SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT …servicetax.net/download/Book_on_VCES.pdf · Chapter 4 Service Tax Voluntary Compliance Encouragement Scheme, 2013 20 Chapter 5 Service

SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT

SCHEME, 2013 with RULES, 2013

SERVICE TAX VOLUNTARY COMPLIANCE

ENCOURAGEMENT SCHEME, 2013

with RULES, 2013

by

CA. ATUL KUMAR GUPTA B. Com (H), FCA, AICWA, MIMA

First Edition August 2013

© AUTHOR

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With the Blessings of “MATA VAISHNO DEVI”

PREFACE

It has always been our endeavor to provide all the members of society

an updated knowledge of service tax. This helps not only in self

compliance but also assist all the stakeholders of the profession, may it be

peers, industry, clients.

Our earlier editions of book titled ‘Introduction of Service Tax’,

‘Comprehensive Guide on Service Tax’, ‘Convergence of Accrual System

of Taxation’ and ‘Do you Know Series’ have always tried to provide

quality advice and regular updation on service tax matters.

Now it gives us immense pleasure to bring out a book on “Voluntary

Compliance Encouragement Scheme” introduced by Finance Act, 2013. It

contains detailed analysis of the scheme, its rules along with frequently

asked questions.

The main objective of this book is to evaluate the provisions of the

VCES in detail so as to find out the impact on Assessee.

Hope, this part will add to the comprehensiveness and assist the

readers in their professional endeavours, and will, we doubt not, meet with

favour equal to that of the parts previously published.

The suggestions for advancement in this book are always welcome and

will be highly appreciated.

Atul Kumar Gupta

New Delhi

12 August, 2013

CONTENTS

Chapter 1 Introduction 9

Chapter 2 Amnesty Scheme 11

Chapter 3 How Amnesty Scheme Will Work — A Power

Point Presentation 15

Chapter 4 Service Tax Voluntary Compliance Encouragement

Scheme, 2013 20

Chapter 5 Service Tax Voluntary Compliance Encouragement

Rules, 2013 24

Chapter 6 Departmental Circular 169/4/2013 on the Amnesty

Scheme 29

Chapter 7 Frequently Asked Questions 32

Chapter 8 Departmental Circular on the Amnesty Scheme

Circular No. 170/5 /2013-ST 55

CHAPTER 1

INTRODUCTION

To achieve substantial growth in Service Tax Collection and to broaden tax base,

Central Government introduced Negative List Approach vide Finance Act, 2012.

However, even after one year, this step could not achieve its objective in totality;

main reason behind this could be non-compliance by tax payers. Therefore, to

encourage voluntary compliance and broaden the tax base, The Hon’ble Finance

Minister in the Budget 2013-14 has announced ‘Voluntary Compliance

Encouragement Scheme, 2013’ to provide one time amnesty by way of (i) waiver

of interest and penalty; and (ii) immunity from prosecution, to the Defaulters i.e.

stop filers, non-filers or non-registrants or service providers (who have not

disclosed true liability in the returns filed by them during the period from

October 2007 to December 2012), who make a truthful declaration of all his

pending “tax dues” (from October1, 2007 to December 31, 2012) and pay the

same.

The scheme is similar to ‘Extra-ordinary Taxpayer Friendly Scheme’ announced

in the Budget Year 2004-05 vide Board Circular No. 137/39/2004-CX4, dated

23-09-2004 to be operational upto 30-10-2004 for instant registration of Service

Tax providers. This scheme aimed to register all service providers on the basis of

their declaration with regard to his past liabilities towards the Service Tax and

interest payable and who had earlier failed to register themselves with the

department due to ignorance or any other reason with full waiver of penalty.

The new Amnesty scheme is, however, an improved one over the old scheme in

so far as assessee gets complete waiver not only of penalty but also of interest

obligation. Also, issue of registration is taken care of in an indirect manner unlike

old ‘Taxpayer friendly Scheme’ by ensuring that to make the declaration under

scheme, Declarant would be first required to get himself registered with Service

Tax Department.

While presenting their Budget Speech in Parliament for the session 2013-14 on

February 28th, 2013, The Hon’ble Finance Minister Shri P. Chidambaram in Para

183 stated that:

“While there are nearly 17,00,000 registered assessees under Service Tax, only

about 7,00,000 file returns. Many have simply stopped filing returns. We cannot

go after each of them. I have to motivate them to file returns and pay the tax

dues. Hence, I propose to introduce a one-time scheme called ‘Voluntary

Compliance Encouragement Scheme’. A defaulter may avail of the scheme on

condition that he files a truthful declaration of Service Tax dues since 1-10-2007

and makes the payment in one or two instalments before prescribed dates. In

such a case, interest, penalty and other consequences will be waived. I hope to

10 Introduction Chap. 1

entice a large number of assessees to return to the tax fold. I also hope to collect

a reasonable sum of money.”

In the nutshell, on one hand where the Amnesty Scheme would be benefiting the

certain tax-payers/defaulters to pay all their pending dues without any

consequential interest and penalty obligations, it would be contributing a lot

towards broadening the tax base of Government by bringing a large number of

assessees within the purview of Service tax not registered so far and

enhancement of Service Tax collection by inviting payment of long awaited dues

which could otherwise have escaped from being assessed.

CHAPTER 2

AMNESTY SCHEME

1.1 Scope of the Scheme and Date of its Applicability

The Scheme is applicable only for tax due or payable under the Chapter V of

Finance Act, 1994 or any other amount due or payable under section 73A

thereof, for the period beginning from the 1st day of October, 2007 and ending

on the 31st day of December, 2012 including a cess leviable thereon under any

other Act for the time being in force, but not paid as on the 1st day of March, 2013.

Details of the scheme are available in Chapter VI of the Finance Act, 2013 (17 of

2013) given in Chapter 3 and will become operational from 10th May, 2013 i.e.

date on which the Finance Bill, 2013 receives the assent of the President till 31st

December 2013.

1.2 Person who can apply for the Scheme

Any person may declare his tax dues in respect of which no notice or order for

determination has been issued or made under Section 72, Section 73 or Section

73A of Finance Act, 1994 before 1st March 2013 except

Any person who has furnished return under section 70 of the Chapter and

disclosed his true liability, but has not paid the disclosed amount of service

tax or any part thereof, shall not be eligible to make declaration for the

period covered by the said return;

Person on whom notice or order of determination has been issued in

respect of any period on any issues can not file declaration on such issue

for any subsequent period.

1.3 How to apply for Scheme

Any person eligible and wishing to apply for the Scheme shall take the following

steps:

(a) Take registration under rule 4 of the Service Tax Rules, 1994, if not

already registered;

(b) Make the declaration to the designated authority in Form VCES -1 on or

before the 31st day of December, 2013 in respect of his “tax dues”;

where “Designated Authority” shall be an officer not below the rank of

Assistant Commissioner of Central Excise as notified by the Commissioner of

Central Excise for the purposes of this Scheme.

1.4 Procedure on receipt of Declaration

On receipt of declaration from Declarant, the Designated Authority shall issue an

acknowledgment thereof, in Form VCES-2 with a period of seven working days

12 Amnesty Scheme Chap. 2

from the date of receipt of declaration. However, where a declaration has been

made by a person against whom,—

(a) an inquiry or investigation in respect of a service tax not levied or not paid

or short-levied or short-paid 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.

1.5 Payment of “Tax Dues” and Acknowledgment thereof

Where the declaration made by a person under Scheme has been accepted by

Designated Authority, Declarant shall proceed to make the payment of “Tax

dues” declared by him in VCES-1 as under:

To pay not less than fifty per cent of the “tax dues” so declared along

with submission of proof of such payment to the designated authority on

or before the December 31st, 2013.

Balance of the tax due declared but not paid shall be required to be paid

by the declarant on or before the June 30th, 2014.

However, in case a declarant fails to make the balance payment on or

before June 30th, 2014, shall pay the same on or before December 31st,

2014 along with the interest thereon for the period of delay starting from

1.7.2014.

No CENVAT credit shall be utilised for payment of “tax dues” under the

Scheme.

The declarant shall furnish to the designated authority details of payment

made from time to time under this Scheme along with a copy of

acknowledgement issued to him in the form VCES-2.

On furnishing the details of full payment of declared tax dues and the

interest, if any, the designated authority shall issue an acknowledgement

thereof, to the declarant in Form VCES-3 within a period of seven

working days from the date of furnishing of details of payment of tax

dues in full along with interest, if any, by the declarant.

No refund of amount paid under the scheme under any circumstances

Chap. 2 Amnesty Scheme 13

1.6 Immunity from penalty, interest and other proceeding.

The declarant, on receipt of acknowledgment from Designated Authority in the

Form VCES-3 shall get complete immunity from penalty, interest or any other

proceeding under the provisions of Finance Act, 1994 and no matter shall be

reopened thereafter in any proceedings under the Chapter before any authority or

court relating to the period covered by such declaration.

1.7 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 Finance Act, 1994 which reads as under.

Section 87. Recovery of any amount due to Central Government

Where any amount payable by a person to the credit of the Central Government

under any of the provisions of this Chapter or of the rules made thereunder is not

paid, the Central Excise Officer shall proceed to recover the amount by one or

more of the modes mentioned below:—

(a) the Central Excise Officer may deduct or may require any other Central

Excise Officer or any officer of customs to deduct the amount so payable

from any money owing to such person which may be under the control of

the said Central Excise Officer or any officer of customs;

(b) (i) the Central Excise Officer may, by notice in writing, require any

other person from whom money is due or may become due to such

person, or who holds or may subsequently hold money for or on

account of such person, to pay to the credit of the Central

Government either forthwith upon the money becoming due or being

held or at or within the time specified in the notice, not being before

the money becomes due or is held, so much of the money as is

sufficient to pay the amount due from such person or the whole of the

money when it is equal to or less than that amount;

(ii) every person to whom a notice is issued under this section shall be

bound to comply with such notice, and, in particular, where any such

notice is issued to a post office, banking company or an insurer, it

shall not be necessary to produce any pass book, deposit receipt,

policy or any other document for the purpose of any entry,

endorsement or the like being made before payment is made,

notwithstanding any rule, practice or requirement to the contrary;

(iii) in a case where the person to whom a notice under this section is

sent, fails to make the payment in pursuance thereof to the Central

Government, he shall be deemed to be an assessee in default in

respect of the amount specified in the notice and all the

consequences of this Chapter shall follow;

14 Amnesty Scheme Chap. 2

(c) the Central Excise Officer may, on an authorisation by the

Commissioner of Central Excise, in accordance with the rules made in

this behalf, distrain any movable or immovable property belonging to or

under the control of such person, and detain the same until the amount

payable is paid; and in case, any part of the said amount payable or of

the cost of the distress or keeping of the property, remains unpaid for a

period of thirty days next after any such distress, may cause the said

property to be sold and with the proceeds of such sale, may satisfy the

amount payable and the costs including cost of sale remaining unpaid

and shall render the surplus amount, if any, to such person;

(d) the Central Excise Officer may prepare a certificate signed by him

specifying the amount due from such person and send it to the Collector

of the district in which such person owns any property or resides or

carries on his business and the said Collector, on receipt of such

certificate, shall proceed to recover from such person the amount

specified thereunder as if it were an arrear of land revenue.

