Shri B R Ajit (Managing Director) vs Commissioner Of Customs, Central ...

Application(s) Involved: Misc. Application No. 22141/2014 Service Tax Appeal No: ST/21945/14-SM [Arising out of Order-in-Appeal No. 299/2014-ST dated 11.04.2014 passed by CCE (Cochin) Kerala]

Shri B R Ajit (Managing Director)

Appellant(s)

Versus

Commissioner of Customs, Central Excise & Service Tax Commissionerate Cochin Respondent(s)

Appearance:

Shri V. Unnikrishnan, Consultant For the Appellant Shri A. K. Nigam, Addl. Commissioner (AR) For the Respondent

CORAM:

HON'BLE SHRI S.K. MOHANTY, JUDICIAL MEMBER

Date of Hearing: 22/08/2014 Date of Decision: 07/07/2015 Per S.K. MOHANTY:

The issue that arises for consideration in this appeal is the rejection of declaration filed by the appellant in form VCES-1 under Section 107(1) of the Finance Act, 2013.

1. Brief facts of the case are as under:

1.1 The appellant provides Architect Services and is registered with the Jurisdictional Service Tax Authorities. In respect of the period under dispute, the appellant opted for the Voluntary Compliance Encouragement Scheme, 2013 (VCES) and filed declaration in the prescribed VCES-1 form under Section 107(1), chapter V of the Finance Act 2013, in respect of Tax dues of Rs. 47,84,597/- for the period December 2009 to November 2012. The appellant had also deposited 50% of the admitted tax liability before 31.12.2013 as required under the Scheme.

1.2 After receipt of the said declaration, the Jurisdictional Assistant Commissioner of Service Tax issued the Show Cause Notice dated 31.12.2013, seeking rejection of the declaration, stating that the appellant is ineligible for the benefit under the said scheme, in terms of the Second Proviso to Section 106(1) of the Finance Act, 2013, for the reason that a Show Cause Notice No. 28/2013-ST dated 22.02.2013 had already been issued to the appellant, demanding service tax of Rs. 40,01,067/- for the period April 2009 to December 2011, and therefore, the appellant cannot avail the option of VCES.

1.3 The said notice dated 31.12.2013 was replied by the appellant stating that SCN dated 22.02.2013 was not received by the appellant before 01.03.2013, and as such, the disqualification as per the second Proviso to Section 106 of the Finance Act, 2013 cannot be made applicable. Subsequently, the Assistant Commissioner issued another Show Cause Notice, No. 19/2014-ST (VCES) dated 17.01.2014, proposing for rejection of the declaration on the ground envisaged in the main provisions of Section 106(1) of the Act.

1.4 Both the above referred Show cause Notices (dated 31.12.2013 and 17.01.2014) were adjudicated by the Assistant Commissioner vide Order-in-Original No.12/2014 - ST (VCES) dated 31.01.2014, holding that the declaration of tax dues, filed by the appellant attracted disqualifications envisaged in the main part, as well as those contained in the proviso to Section 106(1) of the Finance Act, 2013. The appeal filed against the adjudication order was disposed of by the Ld. Commissioner (Appeals), upholding the above order of the adjudicating authority. Hence, the present appeal before this Tribunal.

2. Shri V. Unnikrishnan, the Ld. Consultant for the appellant submitted that the show cause notice dated 22.02.2013 was not served to the appellant before 01.03.2013, and thus, the disqualification in terms of the main provision as well as the second proviso to Section 106(1) of the Finance Act, 2013 cannot be applied. The ld. Consultant further submitted that the show cause notice dated 22.02.2013 having been issued under Section 73 of the Finance Act, 1994, which mandates that the notice has to be served on the person for recovery of the service tax not levied or paid, non-service of such notice within the stipulated time frame, cannot take away the substantive right of the appellant to avail the benefits under the VCES. Thus, according to the ld. Consultant, since the SCN was not received by the appellant before 01.03.2013, the benefits provided in the VCES cannot be denied to the appellant on the ground that even if notice is issued it cannot be considered that notice is served upon the appellant.

3. Per contra, Shri A.K. Nigam, the ld. DR appearing for the respondent while reiterating the findings recorded in the impugned order, further submitted that since the show cause notice was sent through postal department, the date of sending the notice is to be interpreted as the date of giving of notice, and therefore, the SCN dated 22.02.2013 having been issued prior to 01.03.2013, that issuance of notice is sufficient compliance of service of notice. The appellant, therefore, is not entitled for the benefits of VCES, 2013 as per the embargo created in Section 106 (1) of the Finance Act, 2013. In this context, the ld. DR relied on the judgment of Hon'ble Calcutta High Court, delivered in the case of Union of India - Vs. - Kanti Tarafdar, reported in 1997 (91) ELT 51 (Cal.).

4. Heard the learned counsel for both sides and perused the records.

5. The Commissioner (Appeals) has recorded the following findings in the impugned order to hold that the appellant is not entitled for the benefits under the VCES:-

9ii. The second and the main point to be decided is as to whether the rejection of the VCES application was correct or not. The VCES application was rejected on the basis of the second proviso to section 106(1), 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. The appellant had contended that even though the show cause notice was issued to him on 22.02.2013, the same was not served on him before 1.03.2013 and therefore do not satisfy the condition in the second proviso to section 106(1), as the word, issued has to be construed as served in a contextual sense.

