has been performed in the month
of April can opt for the VCES?
Answer: No, enquiry shall be considered as initiated as and when the
notice of audit was issued i.e. in the month of February and is
pending as on 1st March, 2013. Hence, would not be eligible for
VCES scheme.
Question 24: Can reverse charge tax payer apply for this scheme?
Answer: Yes, any person whether he is service provider or service
receiver can opt for the scheme to declare his tax dues.
Question 25: Department has issued a notice to my client by Speed Post in
which the name of the company is wrong. For e.g. Correct
name is A B Builders Pvt. Ltd., the letter was issued in the
name of A Construction & Makers Pvt. Ltd. Moreover, the
address is somewhat different. Can I go for VCES?
Answer: No. If the Assessee code as mentioned in notice was correct and
notice was served on assessee, then benefit of VCES cannot be
taken.
Question 26: If VCES-2 is not issued within 7 days, what will be its
implication?
Answer: VCES-2 is the acknowledgment for acceptance of declaration by
Designated Authority. Since there is no provision in Chapter VI
36 Frequently Asked Questions Chap. 7
of Finance Act, 2013 and Rules, made there under, for deemed
acceptance by DA, in case VCES is not issued within the
prescribed time limit of 7 days, assessee can continue to pay
under the scheme.
Question 27: If my client pays all the tax upfront, how will the designated
officer give an acknowledgement operationally within a week
as purported in the Scheme?
Answer: To secure VCES-3 from Designated Authority, declarant has to
furnish the details of full payment of declared tax dues and the
interest, if any, along with a copy of acknowledgement issued to
him in the form VCES-2 to Designated Authority. Therefore, unless
and until VCES-2 is issued to declarant, there is no question of
VCES-3 notwithstanding the fact of all the payment of tax dues
having made upfront.
Question 28: Can the service recipient get the CENVAT credit, if service
provider has paid service tax in the new scheme without
recovering it separately from Service receiver?
Answer: No, CENVAT Credit can be availed only on the basis of
CENVATABLE invoice containing the details mentioned in
Rule 4A of Service Tax Rules, 1994 which inter-alia includes
“Details of Service Tax Payable”. Since this would be missing in
invoice when service tax not recovered separately by Service
Provider, no CENVAT credit can be taken by service recipient.
Question 29: If the service provider recovers the tax paid under Amnesty
scheme from the service receiver, can service recipient avail
CENVAT credit of such service tax paid by provider under
Amnesty scheme?
Answer: Yes, if same recovered on the basis of Supplementary invoice
issued in terms of provisions of Service Tax Rules, 1994 [Rule
9(1)(bb) of CCR, 2004], service recipient can avail CENVAT
credit of tax paid by him to service provider.
Question 30: Will Designated Authority do scrutiny before issuing VCES -
3?
Answer: There is no requirement for Designated Authority to make
detailed scrutiny before issuing VCES-3. Only furnishing the
details and challans of full payment of declared tax dues and the
interest, if any, along with a copy of acknowledgement thereof
issued to him in the form VCES-2, to designated authority will
suffice the purpose.
Chap. 7 Frequently Asked Questions 37
Question 31: Can the assessee deposit the 50% in say monthly
installments?
Answer: Yes, as per section 107(3), only requirement is that the declarant
has to deposit at-least 50 % of the tax dues declared by him till
31st December, 2013. Hence, the assessee can deposit the same
in monthly installments also.
Question 32: There is a provision in the scheme which reads as follows-
“101. (1) Where the Commissioner of Central Excise has
reasons to believe that the declaration made by a declarant
under this Scheme was substantially false, he may, for reasons
to be recorded in writing, serve notice on the declarant in
respect of such declaration requiring him to show cause why
he should not pay the tax dues not paid or short-paid.” What is
the meaning of “substantially”?
Answer: The meaning of the expression “substantially false” has not been
given under the scheme and is to be understood as per normal
industry norms. The same is undoubtedly prone to litigation as it
wholly depends upon the perception of the Commissioner as to
when a declaration may be considered as “substantially false” for
the purpose of issuing a SCN and leading to invoking the
provisions of Section 73 and 73A.
Question 33: In the year 2010-2011, suppose an assessee has been
disallowed CENVAT Credit in respect of Input Services with
regard to Trading Activity by way of Assessment order. Now
he is willing to discharge his liability in respect of the said
disallowed CENVAT Credit under the Amnesty Scheme for
the subsequent financial years. Is he eligible for Amnesty
Scheme although similar issue is adjudicated for the previous
financial years?
Answer: No, as per the second proviso to Section 106(1), when an order
of determination has been issued to a person in respect of any
period on any issue, no declaration can be made on the same
issue for any subsequent period.
Question 34: Can Amnesty scheme be used for short payment of service
tax resulting due to excess wrong utilization of CENVAT
Credit?
Answer: Yes, this would amount to short payment of service tax as
disclosed in Return, for which Amnesty Scheme can be utilized.
Question 35: If someone has not filed return since 2010-2011 till date, but
paid taxes along with interest before March 2013 (by
showing interest in the challan), can he still claim waiver of
38 Frequently Asked Questions Chap. 7
interest and ask the department to adjust this interest
against taxes.
Answer: No, Amnesty scheme is only for payment of ‘Tax dues’ pending
as on 1.3.2013. It does not allow for refund or adjustment of
amount (i.e. interest and penalty) already paid against tax
liability of future period.
Question 36: Exactly, what does the amount due to be shown, i.e., amount
of tax not shown in the returns or amount not paid upto
March 2013.
Answer: While filing the declaration under sub section (1) of section 107
of the Act, in Form VCES-1, the declarant has to disclose the
details of the tax dues which means amount due to be paid as on
1.3.2013 for the period 1st October, 2007 to 31st December,
2012.
Question 37: Can this declaration be filed through ACES Website?
Answer: No, the same has to be filed manually to designated authority in
your jurisdiction on or before 31st December 2013 which DA
will acknowledge within 7 days for receipt.
Question 38: If client of assessee does not approve of raising
supplementary invoice under Rule 4A. Does the service tax
have to be charged on reverse calculation? e.g. Rs. 100/-
original invoice service tax to be charged = 100/110*10.
Answer: Yes, invoice can be raised inclusive of service tax.