1.8 Failure to make true declaration

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, before the expiry of one year from the date of declaration,

requiring him to show cause why he should not pay the tax dues not paid or

short-paid. The power to issue notice is irrespective of declarant has been issued

VCES-3 for the period or not.

1.9 Payment of Service Tax liability for the period 1.1.2013 onwards

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.

CHAPTER 3

HOW AMNESTY SCHEME WILL WORK —

A POWER POINT PRESENTATION

Service Tax Voluntary Compliance

Encouragement Scheme, 2013 Scheme

Application and Benefit

Tax Due

Applicable from when?

Benefit available?

Who can apply?

What is the Procedure?

10th May 2013 till 31st December 2013

Only tax dues/payable can be deposited. Interest, Penalty and Prosecution will be waived off. Section 108(1)

Means the service tax due or payable under the chapter or any

other amount due or payable under Section 73A thereof, for the

period from 1st day of October 2007 and ending on the 31st

day of December 2012 including a cess leviable thereon under

any Act for the time being in force, but not paid as on the 1st

day of March 2013.

16 How Amnesty Scheme Will Work — A Power Point Presentation Chap. 3

Who Can’t Apply [Section 106(1)]

• Person who have filed the return u/s 70 and disclosed his true liability

but have not paid the disclosed amount of service tax or part thereof

can not made declaration for the period covered.

• Any Person against whom any notice or an order of determination u/s 72,

73 or 73A has been issued or made before 1st March, 2013.

• A person to whom a notice or an order or determination has been issued

in respect of any period or any issue, no declaration shall be made of his

tax dues on the same issue for any subsequent period.

Who Can Apply

Department shall reject recording reasons [Sec 106(2)]

• Search of premises under Section 82 of the Chapter.

• Issuance of Summon u/s 14 of CEA 1944.

• Requiring production of Accounts, documents or other evidence under

the chapter or the rules; or

• An audit has been initiated.

• And such inquiry, investigation or audit is pending as on 1st day of

March 2013.

Requiring production of Accounts, Documents or other Evidence under the

Chapter or Rule

Circular No 169/4/2013 dated 13th May Clarifies:

For the above terms only notice issued under Section 72 of the Finance Act and

under Rule 5A of the Service Tax Rules 1994 will invoke rejection of

declaration.

Section 14 of Central Excise Act, 1944

(1) Any Central Excise Officer duly empowered by the Central Government

in this behalf, shall have power to summon any person whose attendance

he considers necessary either to give evidence or to produce a document

Persons on whom any enquiry or investigation in respect of

service tax not levied, not paid or short levied or short paid has

been initiated by way of

SECTION 14: Power to summon persons to give evidence and

produce documents in inquiries under this Act. —

Chap. 3 How Amnesty Scheme Will Work — A Power Point Presentation 17

(a) fails to furnish the return under section 70;

(b) having made a return, fails to assess the tax in accordance with

the provisions of this Chapter or rules made there under, the

Central Excise Officer, may require the person to produce such

accounts, documents or other evidence as he may deem

necessary and after taking into account all the relevant

material which is available or which he has gathered, shall by

an order in writing, after giving the person an opportunity of

being heard, make the assessment of the value of taxable

service to the best of his judgment and determine the sum

payable by the assessee or refundable to the assessee on the

basis of such assessment.

or any other thing in any inquiry which such officer is making for any of

the purposes of this Act. A summons to produce documents or other

things may be for the production of certain specified documents or things

or for the production of all documents or things of a certain description

in the possession or under the control of the person summoned.

(2) All persons so summoned shall be bound to attend, either in person or by

an authorised agent, as such officer may direct; and all persons so

summoned shall be bound to state the truth upon any subject respecting

which they are examined or make statements and to produce such

documents and other things as may be required:

Section 72 – Best Judgment Assessment

Section 73

Recovery of Service Tax not levied or paid or Short –levied or Short-paid or

Erroneously Refunded

(1) Where any service tax has not been levied or paid or has been short-

levied or short-paid or erroneously refunded , the Central Excise

Officer may, within ‘eighteen months’ from the relevant date, serve

notice on the person chargeable with the service tax which has not been

levied or paid or which has been short-levied or short-paid or the person

to whom such tax refund has erroneously been made, requiring him to

show cause why he should not pay the amount specified in the notice.

If any person, liable to pay Service Tax

18 How Amnesty Scheme Will Work — A Power Point Presentation Chap. 3

Section 73A

Service Tax Collected from any person to be deposited with Central

Government

(1) Any person who is liable to pay service tax under the provisions of this

Chapter or the rules made thereunder, and has collected any amount in

excess of the service tax assessed or determined and paid on any taxable

service under the provisions of this Chapter or the rules made there under

from the recipient of taxable service in any manner as representing

service tax, shall forthwith pay the amount so collected to the credit of

the Central Government.

(2) Where any person who has collected any amount, which is not required

to be collected, from any other person, in any manner as representing

service tax, such person shall forthwith pay the amount so collected to

the credit of the Central Government.

(3) Where any amount is required to be paid to the credit of the Central

Government under sub-section (1) or sub-section (2) and the same has

not been so paid, the Central Excise Officer shall serve, on the person

liable to pay such amount, a notice requiring him to show cause why the

said amount, as specified in the notice, should not be paid by him to the

credit of the Central Government.

Procedure 1/4

Person will apply in Form VCES 1 to designated authority (DA)

on or before 31st December 2013. Section 106(1)

DA will acknowledge within 7 days for receipt.

Section 106(2)

Declarant shall pay on or before 31st Dec 2013 not less than 50% so

declared and has to submit proof of such payment to DA.

Section 106(3)

Remaining Part to pay on or before 30th June 2014.

Section 106(4)

Chap. 3 How Amnesty Scheme Will Work — A Power Point Presentation 19

Procedure 2/4

Procedure 3/4

Procedure 4/4

Thank You and Your Query Please….

CA. Atul Kumar Gupta

www.servicetax.net

(M) 9810103611

[email protected]

[email protected]

In case fail to pay before 30th June 2014, then can pay till 31st Dec

2014 with interest as applicable under section 75 [Section 106 (4)]

Meaning thereby there is no interest provision for amount payable

till 31st December 2013

After furnishing details of full payment of declared tax and

interest if any, the DA shall issue an acknowledgment of

discharge of such dues. Section 106(7)

Once the acknowledgment of discharge of such dues Section

106(7), no matter shall be reopened thereafter in any proceedings to

the period covered by such declaration. [Section 108(2)]

Any amount paid in pursuance of declaration made shall not be

refundable under any circumstances. [Section 109]

Where declarant fails to pay due tax either fully or partly as

declared by him, such dues along with interest shall be recovered as

under Section 87 of the Act. [Section 110]

Where the CCE has reason to believe that the declaration made

was substantially false, he may issue Show cause notice, within

one year from date of declaration.

http://www.servicetax.net/

mailto:[email protected]

mailto:[email protected]

CHAPTER 4


ENCOURAGEMENT SCHEME, 2013

THE FINANCE ACT, 2013 (17 of 2013)

CHAPTER VI

Service Tax Voluntary Compliance Encouragement Scheme, 2013

104. Short title. — This Scheme may be called the Service Tax Voluntary

Compliance Encouragement Scheme, 2013.

105. Definitions.—(1) In this Scheme, unless the context otherwise

requires,—

(a) “Chapter” means Chapter V of the Finance Act, 1994;

(b) “declarant” means any person who makes a declaration under sub-

section (1) of section 97;

(c) “designated authority” means an officer not below the rank of

Assistant Commissioner of Central Excise as notified by the

Commissioner of Central Excise for the purposes of this Scheme;

(d) “prescribed” means prescribed by rules made under this Scheme;

(e) “tax dues” means the service tax due or payable under the Chapter or any

other amount due or payable under section 73A thereof, for the

period beginning from the 1st day of October, 2007 and ending on the

31st day of December, 2012 including a cess leviable thereon under any

other Act for the time being in force, but not paid as on the 1st day of

March, 2013.

(2) Words and expressions used herein and not defined but defined in the Chapter or the rules made thereunder shall have the meanings respectively

assigned to them in the Chapter or the rules made thereunder.

106. Person who may make declaration of tax dues.—(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 any person who has furnished return under section 70 of the

Chapter and disclosed his true liability, but has not paid the disclosed amount of

service tax or any part thereof, shall not be eligible to make declaration for the

period covered by the said return:

Chap. 4 ST Voluntary Compliance Encouragement Scheme, 2013 21

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.

(2) Where a declaration has been made by a person against whom,—

(a) an inquiry or investigation in respect of a service tax not levied or

not paid or short-levied or short-paid 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.

107. Procedure for making declaration and payment of tax dues.—(1)

Subject to the provisions of this Scheme, a person may make a declaration to the

designated authority on or before the 31st day of December, 2013 in such

form and in such manner as may be prescribed.

(2) The designated authority shall acknowledge the declaration in such form

and in such manner as may be prescribed.

(3) The declarant shall, on or before the 31st day of December, 2013, pay not

less than fifty per cent. of the tax dues so declared under sub-section (1)

and submit proof of such payment to the designated authority.

(4) The tax dues or part thereof remaining to be paid after the payment

made under sub-section (3) shall be paid by the declarant on or before the 30th

day of June, 2014:

Provided that 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.

(5) Notwithstanding anything contained in sub-section (3) and sub-section

(4), 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.

22 ST Voluntary Compliance Encouragement Scheme, 2013 Chap. 4

(6) The declarant shall furnish to the designated authority details of

payment made from time to time under this Scheme along with a copy of

acknowledgement issued to him under sub-section (2).

(7) 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.

108. Immunity from penalty, interest and other proceeding.—(1)

Notwithstanding anything contained in any provision of the Chapter, the

declarant, upon payment of the tax dues declared by him under sub-section (1) of

section 97 and the interest payable under the proviso to sub-section (4) thereof,

shall get immunity from penalty, interest or any other proceeding under the

Chapter.

(2) Subject to the provisions of section 101, a declaration made under

sub-section (1) of section 97 shall become conclusive upon issuance of

acknowledgement of discharge under sub-section (7) of section 97 and no

matter shall be reopened thereafter in any proceedings under the Chapter before

any authority or court relating to the period covered by such declaration.

109. 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.

110. 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.

111. 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 under section 73, or as the case may be, under section 73A

of the Chapter and the provisions of the Chapter shall accordingly apply.

112. Removal of doubts.—For the removal of doubts, it is hereby

declared that nothing contained in this Scheme shall be construed as conferring

any benefit, concession or immunity on the declarant other than the benefit,

concession or immunity granted under section 98. Immunity

113. Power to remove difficulties.—(1) If any difficulty arises in giving

effect to the provisions of this Scheme, the Central Government may, by order,

not inconsistent with the provisions of this Scheme, remove the difficulty:

Chap. 4 ST Voluntary Compliance Encouragement Scheme, 2013 23

Provided that no such order shall be made after the expiry of a period of

two years from the date on which the provisions of this Scheme come into force.

