The concepts of confession and absolution are rooted in human history and religion—it is hardly a surprise that they would permeate into the legal realm as well. After all, amnesty schemes in tax laws are nothing but an extension of the aforesaid concepts. India has experimented with tax amnesty schemes in the past with mixed results. In the past, the government brought VDIS scheme under income tax and the Kar Vivad Samadhan Scheme for indirect taxes. The newly introduced Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) embodies the concepts of confession and absolution specifically in the context of service tax by providing for amnesty vis à vis specified scenarios of transgression of service tax laws.
The eligibility for VCES is restricted to service providers who have not paid service tax or filed service tax returns for the period October 2007 to December 2012. In order to avail the benefit of VCES, the taxpayer would be required to pay the due tax which, if accepted by the tax authorities, will lead to an immunity from the levy of interest, penalty and any other proceedings under Chapter V of the Finance Act, 1994 (hereafter, the Act).
VCES is not an open-ended scheme available to all taxpayers. The benefit of VCES cannot be availed if a show-cause notice or adjudication order has been passed before March 1, 2013, vis à vis the service tax default. Similarly, where an enquiry or an investigation has been initiated in relation to the service tax due in question by way of search of premises, issuance of summons or requisitioning of accounts, documents and other evidence in relation to such enquiry or investigation before March 1, 2013, VCES cannot be availed.
Despite the apparent benefits, till recently, the response to VCES has been lukewarm. This can probably be attributed to the lack of clarity prevailing till recently pertaining to the ambit of the restrictions on the availing of VCES. Like whether a party, against whom an inquiry, investigation or audit has been initiated after March 1, 2013, can avail VCES or when can an enquiry/investigation be said to have been initiated or when an assessee has been audited and audit para issued on a specific issue, whether VCES can be availed for a issue that the audit para doesn’t cover, etc. There were doubts on important aspects, the most crucial of which is whether the service tax amount