PROCEDURAL ASPECTS OF VOLUNTARY COMPLIANCE ENCOURAGEMENT SCHEME, 2013

VATSAL KAKKARB.com., LL.B.

How to make a declaration and comply with the scheme

The procedure to be followed for filing declaration and thereafter its compliance has been laid out u/s 107 of the Chapter VI of the Finance Act, 2013 read with Rules 4, 5, 6 & 7 of the Service Tax Voluntary Compliance Encouragement Rules, 2013.

If the declarant  is not registered, then he is first required to get himself registered and then apply for this scheme. 

Notification No 10/2013-ST dated 13.5.2013 - to give effect to VCES, 2013. It prescribes rules and forms to implement the scheme.

Following rules are relevant-Rule 3 RegistrationRule 4 Form of declarationRule 5 Form of acknowledgement of declarationRule 6 Payment of tax duesRule 7 Form of acknowledgement of discharge

Following forms have been prescribed-Form VCES 1 Declaration u/r 4Form VCES 2 Acknowledgement of declaration u/r 5Form VCES-3 Acknowledgment of discharge u/r 7.

Along with the declaration in form VCES-1, a calculation sheet of tax dues is to be attached. The calculations should be in form as per Sr No. 3F(I) of old ST-3 for the period 1-10-2007 to 30-6-2012. and in form as per Part B of new ST-3 for the period 1-7-2012 to 31-12-2012.

A declaration under this scheme shall be submitted to the Designated Officer (DO) [an officer not below the rank of Assistant Commissioner as may be notified by the Commissioner – sec 105(1)(c)].

The form to be used for this purpose is Form VCES-1. This declaration shall have to be filed positively by 31.12.2013.

Declaration has to be made in duplicate regarding the tax dues.VCES-1 is in two parts- declaration and verification duly signed and dated by the declarant.VCES-1 declaration shall contain the following particulars/ information -

Name & address of declarantTelephone No. & email id.Service Tax Registration Code No.Details of tax dues (Service tax, Education Cess, Secondary &

Higher Education Cess, amount u/s 73A)Calculation sheet for tax dues should be furnished tax return

period wise and service wise.

Upon receiving such a declaration the DO shall acknowledge the same by issuing a receipt in Form VCES-2 within a period of 7 working days from the date of receipt of declaration.

The declarant shall pay the tax as declared by him in Form VCES-1 as follows:

Not less than 50% of total tax dues – on or before 31.12.2013Balance Tax dues shall be paid:

By 30.06.2014 – without interestOn and from 01.07.2014 – along with interest as applicable u/s 75 or 73B

The declarant shall furnish particulars of such tax payment to the DO from time to time. With every such intimation, the declarant shall annex a copy VCES-2.

It is most important to note here that the declared tax dues cannot be paid by utilization of Cenvat Credit balance available with the declarant, if any. [Rule 6(2) of VCES Rules 2013]

Immunity provided under the VCES

The newly enacted Section 108 of Chapter VI contains a very strong non-obstante clause which has an overriding effect on the complete Chapter V (Service Tax Law) of the Finance Act, 1994.

While providing immunity, it states that not withstanding 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 107 and the interest payable under the proviso to sub-section (4) thereof, shall get immunity from penalty, interest and other proceeding under the Chapter.

Further sub-section 2 of section 108 (Immunity from penalty, interest and other proceedings) states that subject to the provisions of section 111(Failure to make true disclosure), a declaration made under sub-section (1) of section 107 shall become conclusive upon issuance of acknowledgement of discharge under sub-section (7) of section 107 [Form VCES-3] 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.   

Rule 7(2) of the Service Tax Voluntary Compliance Encouragement Rules, 2013

“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.”

Consequences of making wrong declaration u/s 107

Under the scheme, on one hand where huge amnesty is being offered for assessees and other persons who might have tax dues, on the other hand stringent safeguards have also been implemented for smooth working of the scheme and to keep a check on “habitual wrong doers”.

Section 111 states that before the expiry of one year from date of any declaration, if the Commissioner of Central Excise has reasons to believe that any declaration made under the VCES is substantially false, then after recording such reasons in writing he may service show cause notice (which shall be deemed to have been served u/s 73 or 73A).

Upon serving of such SCN, all provisions of Chapter V shall apply accordingly. Therefore, while making any declaration, every person must be extremely cautious as regards calculation of his tax dues. However, on close examination it appears that only “substantial false” declaration is liable to be questioned u/s 111 which indicates that there exists a scope for pleading the age old theories of “reasonable cause, mens-rea & materiality”

Refund of Tax Paid

Section 109 – Any amount paid in pursuance of declaration made shall not be refundable under any circumstances.

Declare your service tax dues voluntarily and ….

…..RELAX!