(2) Every order made under this section shall, as soon as may be after it is

made, be laid before each House of Parliament.

114. Power to make rules.—(1) The Central Government may, by

notification in the Official Gazette, make rules for carrying out the provisions of

this Scheme.

(2) Without prejudice to the generality of the foregoing power, such rules

may provide for all or any of the following matters, namely:—

(a) the form and the manner in which a declaration may be made

under subsection (1) of section 97;

(b) the form and the manner of acknowledging the declaration under

sub-section (2) of section 97;

(c) the form and the manner of issuing the acknowledgement of discharge

of tax dues under sub-section (7) of section 97;

(d) any other matter which is to be, or may be, prescribed, or in respect

of which provision is to be made, by rules.

(3) The Central Government shall cause every rule made under this Scheme

to be laid, as soon as may be after it is made, before each House of Parliament,

while it is in session, for a total period of thirty days which may be comprised in

one session or in two or more successive sessions, and if, before the expiry of the

session immediately following the session or the successive sessions aforesaid,

both Houses agree in making any modification in the rule or both Houses agree

that the rule should not be made, the rule shall thereafter have effect only in such

modified form or be of no effect, as the case may be; so, however, that any such

modification or annulment shall be without prejudice to the validity of anything

previously done under that rule.

CHAPTER 5


ENCOURAGEMENT RULES, 2013

Notification No. 10/2013-ST, dated 13-5-2013

In exercise of the powers conferred by sub-sections (1) and (2) of section 114

of the Finance Act, 2013 (17 of 2013), the Central Government hereby makes the

following rules regarding the 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 under the Service

Tax Voluntary Compliance Encouragement Scheme, 2013, namely:—

1. Short title and commencement.—(1) These rules may be called the

Service Tax Voluntary Compliance Encouragement Rules, 2013.

(2) They shall come into force on the date of its publication in the Gazette of

India.

2. Definitions.—(1) In these rules, unless the context otherwise requires,—

(a) “Act” means the Finance Act, 2013;

(b) “Form” means the Forms annexed to these rules.

(c) “Scheme” means the Service Tax Voluntary Compliance Encouragement

Scheme, 2013 as specified in the Act;

(2) Words and expressions used but not defined in these rules but defined in

the Scheme shall have the meanings respectively assigned to them in the Scheme.

3. Registration.—Any person, who wishes to make a declaration under the

Scheme, shall, if not already registered, take registration under rule 4 of the

Service Tax Rules, 1994.

4. Form of declaration.—The declaration under sub-section (1) of section

107 of the Act, in respect of tax dues under the Scheme shall be made in Form

VCES -1.

5. Form of acknowledgment of declaration.—The designated authority on

receipt of declaration shall issue an acknowledgement thereof, in Form VCES -2,

within a period of seven working days from the date of receipt of the declaration.

6. Payment of tax dues.—(1) The tax dues payable under the Scheme along

with interest, if any, under section 107 of the Act shall be paid to the credit of the

Central Government in the manner prescribed for the payment of service tax

under the Service Tax Rules, 1994.

Chap. 5 ST Voluntary Compliance Encouragement Rules, 2013 25

(2) The CENVAT credit shall not be utilised for payment of tax dues under

the Scheme.

7. Form of acknowledgement of discharge.—(1) The designated authority

shall issue an acknowledgement of discharge under sub-section (7) of section 107

of the Act, in Form VCES-3.

(2) The acknowledgement of discharge shall be issued within a period of

seven working days from the date of furnishing of details of payment of tax dues

in full along with interest, if any, by the declarant.

FORM VCES-1

[In duplicate]

Declaration under sub-section (1) of section 107 of the Act

[See rule 4]

(Please read the instructions carefully before filling the form)

1. Name of the declarant

2. Address of the declarant

3. Telephone No.

4. E-mail id

5. Service Tax Code (STC No.)

6. Details of tax dues*

A Service tax `

B Education cess `

C Secondary & Higher Education

Cess

`

D Amount under section 73A

of the Finance Act, 1994

`

E Total Tax dues* [A+B+C+D] `

*Furnish a calculation sheet separately [for the purposes of calculation of tax

dues, the manner of calculation as prescribed in S. No. 3F(I), or as the case

may be, the Part “B‟ of Form ST-3, as existed during relevant period may be

used and calculation of tax dues may be furnished tax return period wise, and

service wise if the tax dues relates to more than one service.]

26 ST Voluntary Compliance Encouragement Rules, 2013 Chap. 5

VERIFICATION

I............(name in block letters) son/daughter of Shri........... solemnly declare that

I have read and understood the Service Tax Voluntary Compliance Encouragement

Scheme as contained in Chapter VI of the Finance Act, 2013, and to the best of my

knowledge and belief,—

(a) the information given in this declaration and the enclosures accompanying it are

correct and complete and the amount of tax dues and other particulars shown

therein are truly stated;

(b) the tax dues declared above do not attract the provisions of sub-section (1),

including the provisos thereto, of section 106 of the Act;

(c) no inquiry, investigation or audit is pending against the declarant as on the 1st

day of March, 2013 as envisaged in sub-section (2) of section 106 of the Act;

I further declare that I am authorised to make this declaration and verify it on behalf

of the declarant in the capacity as ..............................

Enclosures:

S. No. Details of enclosure/statement annexed

1 Calculation sheet in respect of tax dues (refer S. No. 6 above and the

instructions)

2 Any other documents (please specify)

Signature of the declarant/authorised person with stamp

Place: Date:

Declaration No. Date

(To be assigned by the department)

Instructions:

1. The Scheme has been prescribed in the Chapter VI of the Act. The provisions

contained therein may please be read carefully (refer www.cbec.gov.in).

2. This Form shall be submitted to the Central Excise Officer notified as designated

authority under section 105(c) of the Act.

3. The tax dues may be computed separately for each service if the tax dues relates to

more than one service during the period of declaration.

4. For calculation of tax dues, the manner as prescribed at S. No. 3F(I), or as the case

may be the Part “B” of the Form ST-3, as existed during the relevant period, may be

used and calculation of tax dues may be furnished tax return period wise

5. Calculation sheet showing the tax dues calculation may please be enclosed with this

declaration.

6. Obtain an acknowledgment from the designated authority in Form VCES-2.

7. The declarant may approach the designated authority for any clarification.

Chap. 5 ST Voluntary Compliance Encouragement Rules, 2013 27

FORM VCES-2

[Acknowledgment of declaration issued under sub-section (2) of section 107 of the

Act]

[See rule 5]

No.

Receipt of a declaration filed under sub-section (1) of section 107 of the Act, as per

the details below, is acknowledged.

1 Declaration No. Date



4. STC No.

5. Tax dues declared `

6. Schedule for payment of tax dues

A Minimum amount to be paid

on or before the 31st Dec, 2013

(50% of the tax dues)

`

B Remaining tax dues to be

paid on or before the 30th

June, 2014 [Amount at S. No.

5(-) Amount at S. No. 6A]

`

C Any tax dues remaining unpaid as on 1st day of July,2014 shall

be paid before the 31st December,2014 along with interest, as

prescribed under section 75 or as the case may b, section 73B

of the Finance Act, 1994 for the period of delay starting from

the 1st day of July, 2014

Signature, name and seal of designated authority

Place: Date:

————————————————————————————————————

Instructions:

1. This acknowledgment has been issued on the basis of declaration furnished by the

declarant and it does not certify the correctness of the declaration made. This

declaration does not certify payment of any tax dues.

2. Certificate of discharge in Form VCES -3 shall be issued only upon full payment

of tax dues along with interest if any, as per the details at S. No. 6 above.

3. If any amount declared as tax dues under the Scheme remain unpaid as on 1-1-2015,

the same shall be recoverable under section 87 of the Finance Act, 1994.

4. For any clarification, the declarant may get in touch with the designated authority.

28 ST Voluntary Compliance Encouragement Rules, 2013 Chap. 5

FORM VCES-3

Acknowledgement of Discharge

[Issued under sub-section (7) of section 107 of the Act]

[See rule 7]

No.

This acknowledgment of discharge has been issued under sub-section (7) of section

107 of the Act, to ACKNOWLEDGE that the tax dues declared under sub-section (1) of

section 107 of the Act have been paid, in respect of declaration so made as per the

following details.

1 Declaration No. Date



4. STC No.

5. Tax dues declared under the

Scheme

6. Payment of tax dues

A Tax dues paid on or before

31.12.2013

`

B Tax dues paid after 31.12.2013

but on or before 30.6.2014

`

C Tax dues paid after 30.6.2014 but

on or before 31.12.2014

`

D Interest paid under section 107

(4) on amount mentioned at ‘6C’

`

E Total amount paid (A+B+C+D) `

7. Details of challan(s)

Challan No(s)(CIN) Amount

Signature, name and seal of designated authority

Place: Date:

CHAPTER 6

DEPARTMENTAL CIRCULAR ON

THE AMNESTY SCHEME

Circular No. 169/4/2013-ST, dated 13-5-2013

The Service Tax Voluntary Compliance Encouragement Scheme —

Clarifications regarding

The Service Tax Voluntary Compliance Encouragement Scheme (VCES) has

come into effect upon enactment of the Finance Bill, 2013 on the 10th May,

2013. The Service Tax Voluntary Compliance Encouragement Rules, 2013 has

been issued to bring into effect the Scheme. Some references have been received

seeking clarification as regards the scope and applicability of the Scheme.

2. The issues have been examined and clarifications thereto are as follows:

S. No. Issues Clarification

1 Whether a person who

has not obtained service

tax registration so far can

make a declaration under

VCES?

Any person who has tax dues to declare can

make a declaration in terms of the provisions

of VCES. If such person does not already

have a service tax registration he will be

required to take registration before making

such declaration.

2 Whether a declarant shall

get immunity from

payment of late fee/

penalty for having not

taken registration earlier

or not filed the return or

for delay in filing of

return.

Yes. It has been provided in VCES that,

beside interest and penalty, immunity would

also be available from any other proceeding

under the Finance Act, 1994 and Rules made

thereunder.

3 Whether an assessee to

whom show cause notice

or order of determination

has been issued can file

declaration in respect of

tax dues which are not

covered by such SCN or

order of determination?

In terms of section 106 (1) of the Finance

Act, 2013 and second proviso thereto, the

tax dues in respect of which any show cause

notice or order of determination under

section 72, section 73 or section 73A has

been issued or which pertains to the same

issue for the subsequent period are excluded

from the ambit of the Scheme. Any other tax

dues could be declared under the Scheme

subject to the other provisions of the

Scheme.

30 Departmental Circular on the Amnesty Scheme Chap. 6


4 What is the scope of

section 106 (2)(a)(iii)?

Whether a

communication from

department seeking

general information from

the declarant would lead

to invoking of section

106 (2) (a)(iii) for

rejection of declaration

under the said section?

Section 106(2)(a)(iii) of the Finance Act,

2013 provides for rejection of declaration if

such declaration is made by a person against

whom an inquiry or investigation in respect

of service tax not levied or not paid or short-

levied or short paid, has been initiated by

way of requiring production of accounts,

documents or other evidence under the

chapter or the rules made thereunder, and

such inquiry or investigation is pending as

on the 1st day of March, 2013.

