Tax amnesty is a limited-time opportunity for a
specified group of taxpayers to pay a defined
amount, in exchange for forgiveness of a tax
liability (including interest and penalties) relating to a
previous tax period or periods without fear
of criminal prosecution. It typically expires when
some authority begins a tax investigation of the pastdue
tax. In some cases, legislation extending amnesty
also imposes harsher penalties on those who are eligible
for amnesty but do not take it.
an amnesty scheme to the defaulters of service tax in
the name of ‘Service Tax Voluntary Compliance
Encouragement Scheme, 2013’ (VCES). The Scheme is
a one-time measure to encourage voluntary compliance
by persons who may not have filed the returns or not
paid the service tax dues for the period commencing
from 1st October, 2007 and ending on 31st December,
2012. As per the scheme if such defaulters shall declare
the tax dues and pay the same in accordance with the
provisions of the Scheme, they will enjoy immunities
from penalty, interest or any other proceeding under
the service tax law. In this article, we will discuss the
outlay of the said scheme, which will be effective from
the date of enactment of the Finance Act, 2013.
The scheme can be availed of by non-filers or stop filers
or persons who have not made truthful declarations in
their return. For seeking benefit of this scheme, the
defaulter has to make declaration of his tax dues for
which he wants to settle service tax payment. However,
in the following cases, a person cannot seek benefit of
this scheme –
1. In respect of the tax dues for which any notice has
been issued under section 72 or section 73 or
section 73A of the Finance Act, 1994 before the 1st
day of March, 2013.
2. In respect of the tax dues for which any order of
determination has been made under section 72 or
section 73 or section 73A of the Finance Act, 1994
before the 1st day of March, 2013.
(section 72 relates to Best Judgment Assessment, and
sections 73 and 73A relates to recovery under which
Show Cause Notices are issued)
3. If a person has filed truthful
return for any part of the
period covered under the
VCES, but has not paid the
amount of service tax
mentioned in the return or
any part thereof, he shall not
be eligible to seek benefit of
the scheme for the period
covered by the said return.
For example, ‘A’ files a truthful return for the period
from 01-10-2007 to 31-03-2008, but is not able to
pay the service tax mentioned therein due to
financial difficulty and later he does not file returns
for subsequent periods at all. In such case, he
cannot seek benefit under VCES for the period of
return; however, he can seek benefit of the scheme
for the period from 01-04-2008 to 31-12-2012.
This condition of the scheme requires reconsideration
by the Government, as it will deprive the
assessee who genuinely wanted to pay taxes.
4. Where a notice or an order of determination has
been issued to a person in respect of any period
on any issue, the benefit of the VCES shall not be
available for his tax dues on the same issue for any
subsequent period.
Further, as per section 96(2) of Chapter VI of the Finance
Bill, 2013, the following persons may not seek benefit
of the VCES –
A person against whom,–
(a) an inquiry or investigation in respect of a service
tax not levied or not paid or short-levied or shortpaid
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.
Thus, it is clearly provided that the above persons
cannot seek benefit under this scheme, and in case they
still apply for benefit by making declaration of their tax
dues, the designated authority shall reject their claim.
The point of consideration here is that as long as these
summons/letters etc. are issued as an inquiry or
investigation, it sounds alright not to extend benefit of
this scheme to such persons. However, in case of
‘initiation of audit’ which may be in regular course, the
assessee should get benefit of this scheme, and again it
may need clarification as to what would be considered
as ‘initiation’- would simply calling for information be
considered as initiation of audit.
Following is the procedure in brief for seeking benefit
under the VCES. This will be later supplemented by
the rules issued under the Scheme.
Filing of Declaration – A person has to make a
declaration of his tax dues which he wants to settle to
the designated authority on or before the 31st day of
December, 2013 in such form and in such manner as
may be prescribed.
Acknowledgement by the designated authority – The
designated authority shall acknowledge the declaration
in such form and in such manner as may be prescribed.
Payment of 50% dues on or before 31-12-2013 and
rest 50% dues on or before 30-06-2014 – The declarant
shall, on or before the 31st day of December, 2013, pay
not less than 50% of the tax dues so declared and
remaining on or before the 30th day of June, 2014, and
submit proof of such payment to the designated
authority along with a copy of acknowledgement issued
to him for declaration of tax dues.
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.
Discharge by the designated authority – On
furnishing the details of full payment of declared tax
dues and the interest, if any, 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.
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 alongwith interest thereon
shall be recovered under the provisions of section 87
of the Chapter.
No refund of amount paid under the scheme – Any
amount paid in pursuance of the VCES shall not be
refundable under any circumstances.
Payment for tax dues from 01-01-2013 onwards to
be made in regular course – 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.
In case a person seeks benefit of this scheme and follows
the procedure mentioned above, he shall get immunity
from penalty, interest or any other proceeding under
the Chapter. However, 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.
This notice shall be treated as a show cause notice under
section 73/73A. However, in case such notice is not
issued within one year of date of declaration, the
declaration of tax dues by the assessee shall become
conclusive upon issuance of acknowledgement of
discharge by the designated authority and no matter
shall be reopened thereafter in any proceedings under
the law before any authority or court relating to the
period covered by such declaration.
The proposed VCES is a very good gesture on the part
of the Government to enable the assessees to get over
with their backlog and start complying with the law
with a new beginning. However, the Government needs
to reconsider the coverage of the persons in the scheme
so that maximum benefit could be derived out of the
scheme, in terms of garnering revenue and reducing
litigation
CA. Rohini Aggarawal
(The author is a member of ICAI (Mem. No. 89990)
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