Question 39: Somebody is saying that penalty cannot be avoided for nil tax
returns. In case, somebody is declaring turnover other than
earlier declared, Can he has to file the return and pay the
penalty?
Answer: Yes, in case the returns have not reflected the true value and
now, you are paying service tax on non-declared value then,
service tax return for that period is not required to file. By, going
into VCES Scheme, only declaration is required.
Question 40: Can the department refuse me the scheme benefit saying that
you have made some payment of the dues as on Dec 12 in
Feb’13 whereas that payment was done for Jan 13?
Answer: The department cannot refuse for the benefit of the scheme if
you can provide department with necessary documents stating
that the payment made in Feb’13 pertains to Jan’13 not Dec’13.
Question 41: If someone has deposited service tax amounting to Rs. 5
Lakhs, and filed NIL return, now the time period for revision
Chap. 7 Frequently Asked Questions 39
has lapsed, my query is whether he can avail benefit of this
scheme?
Answer: No, the assessee cannot avail the benefit of this scheme as he has
already deposited service tax and filed the return.
Question 42: Can we go for the scheme for the financial year 2011-12 if we
already paid the service tax for the financial year 2012-13
but not paid the service tax for the financial year 2011-12?
Answer: Yes, the assessee is allowed to go for this scheme as he has not
yet paid the service tax for the year 2011-12.
Question 43: If assesses have ST liability of Rs. 1 Crore and having 60
Lakhs as CENVAT Credit. Now he is required to pay 1
Crore or 40 Lakhs in this scheme?
Answer: The assessee cannot pay from CENVAT under this scheme,
hence, he has to pay Rs. 1 Crore and 40 Lakhs credit can be
carry forward as per CENVAT Credit Rules 2004.
Question 44: Proprietorship firm of my client has undergone SIV
investigation for F.Y 2008-09 to 2011-12, so can we follow the
scheme for F.Y. 2012-13.
Answer: No, the assessee is not eligible to follow the scheme now as it is
mentioned in the scheme that “any person on whom
inquiry/investigation/audit has been initiated by way of search of
premises, issue of summons or requiring production of accounts,
documents or other evidence and such inquiry, investigation or
audit is pending as on the 1st day of March, 2013” is not eligible
to avail the benefits of the scheme or enroll for this scheme.
Question 45: Can assessee on whom search was implemented on
01.04.2013 take benefit of the scheme?
Answer: Yes, he can avail the benefit under this scheme.
Question 46: I have applied for registration in December, 2012 under
reverse charge scheme. Can I can get benefit for this
scheme?
Answer: Yes, If the assessee have any short paid or full tax due, he is
eligible to opt for this scheme.
Question 47: One of the clients (a banking institution) had deposited tax
regularly in one of the branch code but now it has taken his
own branch registration so can this scheme be available for
rectifying this error by filing returns.
Answer: No, this scheme is not for rectifying the errors.
40 Frequently Asked Questions Chap. 7
Question 48: Where to file VCES-1, because I have get Service Tax
Registration at Chennai and now residing in Udaipur, then
where to file this form?
Answer: The VCES-1 Form shall be submitted to the place where the
assessee is registered, i.e. Chennai.
Question 49: How this scheme applicable for assessee business is covered
under GTA and whether assessee has to register under
ACES if not registered? And what if assessee is died whether
the scheme is applicable for his legal heir?
Answer: The amnesty scheme is applicable for all the assesses who have
tax dues. The nature of service provided is not a bar. Since the
assessee is liable to pay tax for GTA services, he can avail the
scheme. Further, if the assessee is not registered, he shall be
required to get registered under VCES scheme. The main issue is
that the service tax liability has to be discharged. If an assessee
dies, any person who shall be responsible to discharge his dues
can avail the scheme because eventually the service tax liability
is in respect of the service provided and not the person who pays.
Question 50: If notice from service tax audit team received in April 13 for
the period covered under VCES scheme, in such case
whether shall we eligible to go for VCES or not?
Answer: As per the VCES scheme, any person can avail of the scheme
provided no audit or any other proceedings are pending as on 1st
day of March, 2013. If an assessee receives an audit letter for the
period covered in the scheme in the month of April, it shall be
considered that on 1st March, no proceedings were pending as
no prior information was available as on that date. Therefore, the
assessee will be eligible to avail the scheme.
Question 51: Whether I have to file regular pending returns for which
details as submitted with VCES-1 or it would be deemed as
filed upto December, 2012
Answer: The period as covered under the VCES scheme is October 2007
to December 2012. Any tax which is due to be paid within the
said period would be covered under this scheme. Hence, an
assessee availing the benefit of this scheme is not required to file
any regular returns for the period October 2007 to December
2012. However, regular returns will have to be filed for the
subsequent periods.
Question 52: Since Return is not filed, after filing of VCES-1, do the
assessee need to file the return?
Chap. 7 Frequently Asked Questions 41
Answer: The VCES scheme is a one time amnesty scheme for non filers
and stop filers and is applicable only for a specified period and
no return has to be filed for this period. However, after
December 2012, an assessee will be liable to file regular returns,
contravening which; normal provisions of the Act shall be
applicable as per Section 107 (5).
Question 53: What is the status of Tax Liability for the period from
1/1/2013 till the date of application in form VCES-1? Can
department issue show cause for this period. Should the
assessee discharge the Tax of this period first and then for
the earlier period?
Answer: The provisions of VCES scheme are not applicable for the period
subsequent to December 2012. As has been mentioned in Section
107(5), any service tax which becomes due or payable by the
declarant for the month of January, 2013 and subsequent months
shall be paid by him in accordance with the provisions of the
Chapter and accordingly, interest for delay in payment thereof,
shall also be payable under the Chapter. Hence, the department
can issue show cause notice for the period. There is no
compulsion that the return has to be filed prior to availing the
scheme as the Show Cause Notice if issued will be after 1st
March 2013 and thus will not affect the assessee in availing the
scheme.
Question 54: What will be applicability of this scheme in case of assessee
not filed nil ST returns last 3 years.
Answer: This scheme is applicable for non filers and stop filers who have
‘tax dues’ and is not applicable in case of nil returns. However,
the benefit of Circular No. 97/2007 can be availed as per which
the penalty shall be waived.
Question 55: For making VCES-1 we need to get the registration first,
whereas at the time of registration the superintendent will
ask for latest 3 to 6 months bank statements and will verify
that is there any unpaid service tax liability and not given
registration then what we need to do for applying VCES.