The relevant provisions, beside section 14 of

the Central Excise Act as made applicable to

service tax vide section 83 of the Finance

Act,1994, under which accounts, documents

or other evidences can be requisitioned by

the Central Excise Officer for the purposes

of inquiry or investigation, are as follows,-

(i) Section 72 of the Act envisages requi-

sition of documents and evidences by

the Central Excise Officer if any

person liable to pay service tax fails to

furnish the return or having made a

return fails to assess the tax in

accordance with the provision of the

Chapter or rules made thereunder.

(ii) Rule 5A of the Service Tax Rules,

1994 prescribes for requisition of

specified documents by an officer

authorised by the Commissioner for

the purposes specified therein.

The provision of section 106(2)(a)(iii) shall

be attracted only in such cases where

accounts, documents or other evidences are

requisitioned by the authorised officer from

the declarant under the authority of any of

the above stated statutory provisions and the

inquiry so initiated against the declarant is

pending as on the 1st day of March, 2013.

No other communication from the

department would attract the provisions of

Chap. 6 Departmental Circular on the Amnesty Scheme 31


section 106(2)(a)(iii) and thus would not

lead to rejection of the declaration.

3. Trade Notice/Public Notice may be issued to the field formations and tax

payers. Please acknowledge receipt of this Circular.

—————

Trade Notice No. 09/ST/2013, dated 21-5-2013

Notification of 'Designated Authority' for the purpose of Service Tax

Voluntary Compliance Encouragement Scheme — Reg.

Attention of all trade associations and stake holders is invited to the Trade Notice

No. 08/ST/2013, dated 21/05/2013 issued by the Commissioner, Service Tax,

Delhi, regarding Service Tax Voluntary Compliance Encouragement Scheme

2013.

Please refer to the details of Voluntary Compliance Encouragement Scheme 2013

(VCES). In terms of section 105 and section 107 of the Finance Act, 1994, as

amended, a declaration has to be made before the 'Designated Authority'.

The Commissioner, Service Tax Delhi, hereby notifies Sh. KARAN THAPAR,

Assistant Commissioner of Central Excise & Service Tax as the 'Designated

Authority' for the purpose of declaration under the VECS, 2013 amnesty scheme.

His official address is as 'IAEA HOUSE, 17-B, I.P. ESTATE M.G. MARG,

NEW DELHI-110 002" and Phone No. is 011-4078 5837.

All the Trade Associations are requested to give wide publicity to the contents of

this Trade Notice amongst their members and constitutes.

CHAPTER 7

FREQUENTLY ASKED QUESTIONS

Question 1: In what form to make declaration to apply for Amnesty

Scheme?

Answer: The Assessee has to file VCES-1 to Designated Authority with

relevant calculation of period covered under the scheme.

Question 2: Who is the designated officer for Submission of form VCES-

1? Is there any relevant notification for the same?

Answer: As per the scheme, every Commissionerate will appoint one

Designated Authority to receive the VCES-1 and issue necessary

Forms.

Question 3: Has Designated Authority been appointed under the scheme

till date?

Answer: Yes, In each Commissionerate the same has been appointed and

Trade Notice for the same is being issued.

Question 4: The assessee received summon u/s 14 of excise on 14.04.2013.

Can he go for the scheme?

Answer: Yes, since in the scheme it is mentioned that in case the assessee

has been served a notice under Section 14 of Central Excise Act

1944 which is pending on 1st March 2013, then declaration so

filed in the scheme will be rejected.

Question 5: Is the assessee required to get himself registered for availing

this scheme or he can avail the scheme and afterwards get

himself registered?

Answer: Yes, as mentioned in Rule 3 of Service Tax Voluntary

Compliance Encouragement Rules, 2013 and further clarified in

Circular No 169/4/2013 dt. 13.5.2013, the assessee has to obtain

the registration to opt for the scheme and deposit tax under the

scheme.

Question 6: Is service tax to be paid by an assessee who wishes to avail

benefit of the scheme, before filing VCES-1 or after filing

VCES-1 but before receiving acknowledgement in VCES-2?

Answer: It is on the option of Assessee to pay during the pendency of

VCES 2. It is provided that assessee has to pay more than 50%

of tax due before 31st December 2013.

Chap. 7 Frequently Asked Questions 33

Question 7: Is it necessary to deposit the entire tax liability for period

covered in declaration or even a partial deposit will work to

obtain proportional benefit. Say the actual liability is Rs. 50

Lacs but client is disclosing liability of only Rs.40 Lacs. What

will be the consequence?

Answer: No, there is no scheme for proportional benefit. Assessee has to

pay entire amount of tax due to avail for the scheme.

Question 8: I have paid some tax on 28 Feb, 2013 which was relatable to

Jan and Feb, 2013. Can the department refuse me the

scheme benefit saying that you have made some payment of

the dues as on Dec 12 in Feb’13?

Answer: No, If the assessee can prove that the amount so deposited relates

to Jan and Feb 2013 and the tax due pertaining upto December

2012 is still due after 1st March 2013, then he can go for this

scheme.

Question 9: Is it necessary that the return of Oct’12 to Mar’13 should be

of only Jan- Mar’13 for an assessee availing benefit of

scheme?

Answer: The same is not a pre requisite rather will be a consequential.

Question 10: If a person has taken registration in F.Y. 12-13 but has not

charged service tax for previous 5 years (when he was

supposed to charge) so will he be able to take the benefit of

this scheme?

Answer: Yes, he can opt for this scheme.

Question 11: An Assessee has received an inquiry from the department for

Non filing of return for the F.Y 2011-12 before 1st of March,

2013 and The Assessee does not filed any return since Oct

2007. Is it open for the assessee to apply for the scheme for

the period since Oct, 2007?

Answer: Yes, in case the Notice is not issued under Section 14 of Central

Excise Act, Section 72 of Finance Act 1994, or under Rule 5A of

the Service Tax Rules 1994, then assessee can opt for this

scheme. One has to check the Notice and Section cited on the

same.

Question 12: Whether NIL tax returns, not filed earlier, can be filed now

for the period covered under the scheme.

Answer: The scheme is not for the filing of Service tax return in arrears.

To opt for the scheme assessee must have some of the tax due in

the relevant period. Rather he may use Para 6.1 of Circular No

97/2007 to claim relief from penalties.

34 Frequently Asked Questions Chap. 7

Question 13: An assessee has Export turnover of Rs. 60,00,000/-. Is he

liable to get registration? If yes, can he now take registration

and file returns for past years under VCES without penalties

and interest? He has no local business at all.

Answer: No, the benefit under VCES scheme is available only to those

assessee who have not paid or have short paid service tax. Only

non-registration or non filing defaulters are not eligible to avail

benefit under VCES scheme.

Question 14: Assessee has NIL tax dues and has not filed any returns. Can

he opt for VCES scheme?

Answer: The assessee who are liable to pay tax and have not paid for the

period October 2007 to December 2012 can avail this scheme. If

the service tax liability is nil, he shall not be eligible for the

scheme for non filing of returns.

Question 15: A person who has paid service tax dues and filed late return

was issued a demand letter for the late filing Penalty &

interest. Can he go for VCES now?

Answer: Mere non-filing of return will not allow an assessee to opt for

VCES. However, if there is some part of Service Tax due which

still needs to be paid and no demand letter issued before

1.3.2013, he can go for VCES now.

Question 16: Whether an assessee who has paid service tax, but has not

filed return for a part of the period covered by the scheme,

can he claim waiver of additional fees/ penalty payable on

delayed return filing under this scheme?

Answer: No, since the VCES scheme is introduced for giving benefit of

penalty and interest only in the cases where the service tax has

not been paid/short paid.

Question 17: Can an assessee opt for the scheme where the assessee has

paid tax mistakenly on cash basis and not on accrual basis?

Answer: Yes, provided Service Tax amount disclosed In ST-3 had been

fully paid and there is some amount of tax short paid consequent

to payment of service tax on cash basis rather than accrual basis.

Question 19: If service tax for 2010-11 is paid in March, 2013 without

interest and penalty, whether assessee can go for the amnesty

scheme. Returns are still not filed.

Answer: Yes, the assessee can opt for the scheme, if the tax was unpaid

upto 1st March 2013 and after Scheme came into force.


Question 20: Till date no notice is issued, but if the service provider has

not filed declaration and before December 2013 Department

issued some notice or audit is conducted, still can he file this

declaration now?

Answer: Yes, declaration can be filed at any time on or before

31.12.2013.

Question 21: A letter is issued for filling of return for the period covered

under Amnesty Scheme but no section is quoted in the said

letter. Can it be considered as an enquiry? Is it open to go for

the scheme now?

Answer: Yes, VCES can be opted in case of just routine enquiry.

Question 22: How does one identify/ differentiate a routine enquiry and an

enquiry for anti-evasion?

Answer: As per Section 106(2) read with Circular 169/4/2013-ST dt.

13.5.2013, only inquiry or investigations initiated (i) u/s 14 of

Central Excise Act, 1994, (ii) u/s 72 and u/s 82 of Finance Act,

1994, and (iii) under Rule 5A of the Service Tax Rules, 1994

will be considered under VCES scheme and rest other enquiries

will be considered as routine enquiries.

Question 23: Can an assessee wherein the notice for audit has been issued

in February and the audit has been performed in the month

of April can opt for the VCES?

Answer: No, enquiry shall be considered as initiated as and when the

notice of audit was issued i.e. in the month of February and is

pending as on 1st March, 2013. Hence, would not be eligible for

VCES scheme.

Question 24: Can reverse charge tax payer apply for this scheme?

Answer: Yes, any person whether he is service provider or service

receiver can opt for the scheme to declare his tax dues.

Question 25: Department has issued a notice to my client by Speed Post in

which the name of the company is wrong. For e.g. Correct

name is A B Builders Pvt. Ltd., the letter was issued in the

name of A Construction & Makers Pvt. Ltd. Moreover, the

address is somewhat different. Can I go for VCES?

Answer: No. If the Assessee code as mentioned in notice was correct and

notice was served on assessee, then benefit of VCES cannot be

taken.

Question 26: If VCES-2 is not issued within 7 days, what will be its

implication?

Answer: VCES-2 is the acknowledgment for acceptance of declaration by

Designated Authority. Since there is no provision in Chapter VI


of Finance Act, 2013 and Rules, made there under, for deemed

acceptance by DA, in case VCES is not issued within the

prescribed time limit of 7 days, assessee can continue to pay

under the scheme.

Question 27: If my client pays all the tax upfront, how will the designated

officer give an acknowledgement operationally within a week

as purported in the Scheme?

Answer: To secure VCES-3 from Designated Authority, declarant has to

furnish the details of full payment of declared tax dues and the

interest, if any, along with a copy of acknowledgement issued to

him in the form VCES-2 to Designated Authority. Therefore, unless

and until VCES-2 is issued to declarant, there is no question of

VCES-3 notwithstanding the fact of all the payment of tax dues

having made upfront.

Question 28: Can the service recipient get the CENVAT credit, if service

provider has paid service tax in the new scheme without

recovering it separately from Service receiver?

