Tuesday, 28 May 2013

Requirements of a valid affidavit in support of delay condonation application set out

The assessee filed an appeal before the CIT(A) which was delayed by 4 months. The delay was explained to have been caused by the fact that the assistant of the Authorized Representative kept the papers in a drawer and overlooked them till a penalty notice was received. The CIT(A) declined to condone the delay and dismissed the appeal. The assessee filed an appeal before the Tribunal and also filed an affidavit of the Authorized Representative in support of the application for condonation of delay. HELD by the Tribunal dismissing the application and the appeal:

The affidavit produced by the AR is not a valid affidavit because
1.  there is no verification appended on it and
2.  there is no mention as to which of the paras are true to the knowledge of the deponent and
3.  which of the paras of the affidavit are true to his belief.
4.  The affidavit is also not a duly sworn affidavit as required under Rule 10 of the ITAT Rules 1963 because
(i)                  it has not been properly endorsed by the notary regarding the oath of affirmation before him by the executant of the affidavit.
(ii)                The notary has put his signatures under his name seal but there is no mention whether the oath was administered to the signatory or
(iii)               if done so, when and where it was administered. Even words “Sworn before me” are missing.
(iv)              If the affidavit does not certify or endorse the fact that oath has been administered, it remains a waste paper.
On merits, the case is one of gross negligence and inaction on the part of the assessee and the AR. The explanation that the AR’s assistant kept the papers in his drawer and failed to take necessary action is vague and evasive and not sufficient cause for condonation. There is also no general principle saving the party from all mistakes of its counsel. There is also total inaction and gross negligence on the part of the assessee for not inquiring the status of the appeal from the AR. Though courts adopt liberal view while condoning delay on the principle that technicalities should not prevail over the cause of justice, litigants should not take the courts for granted.

Wednesday, 15 May 2013

Service Tax Voluntary Compliance Encouragement Rules, 2013

Background : The Finance Act, 2013 has provided “Amnesty Scheme for Non Filers and Stop Filers”.

Purpose of this scheme :-To encourage voluntary compliance and broaden the taxbase.

 Section 94 to 104 of Chapter VI of Finance Act, 2013 provides legal backing to this Amnesty Scheme.

Chapter VI of Finance Act, 2013

1. Section 94 Short title
2. Section 95 Definitions
3. Section 96 Person who may make declaration of tax dues
4. Section 97 Procedure for making declaration and payment of tax dues
5. Section 98 Immunity from penalty, interest and other proceeding.
6. Section 99 No refund of amount paid under the Scheme
7. Section 100 Tax dues declared but not paid
8. Section 101 Failure to make true declaration
9. Section 102 Power to remove difficulties
10. Section 103 Power to remove difficulties
11. Section 104 Power to make rules

Notification no. 10/2013; dated 13.05.2013
  •  The above notification brings into action the proposed Amnesty Scheme. 
  •  This scheme will now be called as “ Voluntary Compliance Encouragement Rules, 2013”. 
  •  These rules provides for 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. 

Section 96 – Persons eligible to avail benefit of scheme?
The following persons can take the benefit of this scheme
  • Stop filers 
  • Non Filers 
  • Non registrants 
  • Service providers who have not disclosed there full liability in the return filed by them. 
The disclosure period in the scheme is from October, 2007 to December, 2012.

Persons not eligible to make declaration
  • Person against whom order of determination u/s 72, 73 or 73A has been issued before 1st March, 2013. 
  • Person who have filed the return u/s 70 and disclosed his true liability but has not paid the amount of service tax appropriately. 
  • Person to whom notice or order of determination has been issued in respect of any period on any issue i.e. if a person had already been caught by the department earlier on any issue then he is not eligible to file the declaration. Period here is not specifically specified, we consider it to be Oct, 2007 to 31st Dec, 2012. 
  • Person on whom any inquiry or investigation in respect of service tax not levied, not paid or short levied or short paid has been initiated and such inquiry, investigation or audit is pending as on 1st March, 2013. 

Section 97 – Procedure of availing the scheme

Step 1: If the defaulter is not registered, then he is first required to get himself registered and then apply for this scheme.

Step 2: After registration, defaulter shall make a declaration (Sec 97) in Form VCES – 1.

Step 3: On receipt of VCES the designated authority will issue acknowledgement of declaration in form VCES – 2. This acknowledgment shall be issued within 7 days from the receipt of declaration.

Step 4: The defaulter can pay his tax dues without interest and penalty into installments. The defaulter is required to pay 50% of tax dues by 31st, December, 2013 and rest 50% by 30th June, 2014.

Step 5: On full payment of taxes, the designated authority will issue acknowledgement of discharge (Sub section (7) of section 97) in VCES – 3. VCES – 3 shall be issued with 7 working days from the date of furnishing of details of tax dues in full along with interest.

“designated authority” means an officer not below the rank of Asst. CCE as notified by the CCE for the purposes of this Scheme.
On Payment after 30th June, 2014 upto 31st December, 2014
No waiver of interest; However, immunity from penalty & prosecution still be granted up to 31st December, 2014.

Section 98 - Benefit of availing the scheme
The declarant upon payment of amount in default shall get immunity from – interest, penalty, any other proceedings under Service Tax.

• On issuance of acknowledgement of discharge no matter shall be reopened thereafter in any proceedings before any authority or court relating to the period covered by such declaration, subjected to the provisions of Section 101-Failure to make true declaration.

Section 99- 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.

Section 100- 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.

Section 101-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 u/s 73, or as the case may be, u/s 73A of the Chapter and the provisions of the Chapter shall accordingly apply.

Power’s with CG (Section 103 & 104)

Section 103 – In order to remove any inconsistency or any difficulty the Central Government is vested with power to remove such inconsistency or difficulty by issuing the required orders.

Section 104 – Central Government is vested with the power to make rules for carrying out the provisions of this scheme.