Answer: Registration is a mandatory condition to be fulfilled to avail the
VCES scheme. While applying for the registration under this
scheme, the assessee is required to file an application indicating
the registration being obtained for this scheme. In such a case,
the registration will not be denied to the assessee.
Question 56: Whether Rejection of application is quasi judicial function.
Whether principles of natural justice will be followed?
Whether such rejection is appealable?
42 Frequently Asked Questions Chap. 7
Answer: Yes, the principles of natural justice will be followed in case of
rejection. However, rejection of declaration is not appealable.
Question 57: One of our clients has deposited service tax amounting Rs. 5
Lacs, and subsequently filed NIL return now the time period
for revision has lapsed. My query is whether he can avail
benefit of this scheme?
Answer: In order to avail this scheme, it is necessary that an assessee has
not filed a return under section 70 of the Act and if filed, has
paid entire tax liability as disclosed in Return. That being so, if
there comes out to be some outstanding service tax liability as on
1.3.2013 for the period 1.10.2007 to 31.12.2012, one can go for
the scheme. But since the assessee has filed return and deposited
all his tax dues, he can’t avail the benefit of scheme.
Question 58: It is generally said that where a particular type of service is
under review by the dept. for a part of the 5 yr period then
for the same service this scheme will not apply for the
remaining part of the period. That means he can only avail
this scheme for any other service that he is providing - is my
understanding correct?
Answer: Yes, the scheme can be availed in respect of those services for
which no proceedings have been initiated.
Question 59: The proviso stating that where the declaring fails to pay by
the due date is only for Section 107(4) - but whether it can be
applied to Section 107(3) also - if yes, why.
Answer: The proviso to the section is applicable only for sub section 4. It
shall not be applicable to Section 107(3).
Question 60: If an assessee has taxes payable for the quarter of October to
December 2012, which fall due on 7th Jan 2013, Can he opt
for VCES?
Answer: The period being covered in October 2007 to December 2012,
the assessee will be eligible to avail the benefit of this scheme in-
spite of the fact that the due date for service tax from Oct to Dec
2012 is in January 2013.
Question 61: If I paid all the dues before 30th June 14, can the DA will
issue acknowledgement of discharge immediately?
Answer: The acknowledgement of discharge of service tax dues will be
given by the designated authority within a period of 7 days from
the date of furnishing of details of payment of tax dues in full
along with interest, if any, accompanied with VCES-2.
Question 62: Whether show cause notice can be issued even after the
acknowledgement of discharge issued by the DA.
Chap. 7 Frequently Asked Questions 43
Answer: Yes, In case the designated authority discovers that the assessee
has not disclosed the true liability, show cause notice can be
issued upon him under Section 111 within a year of date of
declaration filed.
Question 63: Whether CENAVT Credit can be taken for payment made
for input services?
Answer: Yes, CENVAT Credit can be taken for payment made for input
services but CENVAT Credit cannot utilized for payment of
service tax under this scheme.
Question 64: An Assessee has received summons issued on 19/10/12 for
renting of immovable properties & maintenance or repairs
services & letter dated 12/07/12 requesting to furnish the
information for service tax on construction of residential
complex for the period 01/07/10 to 31/03/11 & Balance Sheet
& P&L for F.Y. 10-11&11-12. Whether we can go for the
scheme?
Answer:- Rule 106 states that declaration filed by the person on whom
inquiry/investigation/audit has been initiated by way of search of
premises, issue of summons or requiring production of accounts,
documents or other evidence and such inquiry, investigation or
audit is pending as on the 1st day of March, 2013, shall be
rejected by DA by passing a speaking order. In this case, since
the proceedings are pending on 1st March 2013, declaration, if
any, filed shall be rejected by DA.
Question 65: How should an unregistered dealer proceed in this scheme?
What if after applying for registration at first, he is issued
notice just before filing VCES-1. How can he save himself?
Answer: If an assessee has been issued show cause notice on or after
1.3.2013, the same will not be a bar in availing the benefit of this
scheme. Only the persons on whom the proceedings are pending
on 1st March 2013, cannot avail this scheme.
Question 66: Any Service Tax liability incurred before 1st Oct 2007, can
we declare the liability under this scheme? Also, default is
there for Service Tax after 1st Oct, 2007, what is the cure for
default before 1st Oct 2007?
Answer: No, only the liability for the period 1.10.2007 to 31.12.2012 can
be declared under the scheme. For the period prior to 1.10.2007,
ST-3 filed, if any, within the normal time period, no proceedings
can be initiated against the assessee to demand the service tax
since 5 years have already been lapsed. However, for the period
1.10.2007 onwards upto 31.12.2012, assessee can opt to go for
VCES.
44 Frequently Asked Questions Chap. 7
Question 67: How to give tax calculation details with VCES-1.
Answer: For calculation of ‘Tax Dues’ as declared in VCES-1, a separate
sheet is to be furnished showing calculation of ‘tax dues’ Tax
Return period wise, and Service wise if the tax dues relates to
more than one service.
Question 68: Whether input credit is not available or service tax liability
would be netted after taking the service tax credit. pls clarify.
Answer: Sub rule (2) of Rule 6 of Service Tax Voluntary Compliance
Encouragement Rules, 2013 prohibits the utilization of
CENVAT credit for payment of tax dues under the Scheme.
Question 69: Should we need to file the working of the Service Tax
Payable along with VCES-1?
Answer: Yes, a separate sheet showing the calculation of ‘Tax Dues’ as
declared in VCES-1 needs to be enclosed.
Question 70: Are returns to be filed or only info in a format?
Answer: Filing of return is not a pre-requisite to make the declaration
under VCES. Only information in the format as prescribed in
Form VCES-1 need to submit. Also, there is no need to file
return consequent to filing of VCES-1 for the period covered in
Declaration.
Question 71: Scheme is applicable for the period October 2007 to
December 2012. If Assessee has defaulted for April 2012 to
June 2012 and for rest of the quarters there is no default,
then whether scheme can be availed for only April 2012 to
June 2012. Assume all other conditions of scheme are
fulfilled.
Answer: Yes, Assessee can opt for the scheme for any period ranging
from October 1st, 2007 and ending on December 31st, 2012 by
following the proper procedure.