Answer: No, CENVAT Credit can be availed only on the basis of

CENVATABLE invoice containing the details mentioned in

Rule 4A of Service Tax Rules, 1994 which inter-alia includes

“Details of Service Tax Payable”. Since this would be missing in

invoice when service tax not recovered separately by Service

Provider, no CENVAT credit can be taken by service recipient.

Question 29: If the service provider recovers the tax paid under Amnesty

scheme from the service receiver, can service recipient avail

CENVAT credit of such service tax paid by provider under

Amnesty scheme?

Answer: Yes, if same recovered on the basis of Supplementary invoice

issued in terms of provisions of Service Tax Rules, 1994 [Rule

9(1)(bb) of CCR, 2004], service recipient can avail CENVAT

credit of tax paid by him to service provider.

Question 30: Will Designated Authority do scrutiny before issuing VCES -

3?

Answer: There is no requirement for Designated Authority to make

detailed scrutiny before issuing VCES-3. Only furnishing the

details and challans of full payment of declared tax dues and the

interest, if any, along with a copy of acknowledgement thereof

issued to him in the form VCES-2, to designated authority will

suffice the purpose.


Question 31: Can the assessee deposit the 50% in say monthly

installments?

Answer: Yes, as per section 107(3), only requirement is that the declarant

has to deposit at-least 50 % of the tax dues declared by him till

31st December, 2013. Hence, the assessee can deposit the same

in monthly installments also.

Question 32: There is a provision in the scheme which reads as follows-

“101. (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.” What is

the meaning of “substantially”?

Answer: The meaning of the expression “substantially false” has not been

given under the scheme and is to be understood as per normal

industry norms. The same is undoubtedly prone to litigation as it

wholly depends upon the perception of the Commissioner as to

when a declaration may be considered as “substantially false” for

the purpose of issuing a SCN and leading to invoking the

provisions of Section 73 and 73A.

Question 33: In the year 2010-2011, suppose an assessee has been

disallowed CENVAT Credit in respect of Input Services with

regard to Trading Activity by way of Assessment order. Now

he is willing to discharge his liability in respect of the said

disallowed CENVAT Credit under the Amnesty Scheme for

the subsequent financial years. Is he eligible for Amnesty

Scheme although similar issue is adjudicated for the previous

financial years?

Answer: No, as per the second proviso to Section 106(1), when an order

of determination has been issued to a person in respect of any

period on any issue, no declaration can be made on the same

issue for any subsequent period.

Question 34: Can Amnesty scheme be used for short payment of service

tax resulting due to excess wrong utilization of CENVAT

Credit?

Answer: Yes, this would amount to short payment of service tax as

disclosed in Return, for which Amnesty Scheme can be utilized.

Question 35: If someone has not filed return since 2010-2011 till date, but

paid taxes along with interest before March 2013 (by

showing interest in the challan), can he still claim waiver of


interest and ask the department to adjust this interest

against taxes.

Answer: No, Amnesty scheme is only for payment of ‘Tax dues’ pending

as on 1.3.2013. It does not allow for refund or adjustment of

amount (i.e. interest and penalty) already paid against tax

liability of future period.

Question 36: Exactly, what does the amount due to be shown, i.e., amount

of tax not shown in the returns or amount not paid upto

March 2013.

Answer: While filing the declaration under sub section (1) of section 107

of the Act, in Form VCES-1, the declarant has to disclose the

details of the tax dues which means amount due to be paid as on

1.3.2013 for the period 1st October, 2007 to 31st December,

2012.

Question 37: Can this declaration be filed through ACES Website?

Answer: No, the same has to be filed manually to designated authority in

your jurisdiction on or before 31st December 2013 which DA

will acknowledge within 7 days for receipt.

Question 38: If client of assessee does not approve of raising

supplementary invoice under Rule 4A. Does the service tax

have to be charged on reverse calculation? e.g. Rs. 100/-

original invoice service tax to be charged = 100/110*10.

Answer: Yes, invoice can be raised inclusive of service tax.

Question 39: Somebody is saying that penalty cannot be avoided for nil tax

returns. In case, somebody is declaring turnover other than

earlier declared, Can he has to file the return and pay the

penalty?

Answer: Yes, in case the returns have not reflected the true value and

now, you are paying service tax on non-declared value then,

service tax return for that period is not required to file. By, going

into VCES Scheme, only declaration is required.

Question 40: Can the department refuse me the scheme benefit saying that

you have made some payment of the dues as on Dec 12 in

Feb’13 whereas that payment was done for Jan 13?

Answer: The department cannot refuse for the benefit of the scheme if

you can provide department with necessary documents stating

that the payment made in Feb’13 pertains to Jan’13 not Dec’13.

Question 41: If someone has deposited service tax amounting to Rs. 5

Lakhs, and filed NIL return, now the time period for revision


has lapsed, my query is whether he can avail benefit of this

scheme?

Answer: No, the assessee cannot avail the benefit of this scheme as he has

already deposited service tax and filed the return.

Question 42: Can we go for the scheme for the financial year 2011-12 if we

already paid the service tax for the financial year 2012-13

but not paid the service tax for the financial year 2011-12?

Answer: Yes, the assessee is allowed to go for this scheme as he has not

yet paid the service tax for the year 2011-12.

Question 43: If assesses have ST liability of Rs. 1 Crore and having 60

Lakhs as CENVAT Credit. Now he is required to pay 1

Crore or 40 Lakhs in this scheme?

Answer: The assessee cannot pay from CENVAT under this scheme,

hence, he has to pay Rs. 1 Crore and 40 Lakhs credit can be

carry forward as per CENVAT Credit Rules 2004.

Question 44: Proprietorship firm of my client has undergone SIV

investigation for F.Y 2008-09 to 2011-12, so can we follow the

scheme for F.Y. 2012-13.

Answer: No, the assessee is not eligible to follow the scheme now as it is

mentioned in the scheme that “any person on whom

inquiry/investigation/audit has been initiated by way of search of

premises, issue of summons or requiring production of accounts,

documents or other evidence and such inquiry, investigation or

audit is pending as on the 1st day of March, 2013” is not eligible

to avail the benefits of the scheme or enroll for this scheme.

Question 45: Can assessee on whom search was implemented on

01.04.2013 take benefit of the scheme?

Answer: Yes, he can avail the benefit under this scheme.

Question 46: I have applied for registration in December, 2012 under

reverse charge scheme. Can I can get benefit for this

scheme?

Answer: Yes, If the assessee have any short paid or full tax due, he is

eligible to opt for this scheme.

Question 47: One of the clients (a banking institution) had deposited tax

regularly in one of the branch code but now it has taken his

own branch registration so can this scheme be available for

rectifying this error by filing returns.

Answer: No, this scheme is not for rectifying the errors.


Question 48: Where to file VCES-1, because I have get Service Tax

Registration at Chennai and now residing in Udaipur, then

where to file this form?

Answer: The VCES-1 Form shall be submitted to the place where the

assessee is registered, i.e. Chennai.

Question 49: How this scheme applicable for assessee business is covered

under GTA and whether assessee has to register under

ACES if not registered? And what if assessee is died whether

the scheme is applicable for his legal heir?

Answer: The amnesty scheme is applicable for all the assesses who have

tax dues. The nature of service provided is not a bar. Since the

assessee is liable to pay tax for GTA services, he can avail the

scheme. Further, if the assessee is not registered, he shall be

required to get registered under VCES scheme. The main issue is

that the service tax liability has to be discharged. If an assessee

dies, any person who shall be responsible to discharge his dues

can avail the scheme because eventually the service tax liability

is in respect of the service provided and not the person who pays.

Question 50: If notice from service tax audit team received in April 13 for

the period covered under VCES scheme, in such case

whether shall we eligible to go for VCES or not?

Answer: As per the VCES scheme, any person can avail of the scheme

provided no audit or any other proceedings are pending as on 1st

day of March, 2013. If an assessee receives an audit letter for the

period covered in the scheme in the month of April, it shall be

considered that on 1st March, no proceedings were pending as

no prior information was available as on that date. Therefore, the

assessee will be eligible to avail the scheme.

Question 51: Whether I have to file regular pending returns for which

details as submitted with VCES-1 or it would be deemed as

filed upto December, 2012

Answer: The period as covered under the VCES scheme is October 2007

to December 2012. Any tax which is due to be paid within the

said period would be covered under this scheme. Hence, an

assessee availing the benefit of this scheme is not required to file

any regular returns for the period October 2007 to December

2012. However, regular returns will have to be filed for the

subsequent periods.

Question 52: Since Return is not filed, after filing of VCES-1, do the

assessee need to file the return?


Answer: The VCES scheme is a one time amnesty scheme for non filers

and stop filers and is applicable only for a specified period and

no return has to be filed for this period. However, after

December 2012, an assessee will be liable to file regular returns,

contravening which; normal provisions of the Act shall be

applicable as per Section 107 (5).

Question 53: What is the status of Tax Liability for the period from

1/1/2013 till the date of application in form VCES-1? Can

department issue show cause for this period. Should the

assessee discharge the Tax of this period first and then for

the earlier period?

Answer: The provisions of VCES scheme are not applicable for the period

subsequent to December 2012. As has been mentioned in Section

107(5), 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. Hence, the department

can issue show cause notice for the period. There is no

compulsion that the return has to be filed prior to availing the

scheme as the Show Cause Notice if issued will be after 1st

March 2013 and thus will not affect the assessee in availing the

scheme.

Question 54: What will be applicability of this scheme in case of assessee

not filed nil ST returns last 3 years.

Answer: This scheme is applicable for non filers and stop filers who have

‘tax dues’ and is not applicable in case of nil returns. However,

the benefit of Circular No. 97/2007 can be availed as per which

the penalty shall be waived.

Question 55: For making VCES-1 we need to get the registration first,

whereas at the time of registration the superintendent will

ask for latest 3 to 6 months bank statements and will verify

that is there any unpaid service tax liability and not given

registration then what we need to do for applying VCES.

Answer: Registration is a mandatory condition to be fulfilled to avail the

VCES scheme. While applying for the registration under this

scheme, the assessee is required to file an application indicating

the registration being obtained for this scheme. In such a case,

the registration will not be denied to the assessee.

Question 56: Whether Rejection of application is quasi judicial function.

Whether principles of natural justice will be followed?

Whether such rejection is appealable?


Answer: Yes, the principles of natural justice will be followed in case of

rejection. However, rejection of declaration is not appealable.

Question 57: One of our clients has deposited service tax amounting Rs. 5

Lacs, and subsequently filed NIL return now the time period

for revision has lapsed. My query is whether he can avail

benefit of this scheme?

Answer: In order to avail this scheme, it is necessary that an assessee has

not filed a return under section 70 of the Act and if filed, has

paid entire tax liability as disclosed in Return. That being so, if

there comes out to be some outstanding service tax liability as on

1.3.2013 for the period 1.10.2007 to 31.12.2012, one can go for

the scheme. But since the assessee has filed return and deposited

all his tax dues, he can’t avail the benefit of scheme.

Question 58: It is generally said that where a particular type of service is

under review by the dept. for a part of the 5 yr period then

for the same service this scheme will not apply for the

remaining part of the period. That means he can only avail

this scheme for any other service that he is providing - is my

understanding correct?

