2026-VIL-1859-CESTAT-CHE-ST
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SERVICE TAX CESTAT Cases

Service Tax - Rejection of declaration under Voluntary Compliance Encouragement Scheme, 2013 as substantially false under Section 111 of Finance Act, 2013 - Appellant, a civil contractor and subcontractor, filed a declaration for the period up to 31.12.2012 and paid the declared dues, the investigation commenced after 01.03.2013, and the Department computed a higher liability from the books, Form 26AS, work orders and invoices on the view that the declaration was substantially false - Whether the rejection of the declaration is sustainable and whether the amount paid is refundable - HELD - No investigation was pending against the Appellant as on 01.03.2013, the relevant date for eligibility, and the subsequent investigation could not retrospectively make the Appellant ineligible. Section 111 requires reason to believe that the declaration was substantially false, which cannot be established merely by comparing the amount declared with a higher amount worked out by the Department. The difference arose from particular transactions ascertainable from contemporaneous records, the Appellant did not deny the contracts or receipts, and it explained the treatment adopted with reference to the tax paid by the principal contractors, Form 26AS entries, classification, the composition scheme and free supplies. Payment of Service Tax by a principal contractor does not automatically discharge the independent liability of a sub-contractor, but a difference of opinion on taxability, classification or valuation does not by itself establish substantial falsity - The rejection of the declaration is unsustainable, but in view of Section 109 the amount paid under the Scheme is not refundable merely because the demand is set aside - Limitation and extended period under Section 73(1) of Finance Act, 1994 where SCN was issued under Section 111 of Finance Act, 2013 after a VCES declaration - SCN was issued in December 2014 for the period from April 2008 to December 2012, and the Department contended that the true liability was not disclosed in the declaration and was detected during investigation - Whether the demand is barred by limitation, whether the VCES declaration restarts limitation and whether the extended period, interest and penalty are sustainable - HELD - Limitation must be determined return-period-wise with reference to the relevant date under Section 73(6), and for the last return period the normal period of eighteen months expired before the SCN. Section 111(3) merely attracts the machinery of Section 73 and does not substitute the date of the VCES declaration for the relevant date, so the declaration cannot be a fresh starting point of limitation. Mere non-payment cannot amount to suppression, and the burden of establishing suppression rests on the Revenue. The demand was reconstructed from the Appellant's books of account, ST-3 returns, Form 26AS, work orders and invoices, and the disputes arose from differing legal characterisation of the receipts, which do not establish deliberate withholding of information with intent to evade tax - The extended period is not invocable, the entire demand is barred by limitation, the demand, interest and penalty are set aside without examination of the merits and the appeal is allowed.
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