Question 72: I want to pay tax under reverse charge on GTA services
availed by me during the year 2010-11 and 2011-12. Can I
claim CENVAT credit of such tax paid under this scheme?
Answer: Yes, Service Recipient is eligible to avail CENVAT Credit of the
tax paid under VCES scheme as no restriction has been imposed
for availing CENVAT credit for the tax paid under the VCES
scheme. Thus, CENVAT Credit can be availed.
Question 73: Assessee has made declaration but later realised that he is
not liable to pay. So he did not pay the taxes. What would be
its consequences?
Chap. 7 Frequently Asked Questions 45
Answer: The department can invoke the provisions of section 87 of
Finance Act, 1994 for recovery of tax dues declared but not paid
by virtue of Section 110 of Finance Act, 2013.
Question 74: Return filed timely by utilizing the CENVAT Credit which is
not available, realized later. Is it open to go for the scheme
now for payment of service tax short paid?
Answer: Yes, payment of service tax by utilizing the inadmissible amount
of CENVAT Credit would amount to short payment of service
tax.
Question 75: From where should a partnership firm apply for registration
and avail the scheme (Head Office or Branch Office) (Where
services are being rendered in branch office only)
Answer: As per the provisions of Rule 4 of Service Tax Rules, 1994,
registration needs to be taken for the premises from where
taxable services are rendered. Hence, it is branch office which
needs to be registered and declaration to be filed accordingly.
Question 76: Can I go for the scheme if only interest part is un- paid?
Answer: NO, to opt for VCES there must be some part of Service Tax due
or payable pending as on 1.3.2013 for the period 1.10.2007 to
31.12.2012.
Question 77: Service tax is partly paid for period covered by Amnesty
scheme and service tax is partly pending for a certain period
as on 01/03/2013. Can the assessee go for the scheme?
Answer: Yes, assessee can opt for the scheme for ‘Tax Dues’ pertaining
to any part of period ranging from October 1st, 2007 and ending
on December 31st, 2012.
Question 78: If the assessee has not filed his return for the period April 12
to March 2013 and no notice has been received till date can
he opt for the scheme till Dec 12
Answer: Yes, he can opt for the scheme for the period April, 12 to
December, 2012.
Question 79: What would the time to get registration either before filing
the declaration or after filing declaration. what would be
better option?
Answer: Any person, who wishes to make a declaration under the
Scheme, shall, if not already registered, take registration under
Rule 4 of the Service Tax Rules, 1994 before filing the
declaration. There is option available to declarant to apply for
registration either before filing the declaration or after filing
declaration
46 Frequently Asked Questions Chap. 7
Question 80: A person obtained Service Tax Registration number since 12
years. Although, his turnover is below the taxable limit,
however, the assessee collected tax from services done but
did not pay any amount so far. Can he go for the scheme now
to pay tax collected from clients?
Answer: Yes, the amount so collected would attract the provisions of
Section 73A of Finance Act, 1994. Hence, the assessee can opt
for the scheme to pay tax now collected from clients.
Question 81: Can an assessee to whom a letter requesting documents for
EA 2000 audit, was received on 26th Feb 2013, however audit
actually started on 10th March 2013, be eligible for the
scheme?
Answer: No, issue of letter demanding the documents for conducting the
audit by department means that audit proceedings have been
initiated as on 26.2.2013. Since the same is pending as 1.3.2013,
he is not eligible for the Amnesty Scheme.
Question 82: After paying 50% of the dues, does the assessee has to wait
until the remaining service tax is paid or can pay his regular
service tax dues?
Answer: The provisions of VCES are not to come in the way of payment
of service tax for the period 1.1.2013 onwards. Assessee has to
pay his regular service tax dues as and when become payable in
accordance with the provisions of Chapter and will attract the
provisions of Finance Act, 1994 for any contravention.
Question 83: Is service tax for quarter 3 said to be due after 01/01/2013?
Answer: NO, service tax becomes due as and when taxable service is
provided or deemed to be provided. In other words, service tax
for the services rendered in Q3 becomes due in Q3 itself. It is
only for the ease of assessee that last due date for payment as
been fixed as 5th/6th of the Quarter immediately following the
Quarter in which POT falls i.e. taxable service is rendered.
Quarter 84: Whether less than 50% of tax due can be paid
upto 31.12.2013 and balance will be paid with interest
upto 31.12.2014?
Answer: No, According to Section 106(3), the assessee has to pay not less
than fifty per cent of the tax dues so declared along with
submission of proof of such payment to the designated authority
on or before the 31st day of December, 2013. It implies that
minimum 50% of the tax dues declared have to be paid up to
31.12.2013 and balance can be paid up to 31.12.2014 along with
interest.
Chap. 7 Frequently Asked Questions 47
Question 85: What is the service tax rate for the period of 5 years?
Whether we can take it 10% as for financial year 2010-11?
Answer: The service tax rate under VCES shall be the rate that was
applicable in that particular financial year.
Question 86: ABC Pvt. Ltd would like to file declaration under VCES, but
they have received a notice dated 01/06/2013 from the audit
team of Service Tax to submit financial statements for the
period 2008 to 2012. Is M/s ABC Pvt Ltd still eligible for the
scheme?
Answer: Yes, since no audit proceedings have been pending as on
1.3.2013, ABC Pvt. Ltd. is eligible to apply for the scheme.
Question 87: If a person doesn’t pay 50% by December 2013, will it
invalidate his declaration?
Answer: Yes, because as per Section 107(3), the declarant shall, on or
before the 31st day of December, 2013, pay not less than fifty
per cent of the tax dues declared and submit proof of such
payment to the designated authority. So, if the person doesn’t
pay 50% by December, 2013, his declaration will be invalid.
Question 88: A had filed declaration but later realized that he need not
pay the tax and has not paid the taxes can department
initiate proceedings U/s 87?
Answer: Yes, The department can very well invoke the provisions of
section 87 of Finance Act, 1994 for recovery of tax dues
declared but not paid by virtue of Section 110 of Finance Act,
2013.
Question 89: Is demand letter equivalent to notice?
Answer: Yes, demand letter is equivalent to notice because it can be
issued only under the provisions of Section 72, Section 73 or
Section 73A of Finance Act, 1994.
Question 90: Can voluntary scheme be followed by a firm for F.Y 2012-13
who has suffered from Audit & SIV investigation for F.Y
2008-09 to 2011-12?