Answer: Yes, the scheme can be availed in respect of those services for

which no proceedings have been initiated.

Question 59: The proviso stating that where the declaring fails to pay by

the due date is only for Section 107(4) - but whether it can be

applied to Section 107(3) also - if yes, why.

Answer: The proviso to the section is applicable only for sub section 4. It

shall not be applicable to Section 107(3).

Question 60: If an assessee has taxes payable for the quarter of October to

December 2012, which fall due on 7th Jan 2013, Can he opt

for VCES?

Answer: The period being covered in October 2007 to December 2012,

the assessee will be eligible to avail the benefit of this scheme in-

spite of the fact that the due date for service tax from Oct to Dec

2012 is in January 2013.

Question 61: If I paid all the dues before 30th June 14, can the DA will

issue acknowledgement of discharge immediately?

Answer: The acknowledgement of discharge of service tax dues will be

given by the designated authority within a period of 7 days from

the date of furnishing of details of payment of tax dues in full

along with interest, if any, accompanied with VCES-2.

Question 62: Whether show cause notice can be issued even after the

acknowledgement of discharge issued by the DA.


Answer: Yes, In case the designated authority discovers that the assessee

has not disclosed the true liability, show cause notice can be

issued upon him under Section 111 within a year of date of

declaration filed.

Question 63: Whether CENAVT Credit can be taken for payment made

for input services?

Answer: Yes, CENVAT Credit can be taken for payment made for input

services but CENVAT Credit cannot utilized for payment of

service tax under this scheme.

Question 64: An Assessee has received summons issued on 19/10/12 for

renting of immovable properties & maintenance or repairs

services & letter dated 12/07/12 requesting to furnish the

information for service tax on construction of residential

complex for the period 01/07/10 to 31/03/11 & Balance Sheet

& P&L for F.Y. 10-11&11-12. Whether we can go for the

scheme?

Answer:- Rule 106 states that declaration filed by the person on whom

inquiry/investigation/audit has been initiated by way of search of

premises, issue of summons or requiring production of accounts,

documents or other evidence and such inquiry, investigation or

audit is pending as on the 1st day of March, 2013, shall be

rejected by DA by passing a speaking order. In this case, since

the proceedings are pending on 1st March 2013, declaration, if

any, filed shall be rejected by DA.

Question 65: How should an unregistered dealer proceed in this scheme?

What if after applying for registration at first, he is issued

notice just before filing VCES-1. How can he save himself?

Answer: If an assessee has been issued show cause notice on or after

1.3.2013, the same will not be a bar in availing the benefit of this

scheme. Only the persons on whom the proceedings are pending

on 1st March 2013, cannot avail this scheme.

Question 66: Any Service Tax liability incurred before 1st Oct 2007, can

we declare the liability under this scheme? Also, default is

there for Service Tax after 1st Oct, 2007, what is the cure for

default before 1st Oct 2007?

Answer: No, only the liability for the period 1.10.2007 to 31.12.2012 can

be declared under the scheme. For the period prior to 1.10.2007,

ST-3 filed, if any, within the normal time period, no proceedings

can be initiated against the assessee to demand the service tax

since 5 years have already been lapsed. However, for the period

1.10.2007 onwards upto 31.12.2012, assessee can opt to go for

VCES.


Question 67: How to give tax calculation details with VCES-1.

Answer: For calculation of ‘Tax Dues’ as declared in VCES-1, a separate

sheet is to be furnished showing calculation of ‘tax dues’ Tax

Return period wise, and Service wise if the tax dues relates to

more than one service.

Question 68: Whether input credit is not available or service tax liability

would be netted after taking the service tax credit. pls clarify.

Answer: Sub rule (2) of Rule 6 of Service Tax Voluntary Compliance

Encouragement Rules, 2013 prohibits the utilization of

CENVAT credit for payment of tax dues under the Scheme.

Question 69: Should we need to file the working of the Service Tax

Payable along with VCES-1?

Answer: Yes, a separate sheet showing the calculation of ‘Tax Dues’ as

declared in VCES-1 needs to be enclosed.

Question 70: Are returns to be filed or only info in a format?

Answer: Filing of return is not a pre-requisite to make the declaration

under VCES. Only information in the format as prescribed in

Form VCES-1 need to submit. Also, there is no need to file

return consequent to filing of VCES-1 for the period covered in

Declaration.

Question 71: Scheme is applicable for the period October 2007 to

December 2012. If Assessee has defaulted for April 2012 to

June 2012 and for rest of the quarters there is no default,

then whether scheme can be availed for only April 2012 to

June 2012. Assume all other conditions of scheme are

fulfilled.

Answer: Yes, Assessee can opt for the scheme for any period ranging

from October 1st, 2007 and ending on December 31st, 2012 by

following the proper procedure.

Question 72: I want to pay tax under reverse charge on GTA services

availed by me during the year 2010-11 and 2011-12. Can I

claim CENVAT credit of such tax paid under this scheme?

Answer: Yes, Service Recipient is eligible to avail CENVAT Credit of the

tax paid under VCES scheme as no restriction has been imposed

for availing CENVAT credit for the tax paid under the VCES

scheme. Thus, CENVAT Credit can be availed.

Question 73: Assessee has made declaration but later realised that he is

not liable to pay. So he did not pay the taxes. What would be

its consequences?


Answer: The department can invoke the provisions of section 87 of

Finance Act, 1994 for recovery of tax dues declared but not paid

by virtue of Section 110 of Finance Act, 2013.

Question 74: Return filed timely by utilizing the CENVAT Credit which is

not available, realized later. Is it open to go for the scheme

now for payment of service tax short paid?

Answer: Yes, payment of service tax by utilizing the inadmissible amount

of CENVAT Credit would amount to short payment of service

tax.

Question 75: From where should a partnership firm apply for registration

and avail the scheme (Head Office or Branch Office) (Where

services are being rendered in branch office only)

Answer: As per the provisions of Rule 4 of Service Tax Rules, 1994,

registration needs to be taken for the premises from where

taxable services are rendered. Hence, it is branch office which

needs to be registered and declaration to be filed accordingly.

Question 76: Can I go for the scheme if only interest part is unpaid?

Answer: NO, to opt for VCES there must be some part of Service Tax due

or payable pending as on 1.3.2013 for the period 1.10.2007 to

31.12.2012.

Question 77: Service tax is partly paid for period covered by Amnesty

scheme and service tax is partly pending for a certain period

as on 01/03/2013. Can the assessee go for the scheme?

Answer: Yes, assessee can opt for the scheme for ‘Tax Dues’ pertaining

to any part of period ranging from October 1st, 2007 and ending

on December 31st, 2012.

Question 78: If the assessee has not filed his return for the period April 12

to March 2013 and no notice has been received till date can

he opt for the scheme till Dec 12

Answer: Yes, he can opt for the scheme for the period April, 12 to

December, 2012.

Question 79: What would the time to get registration either before filing

the declaration or after filing declaration. what would be

better option?

Answer: Any person, who wishes to make a declaration under the

Scheme, shall, if not already registered, take registration under

Rule 4 of the Service Tax Rules, 1994 before filing the

declaration. There is option available to declarant to apply for

registration either before filing the declaration or after filing

declaration


Question 80: A person obtained Service Tax Registration number since 12

years. Although, his turnover is below the taxable limit,

however, the assessee collected tax from services done but

did not pay any amount so far. Can he go for the scheme now

to pay tax collected from clients?

Answer: Yes, the amount so collected would attract the provisions of

Section 73A of Finance Act, 1994. Hence, the assessee can opt

for the scheme to pay tax now collected from clients.

Question 81: Can an assessee to whom a letter requesting documents for

EA 2000 audit, was received on 26th Feb 2013, however audit

actually started on 10th March 2013, be eligible for the

scheme?

Answer: No, issue of letter demanding the documents for conducting the

audit by department means that audit proceedings have been

initiated as on 26.2.2013. Since the same is pending as 1.3.2013,

he is not eligible for the Amnesty Scheme.

Question 82: After paying 50% of the dues, does the assessee has to wait

until the remaining service tax is paid or can pay his regular

service tax dues?

Answer: The provisions of VCES are not to come in the way of payment

of service tax for the period 1.1.2013 onwards. Assessee has to

pay his regular service tax dues as and when become payable in

accordance with the provisions of Chapter and will attract the

provisions of Finance Act, 1994 for any contravention.

Question 83: Is service tax for quarter 3 said to be due after 01/01/2013?

Answer: NO, service tax becomes due as and when taxable service is

provided or deemed to be provided. In other words, service tax

for the services rendered in Q3 becomes due in Q3 itself. It is

only for the ease of assessee that last due date for payment as

been fixed as 5th/6th of the Quarter immediately following the

Quarter in which POT falls i.e. taxable service is rendered.

Quarter 84: Whether less than 50% of tax due can be paid

upto 31.12.2013 and balance will be paid with interest

upto 31.12.2014?

Answer: No, According to Section 106(3), the assessee has to pay not less

than fifty per cent of the tax dues so declared along with

submission of proof of such payment to the designated authority

on or before the 31st day of December, 2013. It implies that

minimum 50% of the tax dues declared have to be paid up to

31.12.2013 and balance can be paid up to 31.12.2014 along with

interest.


Question 85: What is the service tax rate for the period of 5 years?

Whether we can take it 10% as for financial year 2010-11?

Answer: The service tax rate under VCES shall be the rate that was

applicable in that particular financial year.

Question 86: ABC Pvt. Ltd would like to file declaration under VCES, but

they have received a notice dated 01/06/2013 from the audit

team of Service Tax to submit financial statements for the

period 2008 to 2012. Is M/s ABC Pvt Ltd still eligible for the

scheme?

Answer: Yes, since no audit proceedings have been pending as on

1.3.2013, ABC Pvt. Ltd. is eligible to apply for the scheme.

Question 87: If a person doesn’t pay 50% by December 2013, will it

invalidate his declaration?

Answer: Yes, because as per Section 107(3), the declarant shall, on or

before the 31st day of December, 2013, pay not less than fifty

per cent of the tax dues declared and submit proof of such

payment to the designated authority. So, if the person doesn’t

pay 50% by December, 2013, his declaration will be invalid.

Question 88: A had filed declaration but later realized that he need not

pay the tax and has not paid the taxes can department

initiate proceedings U/s 87?

Answer: Yes, The department can very well invoke the provisions of

section 87 of Finance Act, 1994 for recovery of tax dues

declared but not paid by virtue of Section 110 of Finance Act,

2013.

Question 89: Is demand letter equivalent to notice?

Answer: Yes, demand letter is equivalent to notice because it can be

issued only under the provisions of Section 72, Section 73 or

Section 73A of Finance Act, 1994.

Question 90: Can voluntary scheme be followed by a firm for F.Y 2012-13

who has suffered from Audit & SIV investigation for F.Y

2008-09 to 2011-12?

Answer: No, in case audit or investigation proceedings initiated and

pending as on 1.3.2013, no declaration should be filed and if

filed, shall be rejected by DA by passing a speaking order.

