TIOL-DDT 2392
09.07.2014
Wednesday  

AS per the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES), a declarant was required to pay 50% of the tax dues as declared in the prescribed form within December 31, 2013, the balance amount by June 30, 2014. There was a provision to pay the amount latest by December 31, 2014, with interest.

What happens if after the declaration, the first 50% is not paid by December 31 2013?

The Department's view is that the moment 50% of the ‘tax dues' is not paid on/or before December 31, 2013, the declaration itself becomes invalid and, therefore, the authorities are not bound to take action contemplated under Section 110 of the said Act. It is further submitted that once the conditions attached for availing the scheme framed by the appropriate authority are not fulfilled, the benefit under the said scheme cannot be extended to the petitioner. It is further contended that Section 109 of the said scheme postulates that any amount paid in pursuance of the declaration made under Sub-section (1) of Section 97 shall not be refunded under any circumstances meaning thereby that any payment made would not be treated to have been made under the said scheme .

The issue was before the High Court.

The High Court observed,

It is a settled proposition of law that the insertion of the proviso is made to regulate the enabling provision. The right conferred under the enabling provision is subject to the proviso and the conditions enshrined therein. On the meaningful reading of the proviso it appears that if the declarant fails to pay within 31st December, 2013 with interest thereof and the interpretation tried to be given by the petitioner is accepted, then the proviso would not have indicated that the interest would be calculated from 1st day of July, 2014. When there is clear indication in the proviso relating to the starting point of the limitation, there is no ambiguity to understand that such proviso is relatable to Sub-section (4) of Section 107 and not Sub-Section (3) thereof. The aforesaid proposition can be further fortified from Sub-section (7) of Section 107 of the said Act which is in unequivocal terms says that 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.

The legislature have clearly indicated that such proviso is appended to Sub-Section (4) and by no stretch of imagination it would be conceived that the same can also apply in the eventuality contemplated under Sub- Section (3) of Section 107 thereof.

My endeavour has failed to find out from the provision of the said scheme that once a default is committed for non-compliance of the provisions contained therein relating to the deposit, the declarant shall be thrown outside the ambit of the said scheme and shall be thrown in the pool of the chapter containing the service tax. Section 110 of the said Act clearly indicates that in the event of the default of the payment either fully or in part, the balance amount would be recovered by taking recourse to Section 87 of the Finance Act.

On meaningful reading of the provisions contained therein it appears that the immunity as to any benefit, concession or immunity granted under Section 96 shall not be available to the defaulting declarant. The aforesaid provisions have to be read conjointly with section 110 of the said Act. If default is committed under the scheme the consequences provided in the scheme is to be adhered to and the authority cannot travel beyond the boundaries set therein. The benefit under the scheme is provided to a person against whom no enquiry or investigation or other proceeding are initiated. Section 106 of the said Act makes the position clear and, therefore, the person who voluntarily declare his liability to pay service tax, if commits defaults in complying the provisions contained under the said scheme, the authorities are bound to take action under the provisions which provides for the steps to be taken for non-compliance of any of the provisions of the said scheme.

To sum up, this Court must conclude that the proviso is applicable only in respect of Sub-section (4) of Section 107 and cannot be stretched to Sub-section (3) of Section 107. The authorities can take recourse under Section 110 of the said Act, in the event any default is committed under the said scheme.

And the writ petition is disposed of.

INCIDENTALLY, the issue has already been decided by the High Courts of Gujarat & Delhi against the VCES applicant in the cases of Ramilaben Bharatbhai Patel [2014-TIOL-678-HC-AHM-ST] and Teknow Overseas P. Ltd. [2014-TIOL-471-HC-DEL-ST].

Please see 2014-TIOL-1094-HC-KOL-ST

Budget Comments

THERE was one continued and ceaseless struggle on the part of the Finance Department of the Government of India to maintain at all risks and hazards a ‘strong financial position' in the face of a rapidly changing situation, and provide by anticipation against all possible dangers near and remote, fancied and real: and not a year passed - literally speaking — but heralded some change in the financial arrangements of the country.

Such continuous piling up of tax on tax, and such ceaseless adding to the burdens of a suffering people, is probably without precedent in the annals of finance.