Answer: No, in case audit or investigation proceedings initiated and
pending as on 1.3.2013, no declaration should be filed and if
filed, shall be rejected by DA by passing a speaking order.
Question 91: What will be the rate applicable-the rate applicable at
different periods or the current rate?
Answer: The service tax rate under VCES shall be the rate that was
applicable at the respective time period and not the current rate.
48 Frequently Asked Questions Chap. 7
Question 92: XXX paid Service Tax along with interest for the period
April-June 2012. However, they filed Nil Return earlier.
Since 90 days have been expired, revised return cannot be
filed. XXX did not declare the liability to the department till
date. However the same has been paid. The assessee is opting
the scheme for prior periods. Can the interest paid for the
period Apr-Jun 2012, be claimed against the pending dues?
Answer: No, Amnesty scheme is only for payment of ‘Tax dues’ pending
as on 1.3.2013. It does not allow for refund or adjustment of
amount (i.e. interest and penalty) already paid against tax
liability of future period.
Question 93: We have received a notice for non- payment of tax & non
filling of return, but no section reference is given. Can we
avail the benefit of scheme?
Answer: Yes, as clarified in Circular No. 169/4/2013-ST, dated 13.5.2013
that in case of routine enquiry one can opt to go for the benefit of
scheme.
Question 94: In case notice has been issued or order passed u/s 73 for a
particular service (say Rent-a-Cab service) pertaining to the
period 2007-08 and 2008-09, how can declaration be filed for
“tax dues” pertaining to the period 1.10.2007 to 31.12.2012
pending as on 1.3.2013 not disclosed in ST-3?
Answer: As per the provisions of section 106(1), no declaration can be
filed by assessee for the “Tax dues” pertaining to the period
1.10.2007 to 31.3.2009, which have been adjudicated before
1.3.2013. Further, no declaration can be filed for Rent-a-Cab
service’ even for the period 1.4.2009 onwards because issue has
been adjudicated in respect of prior period.
Question 95: Whether the communications, wherein department has
sought information of roving nature from potential taxpayer
regarding their business activities without seeking any
documents from such person or calling for his presence,
while quoting the authority of section 14 of the Central
Excise Act, 1944, would attract the provision of section 106
(2) (a)?
Answer: Attention is invited to clarification issued at S.No. 4 of the
Circular No. 169/4/2013-ST, dated 13.5.2013, as regards the
scope of section 106 (2) (a) of the Finance Act, 2013, wherein it
has been clarified that the provision of section 106(2)(a)(iii) shall
be attracted only in such cases where accounts, documents or
other evidence are requisitioned by the authorized officer from
the declarant under the authority of a statutory provision. A
Chap. 7 Frequently Asked Questions 49
communication of the nature as mentioned in the previous
column would not attract the provision of section 106(2)(a) even
though the authority of section 14 of the Central Excise Act may
have been quoted therein.
Question 96: An assessee has two units at two different locations, say
Mumbai and Ahmedabad. Both are separately registered.
The Mumbai unit has received a Show Cause Notice for non-
payment of tax on a revenue stream but the Ahmedabad unit
has not. Whether the Ahmedabad unit is eligible for VCES?
Answer: Two separate service tax registrations are two distinct assessees
for the purposes of service tax levy. Therefore, eligibility for
availing of the Scheme is to be determined accordingly. The unit
that has not been issued a show cause notice shall be eligible to
make a declaration under the Scheme.
Question 97: Whether a declaration can be made under the Scheme in
respect of CENVAT credit wrongly utilized for payment of
service tax?
Answer: Any service tax that has been paid utilizing the irregular credit,
amounts to non-payment of service tax. Therefore such service
tax amount is covered under the definition of “tax dues”.
Question 98: Whether a party, against whom an inquiry, investigation or
audit has been initiated after 1.3.2013 (the cutoff date) can
make a declaration under the Scheme?
Answer: Yes. There is no bar from filing of declaration in such cases.
Question 99: There was a default and a Show Cause Notice was issued for
the period prior to the period covered by the Scheme, i.e.
before October, 2007. Whether declaration can be filed for
default on the same issue for the subsequent period?
Answer: In the context of the Scheme, the relevant period is from
October, 2007 to December, 2012. Therefore, the 2ndproviso to
section 106 (1) shall be attracted only in such cases where a
show cause notice or order of determination has been issued for
the period from October 2007 to December 2012.
Accordingly, issuance of a show cause notice or order of
determination for any period prior to October 2007, on an issue,
would not make a person ineligible to make a declaration under
the Scheme on the same issue for the period covered by the
Scheme. Therefore, declaration can be made under VCES.
Question 100: In a case where the assessee has been audited and an audit
para has been issued, whether the assessee can declare
liability on an issue which is not a part of the audit para,
under the VCES 2013?
50 Frequently Asked Questions Chap. 7
Answer: Yes, declarant can declare the “tax dues” concerning an issue
which is not a part of the audit para.
Question 101: Whether a person, who has paid service tax for a particular
period but failed to file return, can take the benefit of VCES
Scheme so as to avoid payment of penalty for non- filing of
return?
Answer: Under VCES a declaration can be made only in respect of “tax
dues”. A case where no tax is pending, but return has not been
filed, does not come under the ambit of the Scheme. However,
rule 7C of the Service Tax Rules provides for waiver of penalty
in deserving cases where return has not been filed and, in such
cases, the assessee may seek relief under rule 7C.
Question 102: A person has made part payment of his ‘tax dues’ on any
issue before the scheme was notified and makes the
declaration under VCES for the remaining part of the tax
dues. Will he be entitled to the benefit of non-payment of
interest/penalty on the tax dues paid by him outside the
VCES, i.e., (amount paid prior to VCES)?
Answer: No. The immunity from interest and penalty is only for “tax
dues” declared under VCES.
If any “tax dues” have been paid prior to the enactment of the
scheme, any liability of interest or penalty thereon shall be
adjudicated as per the provisions of Chapter V of the Finance
Act, 1994 and paid accordingly.
Question 103: Whether an assessee, who, during a part of the period
covered by the Scheme, is in dispute on an issue with the
department under an erstwhile provision of law, can declare
his liability under the amended provisions, while continuing
to litigate the outstanding liability under the erstwhile
provision on the issue?