Question 91: What will be the rate applicable-the rate applicable at

different periods or the current rate?

Answer: The service tax rate under VCES shall be the rate that was

applicable at the respective time period and not the current rate.


Question 92: XXX paid Service Tax along with interest for the period

April-June 2012. However, they filed Nil Return earlier.

Since 90 days have been expired, revised return cannot be

filed. XXX did not declare the liability to the department till

date. However the same has been paid. The assessee is opting

the scheme for prior periods. Can the interest paid for the

period Apr-Jun 2012, be claimed against the pending dues?

Answer: No, Amnesty scheme is only for payment of ‘Tax dues’ pending

as on 1.3.2013. It does not allow for refund or adjustment of

amount (i.e. interest and penalty) already paid against tax

liability of future period.

Question 93: We have received a notice for non- payment of tax & non

filling of return, but no section reference is given. Can we

avail the benefit of scheme?

Answer: Yes, as clarified in Circular No. 169/4/2013-ST, dated 13.5.2013

that in case of routine enquiry one can opt to go for the benefit of

scheme.

Question 94: In case notice has been issued or order passed u/s 73 for a

particular service (say Rent-a-Cab service) pertaining to the

period 2007-08 and 2008-09, how can declaration be filed for

“tax dues” pertaining to the period 1.10.2007 to 31.12.2012

pending as on 1.3.2013 not disclosed in ST-3?

Answer: As per the provisions of section 106(1), no declaration can be

filed by assessee for the “Tax dues” pertaining to the period

1.10.2007 to 31.3.2009, which have been adjudicated before

1.3.2013. Further, no declaration can be filed for Rent-a-Cab

service’ even for the period 1.4.2009 onwards because issue has

been adjudicated in respect of prior period.

Question 95: Whether the communications, wherein department has

sought information of roving nature from potential taxpayer

regarding their business activities without seeking any

documents from such person or calling for his presence,

while quoting the authority of section 14 of the Central

Excise Act, 1944, would attract the provision of section 106

(2) (a)?

Answer: Attention is invited to clarification issued at S.No. 4 of the

Circular No. 169/4/2013-ST, dated 13.5.2013, as regards the

scope of section 106 (2) (a) of the Finance Act, 2013, wherein it

has been clarified that the provision of section 106(2)(a)(iii) shall

be attracted only in such cases where accounts, documents or

other evidence are requisitioned by the authorized officer from

the declarant under the authority of a statutory provision. A


communication of the nature as mentioned in the previous

column would not attract the provision of section 106(2)(a) even

though the authority of section 14 of the Central Excise Act may

have been quoted therein.

Question 96: An assessee has two units at two different locations, say

Mumbai and Ahmedabad. Both are separately registered.

The Mumbai unit has received a Show Cause Notice for non-

payment of tax on a revenue stream but the Ahmedabad unit

has not. Whether the Ahmedabad unit is eligible for VCES?

Answer: Two separate service tax registrations are two distinct assessees

for the purposes of service tax levy. Therefore, eligibility for

availing of the Scheme is to be determined accordingly. The unit

that has not been issued a show cause notice shall be eligible to

make a declaration under the Scheme.

Question 97: Whether a declaration can be made under the Scheme in

respect of CENVAT credit wrongly utilized for payment of

service tax?

Answer: Any service tax that has been paid utilizing the irregular credit,

amounts to non-payment of service tax. Therefore such service

tax amount is covered under the definition of “tax dues”.

Question 98: Whether a party, against whom an inquiry, investigation or

audit has been initiated after 1.3.2013 (the cutoff date) can

make a declaration under the Scheme?

Answer: Yes. There is no bar from filing of declaration in such cases.

Question 99: There was a default and a Show Cause Notice was issued for

the period prior to the period covered by the Scheme, i.e.

before October, 2007. Whether declaration can be filed for

default on the same issue for the subsequent period?

Answer: In the context of the Scheme, the relevant period is from

October, 2007 to December, 2012. Therefore, the 2ndproviso to

section 106 (1) shall be attracted only in such cases where a

show cause notice or order of determination has been issued for

the period from October 2007 to December 2012.

Accordingly, issuance of a show cause notice or order of

determination for any period prior to October 2007, on an issue,

would not make a person ineligible to make a declaration under

the Scheme on the same issue for the period covered by the

Scheme. Therefore, declaration can be made under VCES.

Question 100: In a case where the assessee has been audited and an audit

para has been issued, whether the assessee can declare

liability on an issue which is not a part of the audit para,

under the VCES 2013?


Answer: Yes, declarant can declare the “tax dues” concerning an issue

which is not a part of the audit para.

Question 101: Whether a person, who has paid service tax for a particular

period but failed to file return, can take the benefit of VCES

Scheme so as to avoid payment of penalty for non- filing of

return?

Answer: Under VCES a declaration can be made only in respect of “tax

dues”. A case where no tax is pending, but return has not been

filed, does not come under the ambit of the Scheme. However,

rule 7C of the Service Tax Rules provides for waiver of penalty

in deserving cases where return has not been filed and, in such

cases, the assessee may seek relief under rule 7C.

Question 102: A person has made part payment of his ‘tax dues’ on any

issue before the scheme was notified and makes the

declaration under VCES for the remaining part of the tax

dues. Will he be entitled to the benefit of non-payment of

interest/penalty on the tax dues paid by him outside the

VCES, i.e., (amount paid prior to VCES)?

Answer: No. The immunity from interest and penalty is only for “tax

dues” declared under VCES.

If any “tax dues” have been paid prior to the enactment of the

scheme, any liability of interest or penalty thereon shall be

adjudicated as per the provisions of Chapter V of the Finance

Act, 1994 and paid accordingly.

Question 103: Whether an assessee, who, during a part of the period

covered by the Scheme, is in dispute on an issue with the

department under an erstwhile provision of law, can declare

his liability under the amended provisions, while continuing

to litigate the outstanding liability under the erstwhile

provision on the issue?

Answer: In terms of the second proviso to section 106(1), where a notice

or order of determination has been issued to a person in respect

of any issue, no declaration shall be made by such person in

respect of “tax dues” on the same issue for subsequent period.

Therefore, if an issue is being litigated for a part of the period

covered by the Scheme, i.e., Oct, 2007 to Dec 2012, no

declaration can be filed under VCES in terms of the said proviso

on the same issue for the subsequent period.

Question 104: Whether upon filing a declaration a declarant realizes that

the declaration filed by him was incorrect by mistake? Can

he file an amended declaration?


Answer: The declarant is expected to declare his tax dues correctly. In

case the mistake is discovered suomoto by the declarant himself,

he may approach the designated authority, who, after taking into

account the overall facts of the case may allow amendments to

be made in the declaration, provided that the amended

declaration is furnished by declarant before the cut off date for

filing of declaration, i.e., 31.12.2013.

Question 105: What is the consequence if the designated authority does not

issue an acknowledgement within seven working days of

filing of declaration? Whether the declarant can start

making payment of the tax dues even if acknowledgement is

not issued?

Answer: Department would ensure that the acknowledgement is issued in

seven working days from the date of filing of the declaration. It

may however be noted that payment of tax dues under the

Scheme is not linked to the issuance of an acknowledgement.

The declarant can pay tax dues even before the

acknowledgement is issued by the department.

Question 106: 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?

Answer: 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

Question 107: What is the appeal mechanism against the order of the

designated authority whereby he rejects the declaration

under section 106 (2) of the Finance Act, 2013?

Answer: The Scheme does not have a statutory provision for filing of

appeal against the order for rejection of declaration under section

106 (2) by the designated authority.


Question 108: A declarant pays a certain amount under the Scheme and

subsequently his declaration is rejected. Would the amount

so paid by him be adjusted against his liability that may be

determined by the department?.

Answer: The amount so paid can be adjusted against the liability that is

determined by the department.

Question 109: Section 111 prescribes that where the Commissioner of

Central Excise has reasons to believe that the declaration

made by the declarant was ‘substantiallyfalse’, he may serve

a notice on the declarant in respect of such declaration.

However, what constitutes a ‘substantially false’ declaration

has not been specified.

Answer: The Commissioner would, in the overall facts of the case, taking

into account the reasons he has to believe, take a judicious view

as to whether a declaration is ‘substantially false’. It is not

feasible to define the term substantially false” in precise terms.

The proceeding under section 111 would be initiated in

accordance with the principles of natural justice.

To illustrate, a declarant has declared his “tax dues” as Rs 25

lakh. However, Commissioner has specific information that

declaration has been made only for part liability, and the actual

“tax dues” are Rs 50 lakh. This declaration would fall in the

category of “substantially false”.

This example is only illustrative.

Question 110: What is the consequence if a declarant fails to pay atleast

50% of declared amount of tax dues by the 31st Dec 2013?

Answer: One of the conditions of the Scheme [section 107 (3)] is that the

declarant shall pay atleast an amount equal to 50% of the

declared tax dues under the Scheme, on or before the

31.12.2013. Therefore, if the declarant fails to pay atleast 50% of

the declared tax dues by 31st Dec, 2013, he would not be eligible

to avail of the benefit of the scheme.

Question 111: Whether the CENVAT credit is admissible on the

inputs/input services used for provision of output service in

respect of which declaration has been made under VCES for

payment of any tax liability outside the VCES?

Answer: The VCES Rules 2013 prescribe that CENVAT credit cannot be

utilized for payment of “tax dues” under the Scheme.

Accordingly the “tax dues” under the Scheme shall be paid in

cash. The admissibility of CENVAT credit on any inputs and

input services used for provision of output service in respect of


which declaration has been made shall continue to be governed

by the provisions of the Cenvat Credit Rules, 2004.

Question 112: (a) Whether the tax dues amount paid under VCES would be

eligible as CENVAT credit to the recipient of service under a

supplementary invoice?

(b) Whether cenvat credit would be admissible to the person

who pays tax dues under VCES as service recipient under

reverse charge mechanism?

Answer: Rule 6(2) of the Service Tax Voluntary Compliance

Encouragement Rules, 2013, prescribes that CENVAT credit

cannot be utilized for payment of “tax dues” under the Scheme.

Except this condition, all issues relating to admissibility of

CENVAT credit are to be determined in terms of the provisions

of the Cenvat Credit Rules.

As regards admissibility of CENVAT credit in situations covered

under part (a) and (b), attention is invited to rule 9(1)(bb) and

9(1)(e) respectively of the Cenvat Credit Rules.

Question 113: In terms of section 106 (2)(b), if a declaration made by a

person against whom an audit has been initiated and where

such audit is pending, then the designated authority shall by

an order and for reasons to be recorded in writing, reject

such declaration. As the audit process may involve several

stages, it may be indicated as to what event would constitute,-

(i) initiation of audit; and

(ii) culmination of audit.

Answer: Initiation of audit: For the purposes of VCES, the date of the

visit of auditors to the unit of the taxpayer would be taken as the

date of initiation of audit. A register is maintained of all visits for

audit purposes.