The desirability of raising the exemption limit of the income-tax has been frequently admitted on behalf of Government, and, amongst others by the Finance Minister.

In India public revenues are administered under no sense of responsibility to the governed. A severe economy, a rigorous retrenchment of expenditure in all branches of the Administration, consistently of course, with the maintenance of a proper standard of efficiency, ought always to be the most leading feature — the true governing principle — of Indian finance, the object being to keep the level of public taxation as low as possible, so as to leave the springs of national industry free play and room for unhampered movement.

It is the finance of a country, which is not only ‘poor, very poor', but the bulk of whose population is daily growing poorer under the play of the economic forces.

Indian finance seems now to be entering upon a new and important phase, and the time has come when Government should take advantage of the comparative freedom, which the country at present enjoys from the storm and stress of the past, to devote its main energies to a vigorous and statesmanlike effort for the promotion of the material and moral interests of the people.

I would earnestly press upon the attention of Government the necessity of making Education a National charge, so that the same attention which is at present bestowed by the Government on matters connected with the Army Services and Railway expansion might also be bestowed on the education of our people. Under present arrangements, Education is a Provincial charge and the Provincial Governments and Administrations have made over Primary Education to local bodies whose resources are fixed and limited. No serious expansion of educational efforts is under such arrangements possible.

In other countries, national education is held to be one of the most solemn duties of the State, and no effort or money is spared to secure for the rising generations the best equipment possible for the business of life. Here it has so far been a more or less neglected branch of State duty, relegated to a subordinate position in the general scheme of State action.

A larger portion of our revenues than at present should be devoted to objects on which the moral and material well-being of the mass of our people intimately depends. The expenditure on the Army, the Police and similar services may be necessary, but it is a necessary evil, and consistently with the maintenance of a proper standard of efficiency, it must be kept down as far as possible. On the other hand, no State, especially in these days, can expend too much on an object like education. And here, I regret to say that the Government is not doing its duty to the people of India.

The treatment of sanitation, as though the Government had no responsibility in regard to it, has hitherto been one of the most melancholy features of the present scheme of financial decentralisation, under which sanitation has been made over to local bodies as their concern, though they have admittedly no resources for undertaking large projects of improvement.

What one regrets most, however, in the present system of administration is that it favours so largely a policy of mere drift. The actual work of administration is principally in the hands of members of the Civil Service, who, taken as a body, are able and conscientious men; but none of them individually can command that prestige, which is so essential for inaugurating any large scheme of policy involving a departure from the established order of things.

In India the taxpayer has no constitutional voice in the shaping of these things. If we had any votes to give, and the Government of the country had been carried on by an alternation of power between two parties, both alike anxious to conciliate us and bid for our support, the Hon'ble Member (FM) would assuredly have told a different tale.

There is no Indian problem, be it of population or education or labour or subsistence, which it is not in the power of statesmanship to solve.

The India of the future will, under Providence, not be an India of diminishing plenty, of empty prospect, or of justifiable discontent; but one of expanding industry awakened faculties, of increasing prosperity, and of more widely distributed comfort and wealth. I have faith in the conscience and purpose of my own country, and I believe in the almost illimitable capacities of this.

Do they look familiar? These comments are extracted from the speeches made by Gopal Krishna Gokhale in Budget debates in the years 1902 to 1907 - yes, more than a hundred years ago. Things seem to have remained pretty same.

In one of his speeches, Gokhale mentions an interesting information - In the Customs Department there are 41 appointments, with salaries ranging from Rs. 260 to Rs. 2,250; not a single one among them is held by an Indian! Imagine a Customs officer getting a salary of Rs. 2250 in 1902!

The present time in India is full of portents

THE introduction to the book of speeches of Gokhale published in 1908 starts with:

The present time in India is full of portents. One never opens the day's newspaper without anxiety. The air is thick with shadowy visions of the future, fantastic plans, harrowing doubts, black designs, born of blind hope or unreasoning despair. Political postulates, hitherto accepted without question, are freely challenged. The very foundations of our public life are being torn up and examined. A feeling of intense uneasiness broods over the land, and the more susceptible spirits cry in anguish that they have been the victims of foul treachery.

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