Answer: In terms of the second proviso to section 106(1), where a notice
or order of determination has been issued to a person in respect
of any issue, no declaration shall be made by such person in
respect of “tax dues” on the same issue for subsequent period.
Therefore, if an issue is being litigated for a part of the period
covered by the Scheme, i.e., Oct, 2007 to Dec 2012, no
declaration can be filed under VCES in terms of the said proviso
on the same issue for the subsequent period.
Question 104: Whether upon filing a declaration a declarant realizes that
the declaration filed by him was incorrect by mistake? Can
he file an amended declaration?
Chap. 7 Frequently Asked Questions 51
Answer: The declarant is expected to declare his tax dues correctly. In
case the mistake is discovered suomoto by the declarant himself,
he may approach the designated authority, who, after taking into
account the overall facts of the case may allow amendments to
be made in the declaration, provided that the amended
declaration is furnished by declarant before the cut off date for
filing of declaration, i.e., 31.12.2013.
Question 105: What is the consequence if the designated authority does not
issue an acknowledgement within seven working days of
filing of declaration? Whether the declarant can start
making payment of the tax dues even if acknowledgement is
not issued?
Answer: Department would ensure that the acknowledgement is issued in
seven working days from the date of filing of the declaration. It
may however be noted that payment of tax dues under the
Scheme is not linked to the issuance of an acknowledgement.
The declarant can pay tax dues even before the
acknowledgement is issued by the department.
Question 106: Whether declarant will be given an opportunity to be heard
and explain his cases before the rejection of a declaration
under section 106(2) by the designated authority?
Answer: Yes. In terms of section 106 (2) of the Finance Act, 2013, the
designated authority shall, by an order, and for reasons to be
recorded in writing, reject a declaration if any inquiry/
investigation or audit was pending against the declarant as on the
cutoff date, i.e., 1.3.2013. An order under this section shall be
passed following the principles of natural justice.
To allay any apprehension of undue delays and uncertainty, it is
clarified that the designated authority, if he has reasons to
believe that the declaration is covered by section 106 (2), shall
give a notice of intention to reject the declaration within 30 days
of the date of filing of the declaration stating the reasons for the
intention to reject the declaration. For declarations already filed,
the said period of 30 days would apply from the date of this
circular.
The declarant shall be given an opportunity to be heard before
any order is passed by the designated authority
Question 107: What is the appeal mechanism against the order of the
designated authority whereby he rejects the declaration
under section 106 (2) of the Finance Act, 2013?
Answer: The Scheme does not have a statutory provision for filing of
appeal against the order for rejection of declaration under section
106 (2) by the designated authority.
52 Frequently Asked Questions Chap. 7
Question 108: A declarant pays a certain amount under the Scheme and
subsequently his declaration is rejected. Would the amount
so paid by him be adjusted against his liability that may be
determined by the department?.
Answer: The amount so paid can be adjusted against the liability that is
determined by the department.
Question 109: Section 111 prescribes that where the Commissioner of
Central Excise has reasons to believe that the declaration
made by the declarant was ‘substantiallyfalse’, he may serve
a notice on the declarant in respect of such declaration.
However, what constitutes a ‘substantially false’ declaration
has not been specified.
Answer: The Commissioner would, in the overall facts of the case, taking
into account the reasons he has to believe, take a judicious view
as to whether a declaration is ‘substantially false’. It is not
feasible to define the term substantially false” in precise terms.
The proceeding under section 111 would be initiated in
accordance with the principles of natural justice.
To illustrate, a declarant has declared his “tax dues” as Rs 25
lakh. However, Commissioner has specific information that
declaration has been made only for part liability, and the actual
“tax dues” are Rs 50 lakh. This declaration would fall in the
category of “substantially false”.
This example is only illustrative.
Question 110: What is the consequence if a declarant fails to pay atleast
50% of declared amount of tax dues by the 31st Dec 2013?
Answer: One of the conditions of the Scheme [section 107 (3)] is that the
declarant shall pay atleast an amount equal to 50% of the
declared tax dues under the Scheme, on or before the
31.12.2013. Therefore, if the declarant fails to pay atleast 50% of
the declared tax dues by 31st Dec, 2013, he would not be eligible
to avail of the benefit of the scheme.
Question 111: Whether the CENVAT credit is admissible on the
inputs/input services used for provision of output service in
respect of which declaration has been made under VCES for
payment of any tax liability outside the VCES?
Answer: The VCES Rules 2013 prescribe that CENVAT credit cannot be
utilized for payment of “tax dues” under the Scheme.
Accordingly the “tax dues” under the Scheme shall be paid in
cash. The admissibility of CENVAT credit on any inputs and
input services used for provision of output service in respect of
Chap. 7 Frequently Asked Questions 53
which declaration has been made shall continue to be governed
by the provisions of the Cenvat Credit Rules, 2004.
Question 112: (a) Whether the tax dues amount paid under VCES would be
eligible as CENVAT credit to the recipient of service under a
supplementary invoice?
(b) Whether cenvat credit would be admissible to the person
who pays tax dues under VCES as service recipient under
reverse charge mechanism?
Answer: Rule 6(2) of the Service Tax Voluntary Compliance
Encouragement Rules, 2013, prescribes that CENVAT credit
cannot be utilized for payment of “tax dues” under the Scheme.
Except this condition, all issues relating to admissibility of
CENVAT credit are to be determined in terms of the provisions
of the Cenvat Credit Rules.
As regards admissibility of CENVAT credit in situations covered
under part (a) and (b), attention is invited to rule 9(1)(bb) and
9(1)(e) respectively of the Cenvat Credit Rules.
Question 113: In terms of section 106 (2)(b), if a declaration made by a
person against whom an audit has been initiated and where
such audit is pending, then the designated authority shall by
an order and for reasons to be recorded in writing, reject
such declaration. As the audit process may involve several
stages, it may be indicated as to what event would constitute,-
(i) initiation of audit; and
(ii) culmination of audit.
Answer: Initiation of audit: For the purposes of VCES, the date of the
visit of auditors to the unit of the taxpayer would be taken as the
date of initiation of audit. A register is maintained of all visits for
audit purposes.
Culmination of audit: The audit process may culminate in any of
the following manner.—
(i) Closure of audit file if no discrepancy is found in audit;
(ii) Closure of audit para by the Monitoring Committee
Meeting (MCM);
(iii) Approval of audit para by MCM and payment of amount
involved therein by the party in terms of the provisions of
the Finance Act, 1994;
(iv) Approval of audit para by MCM, and issuance of SCN, if
party does not agree to the paraso raised.
