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ST - CBEC has clarified that notice for rejection of VCES-1 declaration should be issued within 30 days-notice issued after 1½ years is clearly time barred: CESTAT

 

By TIOL News Service

MUMBAI, MAY 24, 2018: THE VCES-1 declaration was filed by the appellant on 18/12/2013.

The jurisdictional authorities were of the view that said VCES declaration should be rejected and recovery proceedings should be initiated. Inasmuch as the declaration was an incorrect one as there was an enquiry initiated against the appellant.

This was intimated to the appellant by a letter dated 18/08/2015, almost after 1½ years.

The Commissioner(A) upheld this order of rejection and, therefore, the appellant is before the CESTAT.

It is submitted that the CBEC Circular no. 170/05/2013-ST dated 08/08/2013 clarifies thus -

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.

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.

And, therefore, since there is a delay of 1½ years the proceedings are not legal and correct.

Reliance is placed on the following case laws -

++ Abhi Engineering Corporation - 2015-TIOL-2197-CESTAT-MUM

++ Siddhi Vinayak Enterprises Pvt. Ltd.- 2016-TIOL-1325-CESTAT-DEL

++ V.S.Enterprises - 2017-TIOL-299-CESTAT-MUM

++ Narasimha Mills Pvt. Ltd.- 2015-TIOL-1504-HC-MAD-ST

The Bench observed that in view of the Madras High Court decision in Narasimha Mills Pvt. Ltd. (supra),the appeal is maintainable.

Further, insofar as the present issue is concerned, the CESTAT held -

"6. …, I find merit in the submissions made by the Learned Chartered Accountant. It is the fact that the appellant had filed the VCES declaration on 18/12/2013 and the notice issued by the Assistant Commissioner of Service Tax-II is dated 18/08/2015 for rejection of VCES declaration. I am surprised that this notice was issued by the lower authority when the CBEC Circular dated 18/08/2013 was in the knowledge of the department wherein CBEC has clearly clarified that notice for rejection of VCES scheme should be issued within 30 days."

Concluding that the law on the subject matter is decided by the Tribunal in the cited cases of Abhi Engineering Corporation, Siddhi Vinayak Enterprises Pvt. Ltd. and V.S.Enterprises, following the same, the impugned order was set aside and the appeal was allowed.

(See 2018-TIOL-1607-CESTAT-MUM)


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