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Budget 2013-14 – Amnesty Scheme for Service Tax Defaulters

14-Mar-2013

Budget 2013-14 – Amnesty Scheme for Service Tax Defaulters

Budget 2013-14 – Amnesty Scheme for Service Tax Defaulters

The Budget of 2013-2014 pronounced by Hon. Finance Minister on 28th Feb 2013 is very multifold; many more steps have taken to increase the revenue. Simultaneously, privileges are given to the defaulters to regularize themselves. The Amnesty Scheme for service tax defaulter is also a welcome step proposed by Hon. Finance Minister. The Silent features of the propose scheme are summarized in part A hereunder and the details steps of the said scheme are enumerated in part B.

Part A:- Voluntary Compliance Encouragement Scheme, 2013 (VCES) – To motivate about 10 lakh of those registered assesses of service tax, who are not filing returns and paying tax dues, the Finance Minister has proposed to introduce a one-time scheme called ‘Voluntary Compliance Encouragement Scheme’ in 2013-14 Budget proposals. Under this scheme a defaulter can file a truthful declaration of service tax dues since 1st October, 2007 and make the payment in one or two installments before prescribed dates. In such a case, interest, penalty and other consequences will be waived.1 Scheme is proposed to be introduced to encourage voluntary compliance with the following main features:

  1. The scheme can be availed of by non-filers or stop-filers or persons who have not made a truthful declaration in their return. However it will not be applicable to persons against whom any inquiry or investigation is pending by the issue of search warrant or summon or by way of audit;
  2. The defaulter will be required to make a truthful declaration of all his pending tax dues (from October1, 2007 to December 31, 2012) and pay at least half of that before December 31, 2013; remaining half to be paid by:
    1. June 30, 2014 without interest; or
    2. By December 31, 2014 with interest from July 1, 2014 onwards;
    1. On compliance with all the requirements the person will have immunity from interest (as specified), penalties and other proceedings;
    2. The scheme will come into force when the Finance Bill is enacted. It is clarified that the tax-payers will need to settle their dues for the period after December 31, 2012 under the present law.

Part B

CHAPTER VI SERVICE TAX VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME, 2013

Short title

94. This Scheme may be called the Service Tax Voluntary Compliance Encouragement Scheme, 2013.

95.

    1. In this Scheme, unless the context otherwise requires,—
      1. “Chapter” means Chapter V of the Finance Act, 1994;
      2. 32of 1994 .
      3. “Declarant” means any person who makes a declaration under sub-section (1) of section 97;
      4. “Designated authority” means an officer not below the 15 rank of Assistant Commissioner of Central Excise as Notified by the Commissioner of Central Excise for the Purposes of this Scheme;
      5. “Prescribed” means prescribed by rules made under this Scheme;
      6. “tax dues” means the service tax due or payable under the Chapter or any other amount due or payable u/s. 73A 20 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 there under.

Person who May make Declaration of Tax dues

    1. 96. Any person may declare his tax dues in respect of 25 which no notice Oran order of determination u/s. 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 u/s70 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:

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      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.

  • Where a declaration has been made by a person against whom,—
    1. An inquiry or investigation in respect of a service tax not 35 levied or not paid or short-levied or short-paid has been initiated by way of —
      1. Search of premises under section 82 of the Chapter; or
      2. Issuance of summons under section 14 of the Central 1 of 1944. Excise Act, 1944, as made applicable to the Chapter under section 83 thereof; or
      3. Requiring production of accounts, documents or other 40 evidence under the Chapter or the rules made thereunder;
      4. or
    2. 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.

Procedure for Making declaration and payment of tax dues.

97.
  1. (1) Subject to the provisions of this Scheme, a person 45 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, 50 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 5 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 10 delay in payment thereof, shall also be payable under the Chapter.
  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 15 acknowledgement of discharge of such dues to the declarant in such form and in such manner as may be prescribed.
98.
  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. (Immunity from penalty, interest and other proceeding.)
  2. 20
  3. 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.
99. Any amount paid in pursuance of a declaration made 25 under sub-section (1) of section 97 shall not be refundable under any circumstances. (No refund of amount paid under the Scheme.) 100. 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. (Tax dues declared but not paid.) 101.
  1. Where the Commissioner of Central Excise has 30 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. (Failure to make true declaration.)
  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 35 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.
102. 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. (Removal of doubts) 40 103.
  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: (Power to remove difficulties.) 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 45 may be after it is made, be laid before each House of Parliament.
104.
  1. The Central Government may, by notification in the Official Gazette, make rules for carrying out the provisions of this Scheme. (Power to make rules)
  2. Without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:—
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    1. the form and the manner in which a declaration may be made under sub-section (1) of section 97;
    2. the form and the manner of acknowledging the declaration under sub-section (2) of section 97;
    3. the form and the manner of issuing the acknowledgement of discharge of tax dues under sub-section (7) of section 97;
    4. any other matter which is to be, or may be, prescribed, or in respect of which provision is to be made, by rules.
    5. 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.

Disclaimer

The above proposed scheme is just on paper today. There are going to be many more suggestions, amendments, deletions or re-constructions in drafting the final scheme before enactment. However, we can consider the above as a pathway or guideline to clean oneself who is the defaulter in service tax. Indeed, it is a very good scheme if enacted as pronounced above particularly for the defaulters. On the other hand, it is a curse to the honest and regular tax payers. Because those are sincere and timely payer of the tax and the proposed scheme is an injustice to them. Such a scheme introduced in the Income Tax Act during year 2000 called as VDIS means Voluntary Disclosure of Income Scheme had been challenged as unconstitutional in the court of law. Similarly, this proposed amnesty scheme could also be challenged as unconstitutional in any of the court of law. Hope it may not happen.

However, in the view of the Finance Minister, this scheme may be his Master Stroke but in view of the honest assesses it is nothing but only a Defaulter Friendly Scheme.

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