54 Frequently Asked Questions Chap. 7
The audit culminates at a point when the auditparas raised are
settled in any manner as stated above.
The pendency of audit as on 1.3.2013 means an audit that has
been initiated before 1.3.2013 but has not culminated as on
1.3.2013.
CHAPTER 8
DEPARTMENTAL CIRCULAR ON THE AMNESTY
SCHEME CIRCULAR No. 170/5 /2013-ST
The Service Tax Voluntary Compliance Encouragement Scheme —
Clarifications Regarding
Circular No. 170/5 /2013-ST [F. No. B1/19/2013-TRU (Pt)], dated 8-8-2013
The Service Tax Voluntary Compliance Encouragement Scheme (VCES) has
come into effect from 10.5.2013. Some of the issues raised with reference to the
Scheme have been clarified by the Board vide circular No. 169/4/2013-ST, dated
13.5.2013. Subsequently, references have been received by the Board seeking
further clarifications as regards the scope and applicability of the Scheme.
2. The issues have been examined and clarifications thereto are as follows:
S No. Issues Clarification
1 Whether the communications,
wherein department has sought
information of roving nature from
potential taxpayer regarding their
business activities without
seeking any documents from such
person or calling for his presence,
while quoting the authority of
section 14 of the Central Excise
Act, 1944, would attract the
provision of section 106(2)(a)?
Attention is invited to clarification issued
at S. No. 4 of the circular No.
169/4/2013–ST, dated 13.5.2013, as
regards the scope of section 106(2)(a) of
the Finance Act, 2013, wherein it has
been clarified that the provision of
section 106 (2)(a)(iii) shall be attracted
only in such cases where accounts,
documents or other evidence are
requisitioned by the authorized officer
from the declarant under the authority of
a statutory provision.
A communication of the nature as
mentioned in the previous column would
not attract the provision of section 106
(2)(a) even though the authority of
section 14 of the Central Excise Act may
have been quoted therein.
2 An assessee has two units at two
different locations, say Mumbai
and Ahmedabad. Both are
separately registered. The
Mumbai unit has received a Show
Cause Notice for non-payment of
tax on a revenue stream but the
Ahmedabad unit has not. Whether
the Ahmedabad unit is eligible for
VCES?
Two separate service tax registrations are
two distinct assessees for the purposes of
service tax levy. Therefore, eligibility for
availing of the Scheme is to be
determined accordingly. The unit that has
not been issued a show cause notice shall
be eligible to make a declaration under
the Scheme.
56 Departmental Circular on the Amnesty Scheme Chap. 8
S No. Issues Clarification
3 Whether a declaration can be
made under the Scheme in respect
of CENVAT credit wrongly
utilized for payment of service
tax?
Any service tax that has been paid
utilizing the irregular credit, amounts to
non-payment of service tax. Therefore
such service tax amount is covered under
the definition of “tax dues”.
4 Whether a party, against whom an
inquiry, investigation or audit has
been initiated after 1.3.2013 (the
cutoff date) can make a
declaration under the Scheme?
Yes. There is no bar from filing of
declaration in such cases.
5 There was a default and a Show
Cause Notice was issued for the
period prior to the period covered
by the Scheme, i.e. before Oct
2007. Whether declaration can be
filed for default on the same issue
for the subsequent period?
In the context of the Scheme, the relevant
period is from Oct 2007 to Dec 2012.
Therefore, the 2nd
proviso to section 106
(1) shall be attracted only in such cases
where a show cause notice or order of
determination has been issued for the
period from Oct 2007 to Dec 2012.
Accordingly, issuance of a show cause
notice or order of determination for any
period prior to Oct 2007, on an issue,
would not make a person ineligible to
make a declaration under the Scheme on
the same issue for the period covered by
the Scheme. Therefore, declaration can
be made under VCES.
6 In a case where the assessee has
been audited and an audit para has
been issued, whether the assessee
can declare liability on an issue
which is not a part of the audit
para, under the VCES 2013?
Yes, declarant can declare the “tax dues”
concerning an issue which is not a part of
the audit para.
7 Whether a person, who has paid
service tax for a particular period
but failed to file return, can take
the benefit of VCES Scheme so as
to avoid payment of penalty for
non- filing of return?
Under VCES a declaration can be made
only in respect of “tax dues”. A case
where no tax is pending, but return has
not been filed, does not come under the
ambit of the Scheme. However, rule 7C
of the Service Tax Rules provides for
waiver of penalty in deserving cases
where return has not been filed and, in
such cases, the assessee may seek relief
under rule 7C.
8 A person has made part payment
of his ‘tax dues’ on any issue
before the scheme was notified
and makes the declaration under
VCES for the remaining part of
the tax dues. Will he be entitled to
No. The immunity from interest and
penalty is only for “tax dues” declared
under VCES.
If any “tax dues” have been paid prior to
the enactment of the scheme, any liability
of interest or penalty thereon shall be
Chap. 8 Departmental Circular on the Amnesty Scheme 57
S No. Issues Clarification
the benefit of non-payment of
interest/penalty on the tax dues
paid by him outside the VCES,
i.e., (amount paid prior to VCES)?
adjudicated as per the provisions of
Chapter V of the Finance Act, 1994 and
paid accordingly.
9 Whether an assessee, who, during
a part of the period covered by the
Scheme, is in dispute on an issue
with the department under an
erstwhile provision of law, can
declare his liability under the
amended provisions, while
continuing to litigate the
outstanding liability under the
erstwhile provision on the issue?
In terms of the second proviso to section
106 (1), where a notice or order of
determination has been issued to a person
in respect of any issue, no declaration
shall be made by such person in respect
of “tax dues” on the same issue for
subsequent period. Therefore, if an issue
is being litigated for a part of the period
covered by the Scheme, i.e., Oct, 2007 to
Dec 2012, no declaration can be filed
under VCES in terms of the said proviso
on the same issue for the subsequent
period.
10 Whether upon filing a declaration
a declarant realizes that the
declaration filed by him was
incorrect by mistake? Can he file
an amended declaration?