6. The Finance Minister had announced a Voluntary Compliance Encouragement Scheme, 2013 (VCES) in his budget speech and has incorporated the same in chapter VI under Section 104-114 of the Finance Act 2013. The detailed procedure of the VCES was notified vide Notification No. 10/2013-ST dated 13.05.2013. The VCES was notified to allow the defaulters of tax dues to declare the Tax Dues voluntarily and pay the same and avail the waiver of interest and penalties. Section 107 of the Finance Act, 2013 prescribes the procedures for making declaration and payment of tax dues. The person who can make declaration of tax dues under the VCES is contained in Section 106 of the said Act. The relevant portion of Section 106 is extracted herein below:

106 (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..

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.

7. The only question to be considered in this appeal is whether the date of the Show Cause Notice or the date on which it was served on the person, has to be taken into consideration for interpreting the provisions of Section 106 of the Act, which places an embargo to the effect, that no declaration shall be made for the tax dues where the notice has been issued to the person before 01.03.2013.

8. It is an admitted fact on record that the Show Cause Notice No. 28/2013  ST dated 22.02.2013 issued under Section 73 of the Finance Act, 1994 has not been received by the appellant before 01.03.2013. Section 73 of the Act mandates that in cases, where any service tax has not been levied or paid, the Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with service tax which has not been levied or paid.

9. The law contained in Section 73 of the Act, makes it abundantly clear that the Show Cause Notice has to be served on the person concerned and mere issuance of the same is not enough. In other words, if the Show Cause Notice was issued and posted by registered post before last date but received/served after the last date, then the demand notice under Section 73 of the Act is not sustainable, as it was not served within time.

10. The question whether issuance of notice would amount to receipt/service of notice, has already been settled by various decisions of the Tribunal as in the case of Corvine Chem. & Pharmaceutical Ltd.  Vrs.  Commissioner of Central Excise, Chennai [2004 (170) ELT 181 (Tri.-Del.)], Sewing Systems (P) Ltd.  Vrs.  Collector of Customs [1992 (62) ELT 725 (Tri.)] and Rashtriya Audyogic Sansthan  Vrs.  Collector of Central Excise, Kanpur [2001 (135) ELT 353 (Tri.-Del.)], wherein it has been held that the relevant date is the date of receipt of notice and not the date of issuance of notice. The decision of Tribunal in the case of Sewing Systems (supra) has been affirmed by the Honble Supreme Court by dismissing the Civil Appeal filed by the Revenue Department, reported in 1997 (89) ELT A 36 (S.C.).

11. The judgment of Honble Calcutta High Court in the case of Kanti Tarafdar (supra) relied upon by the ld. D.R. for the Revenue is contextually different from the present case. In the said decided case, the issue involved was with regard to interpretation of the provisions of Section 110(2) of the Customs Act, 1962. The Honble High Court upon consideration of the aim, object and scope of the statutory provision has held that if the notice is sent by registered post, the date of sending the notice should be the date of giving of notice as contemplated in Section 110(2) of the Act. While arriving at such conclusion, the Honble Calcutta High Court vide paragraphs 24 and 25 in the said judgment have held as follows :-

24. It is well-settled that in considering the true? meaning of words or expressions used by the legislature the Court must have regard to the aim, object and scope of the Statute to be read in its entirety. (Supreme Court in the case of State of West Bengal v. Union of India, reported in AIR 1963 S.C. 1241 at 1265).

25. The object in setting a time-limit in Section? 110(2) was to expedite proceedings so as not to harass a citizen whose goods may have been wrongfully seized. The object has been stated by M.P. Menon, J., in C.D. Gonda Rao v. Additional Secretary, reported in 1982 (10) E.L.T. 270, in relation to Section 79 of the Gold Control Act, which is similar to Section 110 of the Customs Act, as follows :

The purpose behind Section 79 is two-fold. The first is that confiscation shall be ordered without the concerned party being given a reasonable opportunity of having his say in the matter. The second is that the appropriate authority should make up his mind within six months whether to proceed with confiscation or not. He should make up his mind within six months whether such proceedings should be initiated, and if he fails to do so, the party concerned is entitled to have the Gold seized returned to him.

12. Contrary is the situation in the present case, in as much as, Section 106 of the Finance Act, 2013 prohibits filing of VCES declaration, where the notice under Section 73 of the Finance Act, 1994 has already been issued. The intention for incorporating such an embargo in Section 106 of the Finance Act, 2013 is to dissuade persons against whom proceedings have been initiated, from taking the shelter of VCES. A person who wants to avail the option/benefit of VCES should not be disqualified to make a declaration as laid in the said provisions of law. To be able to decide whether one is disqualified as per the law, the notice/order must be put to the knowledge of the person. Any notice, which is merely issued but not served cannot be said to be within the knowledge of the person against whom it is issued but not served. In essence, if law prohibits a person with a particular disqualification from filing a declaration, then such disqualification should be established to be within the knowledge of the concerned person. To impute such knowledge, mere issuance of notice is not sufficient. The notice has to be served as provided under section 73 of Finance Act, 1994. Therefore, the words issued to a person used in section 106, in my opinion, have to be construed as served to a person.

13. In view thereof, I am of the considered opinion that since the Show Cause Notice No. 28/2013  ST dated 22.02.2013 issued under Section 73 of the Finance Act, 1994 has not been served on the appellant before 01.03.2013, the impediment of Section 106 of the Finance Act, 2013 regarding non-filing/non-consideration of declaration under VCES will have no application; and since the appellant otherwise fulfills the criteria of Finance Act, 2013, the benefits envisaged therein for availing the waiver of interest and penalties will be available to him.

14. In view of the foregoing discussions, I do not find any merits in the impugned order in favour of dismissing the VCES-1 declaration filed by the appellant. The impugned order is therefore set aside and the appeal is allowed with consequential reliefs if any. The Misc. application for early hearing stands disposed off.

(Pronounced in open court on 07/07/2015.)

(S.K. MOHANTY) MEMBER JUDICIAL

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