Culmination of audit: The audit process may culminate in any of

the following manner.—

(i) Closure of audit file if no discrepancy is found in audit;

(ii) Closure of audit para by the Monitoring Committee

Meeting (MCM);

(iii) Approval of audit para by MCM and payment of amount

involved therein by the party in terms of the provisions of

the Finance Act, 1994;

(iv) Approval of audit para by MCM, and issuance of SCN, if

party does not agree to the paraso raised.


The audit culminates at a point when the auditparas raised are

settled in any manner as stated above.

The pendency of audit as on 1.3.2013 means an audit that has

been initiated before 1.3.2013 but has not culminated as on

1.3.2013.

CHAPTER 8

DEPARTMENTAL CIRCULAR ON THE AMNESTY

SCHEME CIRCULAR No. 170/5 /2013-ST

The Service Tax Voluntary Compliance Encouragement Scheme —

Clarifications Regarding

Circular No. 170/5 /2013-ST [F. No. B1/19/2013-TRU (Pt)], dated 8-8-2013

The Service Tax Voluntary Compliance Encouragement Scheme (VCES) has

come into effect from 10.5.2013. Some of the issues raised with reference to the

Scheme have been clarified by the Board vide circular No. 169/4/2013-ST, dated

13.5.2013. Subsequently, references have been received by the Board seeking

further clarifications as regards the scope and applicability of the Scheme.

2. The issues have been examined and clarifications thereto are as follows:

S No. Issues Clarification

1 Whether the communications,

wherein department has sought

information of roving nature from

potential taxpayer regarding their

business activities without

seeking any documents from such

person or calling for his presence,

while quoting the authority of

section 14 of the Central Excise

Act, 1944, would attract the

provision of section 106(2)(a)?

Attention is invited to clarification issued

at S. No. 4 of the circular No.

169/4/2013–ST, dated 13.5.2013, as

regards the scope of section 106(2)(a) of

the Finance Act, 2013, wherein it has

been clarified that the provision of

section 106 (2)(a)(iii) shall be attracted

only in such cases where accounts,

documents or other evidence are

requisitioned by the authorized officer

from the declarant under the authority of

a statutory provision.

A communication of the nature as

mentioned in the previous column would

not attract the provision of section 106

(2)(a) even though the authority of

section 14 of the Central Excise Act may

have been quoted therein.

2 An assessee has two units at two

different locations, say Mumbai

and Ahmedabad. Both are

separately registered. The

Mumbai unit has received a Show

Cause Notice for non-payment of

tax on a revenue stream but the

Ahmedabad unit has not. Whether

the Ahmedabad unit is eligible for

VCES?

Two separate service tax registrations are

two distinct assessees for the purposes of

service tax levy. Therefore, eligibility for

availing of the Scheme is to be

determined accordingly. The unit that has

not been issued a show cause notice shall

be eligible to make a declaration under

the Scheme.



3 Whether a declaration can be

made under the Scheme in respect

of CENVAT credit wrongly

utilized for payment of service

tax?

Any service tax that has been paid

utilizing the irregular credit, amounts to

non-payment of service tax. Therefore

such service tax amount is covered under

the definition of “tax dues”.

4 Whether a party, against whom an

inquiry, investigation or audit has

been initiated after 1.3.2013 (the

cutoff date) can make a

declaration under the Scheme?

Yes. There is no bar from filing of

declaration in such cases.

5 There was a default and a Show

Cause Notice was issued for the

period prior to the period covered

by the Scheme, i.e. before Oct

2007. Whether declaration can be

filed for default on the same issue

for the subsequent period?

In the context of the Scheme, the relevant

period is from Oct 2007 to Dec 2012.

Therefore, the 2nd

proviso to section 106

(1) shall be attracted only in such cases

where a show cause notice or order of

determination has been issued for the

period from Oct 2007 to Dec 2012.

Accordingly, issuance of a show cause

notice or order of determination for any

period prior to Oct 2007, on an issue,

would not make a person ineligible to

make a declaration under the Scheme on

the same issue for the period covered by

the Scheme. Therefore, declaration can

be made under VCES.

6 In a case where the assessee has

been audited and an audit para has

been issued, whether the assessee

can declare liability on an issue

which is not a part of the audit

para, under the VCES 2013?

Yes, declarant can declare the “tax dues”

concerning an issue which is not a part of

the audit para.

7 Whether a person, who has paid

service tax for a particular period

but failed to file return, can take

the benefit of VCES Scheme so as

to avoid payment of penalty for

non- filing of return?

Under VCES a declaration can be made

only in respect of “tax dues”. A case

where no tax is pending, but return has

not been filed, does not come under the

ambit of the Scheme. However, rule 7C

of the Service Tax Rules provides for

waiver of penalty in deserving cases

where return has not been filed and, in

such cases, the assessee may seek relief

under rule 7C.

8 A person has made part payment

of his ‘tax dues’ on any issue

before the scheme was notified

and makes the declaration under

VCES for the remaining part of

the tax dues. Will he be entitled to

No. The immunity from interest and

penalty is only for “tax dues” declared

under VCES.

If any “tax dues” have been paid prior to

the enactment of the scheme, any liability

of interest or penalty thereon shall be



the benefit of non-payment of

interest/penalty on the tax dues

paid by him outside the VCES,

i.e., (amount paid prior to VCES)?

adjudicated as per the provisions of

Chapter V of the Finance Act, 1994 and

paid accordingly.

9 Whether an assessee, who, during

a part of the period covered by the

Scheme, is in dispute on an issue

with the department under an

erstwhile provision of law, can

declare his liability under the

amended provisions, while

continuing to litigate the

outstanding liability under the

erstwhile provision on the issue?

In terms of the second proviso to section

106 (1), where a notice or order of

determination has been issued to a person

in respect of any issue, no declaration

shall be made by such person in respect

of “tax dues” on the same issue for

subsequent period. Therefore, if an issue

is being litigated for a part of the period

covered by the Scheme, i.e., Oct, 2007 to

Dec 2012, no declaration can be filed

under VCES in terms of the said proviso

on the same issue for the subsequent

period.

10 Whether upon filing a declaration

a declarant realizes that the

declaration filed by him was

incorrect by mistake? Can he file

an amended declaration?

The declarant is expected to declare his

tax dues correctly. In case the mistake is

discovered suo-moto by the declarant

himself, he may approach the designated

authority, who, after taking into account

the overall facts of the case may allow

amendments to be made in the

declaration, provided that the amended

declaration is furnished by declarant

before the cut off date for filing of

declaration, i.e., 31.12.2013.

11 What is the consequence if the

designated authority does not

issue an acknowledgement within

seven working days of filing of

declaration? Whether the

declarant can start making

payment of the tax dues even if

acknowledgement is not issued?

Department would ensure that the

acknowledgement is issued in seven

working days from the date of filing of

the declaration. It may however be noted

that payment of tax dues under the

Scheme is not linked to the issuance of

an acknowledgement. The declarant can

pay tax dues even before the acknowled-

gement is issued by the department.

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.

13 What is the appeal mechanism

against the order of the designated

authority whereby he rejects the

declaration under section 106(2)

of the Finance Act, 2013?

The Scheme does not have a statutory

provision for filing of appeal against the

order for rejection of declaration under

section 106(2) by the designated

authority.

14 A declarant pays a certain amount

under the Scheme and

subsequently his declaration is

rejected. Would the amount so

paid by him be adjusted against

his liability that may be

determined by the department?

The amount so paid can be adjusted

against the liability that is determined by

the department.

15 Section 111 prescribes that where

the Commissioner of Central

Excise has reasons to believe that

the declaration made by the

declarant was ‘substantially false’,

he may serve a notice on the

declarant in respect of such

declaration. However, what

constitutes a ‘substantially false’

declaration has not been specified.

The Commissioner would, in the overall

facts of the case, taking into account the

reasons he has to believe, take a judicious

view as to whether a declaration is

‘substantially false’. It is not feasible to

define the term “substantially false” in

precise terms. The proceeding under

section 111 would be initiated in

accordance with the principles of natural

justice.

To illustrate, a declarant has declared his

“tax dues” as Rs 25 lakh. However,

Commissioner has specific information

that declaration has been made only for

part liability, and the actual “tax dues”

are Rs 50 lakh. This declaration would

fall in the category of “substantially

false”.

This example is only illustrative.

16 What is the consequence if a

declarant fails to pay atleast 50%

One of the conditions of the Scheme

[section 107(3)] is that the declarant shall



of declared amount of tax dues by

the 31st Dec 2013?

pay atleast an amount equal to 50% of

the declared tax dues under the Scheme,

on or before the 31.12.2013. Therefore, if

the declarant fails to pay atleast 50% of

the declared tax dues by 31st Dec, 2013,

he would not be eligible to avail of the

benefit of the scheme.

17 Whether the CENVAT credit is

admissible on the inputs/input

services used for provision of

output service in respect of which

declaration has been made under

VCES for payment of any tax

liability outside the VCES?

The VCES Rules 2013 prescribe that

CENVAT credit cannot be utilized for

payment of “tax dues” under the Scheme.

Accordingly the “tax dues” under the

Scheme shall be paid in cash.

The admissibility of CENVAT credit on

any inputs and input services used for

provision of output service in respect of

which declaration has been made shall

continue to be governed by the

provisions of the Cenvat Credit Rules,

2004.

18 (a) Whether the tax dues amount

paid under VCES would be

eligible as CENVAT credit to the

recipient of service under a

supplementary invoice?

(b) Whether cenvat credit would

be admissible to the person who

pays tax dues under VCES as

service recipient under reverse

charge mechanism?

Rule 6(2) of the Service Tax Voluntary

Compliance Encouragement Rules, 2013,

prescribes that CENVAT credit cannot

be utilized for payment of “tax dues”

under the Scheme. Except this condition,

all issues relating to admissibility of

CENVAT credit are to be determined in

terms of the provisions of the Cenvat

Credit Rules.

As regards admissibility of CENVAT

credit in situations covered under part (a)

and (b), attention is invited to rule

9(1)(bb) and 9(1)(e) respectively of the

Cenvat Credit Rules.

19 In terms of section 106 (2)(b), if a

declaration made by a person

against whom an audit has been

initiated and where such audit is

pending, then the designated

authority shall by an order and for

reasons to be recorded in writing,

reject such declaration. As the

audit process may involve several

stages, it may be indicated as to

what event would constitute,—

(i) initiation of audit; and

(ii) culmination of audit.

Initiation of audit: For the purposes of

VCES, the date of the visit of auditors to

the unit of the taxpayer would be taken as

the date of initiation of audit. A register

is maintained of all visits for audit

purposes.

Culmination of audit: The audit process

may culminate in any of the following

manner.—

(i) Closure of audit file if no

discrepancy is found in audit;

(ii) Closure of audit para by the Moni-

toring Committee Meeting (MCM);



(iii) Approval of audit para by MCM

and payment of amount involved

therein by the party in terms of the

provisions of the Finance Act,

1994;

(iv) Approval of audit para by MCM,

and issuance of SCN, if party does

not agree to the para so raised.

The audit culminates at a point when the

audit paras raised are settled in any

manner as stated above.

The pendency of audit as on 1.3.2013

means an audit that has been initiated

before 1.3.2013 but has not culminated as

on 1.3.2013.

3. Trade Notice/Public Notice may be issued to the field formations and tax

payers.