The declarant is expected to declare his
tax dues correctly. In case the mistake is
discovered suo-moto by the declarant
himself, he may approach the designated
authority, who, after taking into account
the overall facts of the case may allow
amendments to be made in the
declaration, provided that the amended
declaration is furnished by declarant
before the cut off date for filing of
declaration, i.e., 31.12.2013.
11 What is the consequence if the
designated authority does not
issue an acknowledgement within
seven working days of filing of
declaration? Whether the
declarant can start making
payment of the tax dues even if
acknowledgement is not issued?
Department would ensure that the
acknowledgement is issued in seven
working days from the date of filing of
the declaration. It may however be noted
that payment of tax dues under the
Scheme is not linked to the issuance of
an acknowledgement. The declarant can
pay tax dues even before the acknowled-
gement is issued by the department.
12 Whether declarant will be given
an opportunity to be heard and
explain his cases before the
rejection of a declaration under
section 106(2) by the designated
authority?
Yes. In terms of section 106 (2) of the
Finance Act, 2013, the designated
authority shall, by an order, and for
reasons to be recorded in writing, reject a
declaration if any inquiry/investigation or
audit was pending against the declarant
as on the cutoff date, i.e., 1.3.2013. An
order under this section shall be passed
following the principles of natural
justice.
58 Departmental Circular on the Amnesty Scheme Chap. 8
S No. Issues Clarification
To allay any apprehension of undue
delays and uncertainty, it is clarified that
the designated authority, if he has
reasons to believe that the declaration is
covered by section 106(2), shall give a
notice of intention to reject the
declaration within 30 days of the date of
filing of the declaration stating the
reasons for the intention to reject the
declaration. For declarations already
filed, the said period of 30 days would
apply from the date of this circular.
The declarant shall be given an
opportunity to be heard before any order
is passed by the designated authority.
13 What is the appeal mechanism
against the order of the designated
authority whereby he rejects the
declaration under section 106(2)
of the Finance Act, 2013?
The Scheme does not have a statutory
provision for filing of appeal against the
order for rejection of declaration under
section 106(2) by the designated
authority.
14 A declarant pays a certain amount
under the Scheme and
subsequently his declaration is
rejected. Would the amount so
paid by him be adjusted against
his liability that may be
determined by the department?
The amount so paid can be adjusted
against the liability that is determined by
the department.
15 Section 111 prescribes that where
the Commissioner of Central
Excise has reasons to believe that
the declaration made by the
declarant was ‘substantially false’,
he may serve a notice on the
declarant in respect of such
declaration. However, what
constitutes a ‘substantially false’
declaration has not been specified.
The Commissioner would, in the overall
facts of the case, taking into account the
reasons he has to believe, take a judicious
view as to whether a declaration is
‘substantially false’. It is not feasible to
define the term “substantially false” in
precise terms. The proceeding under
section 111 would be initiated in
accordance with the principles of natural
justice.
To illustrate, a declarant has declared his
“tax dues” as Rs 25 lakh. However,
Commissioner has specific information
that declaration has been made only for
part liability, and the actual “tax dues”
are Rs 50 lakh. This declaration would
fall in the category of “substantially
false”.
This example is only illustrative.
16 What is the consequence if a
declarant fails to pay atleast 50%
One of the conditions of the Scheme
[section 107(3)] is that the declarant shall
Chap. 8 Departmental Circular on the Amnesty Scheme 59
S No. Issues Clarification
of declared amount of tax dues by
the 31st Dec 2013?
pay atleast an amount equal to 50% of
the declared tax dues under the Scheme,
on or before the 31.12.2013. Therefore, if
the declarant fails to pay atleast 50% of
the declared tax dues by 31st Dec, 2013,
he would not be eligible to avail of the
benefit of the scheme.
17 Whether the CENVAT credit is
admissible on the inputs/input
services used for provision of
output service in respect of which
declaration has been made under
VCES for payment of any tax
liability outside the VCES?
The VCES Rules 2013 prescribe that
CENVAT credit cannot be utilized for
payment of “tax dues” under the Scheme.
Accordingly the “tax dues” under the
Scheme shall be paid in cash.
The admissibility of CENVAT credit on
any inputs and input services used for
provision of output service in respect of
which declaration has been made shall
continue to be governed by the
provisions of the Cenvat Credit Rules,
2004.
18 (a) Whether the tax dues amount
paid under VCES would be
eligible as CENVAT credit to the
recipient of service under a
supplementary invoice?
(b) Whether cenvat credit would
be admissible to the person who
pays tax dues under VCES as
service recipient under reverse
charge mechanism?
Rule 6(2) of the Service Tax Voluntary
Compliance Encouragement Rules, 2013,
prescribes that CENVAT credit cannot
be utilized for payment of “tax dues”
under the Scheme. Except this condition,
all issues relating to admissibility of
CENVAT credit are to be determined in
terms of the provisions of the Cenvat
Credit Rules.
As regards admissibility of CENVAT
credit in situations covered under part (a)
and (b), attention is invited to rule
9(1)(bb) and 9(1)(e) respectively of the
Cenvat Credit Rules.
19 In terms of section 106 (2)(b), if a
declaration made by a person
against whom an audit has been
initiated and where such audit is
pending, then the designated
authority shall by an order and for
reasons to be recorded in writing,
reject such declaration. As the
audit process may involve several
stages, it may be indicated as to
what event would constitute,—
(i) initiation of audit; and
(ii) culmination of audit.
Initiation of audit: For the purposes of
VCES, the date of the visit of auditors to
the unit of the taxpayer would be taken as
the date of initiation of audit. A register
is maintained of all visits for audit
purposes.
Culmination of audit: The audit process
may culminate in any of the following
manner.—
(i) Closure of audit file if no
discrepancy is found in audit;
(ii) Closure of audit para by the Moni-
toring Committee Meeting (MCM);
60 Departmental Circular on the Amnesty Scheme Chap. 8
S No. Issues Clarification
(iii) Approval of audit para by MCM
and payment of amount involved
therein by the party in terms of the
provisions of the Finance Act,
1994;
(iv) Approval of audit para by MCM,
and issuance of SCN, if party does
not agree to the para so raised.
The audit culminates at a point when the
audit paras raised are settled in any
manner as stated above.
The pendency of audit as on 1.3.2013
means an audit that has been initiated
before 1.3.2013 but has not culminated as
on 1.3.2013.
3. Trade Notice/Public Notice may be issued to the field formations and tax
payers.