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VCES Circular-ST Case Law

Circular No. 176/2/2014 - ST
F. No. B1/19/2013-TRU (Pt)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
Tax Research Unit
 New Delhi, dated the 20th January, 2014
Chief Commissioners of Central Excise and Customs (All),
Director General (Service Tax), Director General (Systems),
Director General (Central Excise Intelligence), Director General (Audit),
Commissioners of Service Tax (All),
Commissioners of Central Excise (All),
Commissioners of Central Excise and Customs (All)

Subject: Clarification regarding issue of Discharge Certificate under VCES and availment of CENVAT credit - regarding.
          Trade and Industry has sought clarification as to whether the first installment of tax dues paid under Voluntary Compliance Encouragement Scheme (VCES), 2013 would be available as Cenvat Credit immediately after payment or Cenvat credit can be availed only after payment of tax dues in full and receipt of Acknowledgement of Discharge in form VCES-3.
2.       The issue has been examined. As per VCES, under Section 108 (2) of the Finance Act, 2013, a declaration made under Section 107 (1) shall become conclusive only upon issuance of acknowledgement of discharge under Section 107 (7). Further, in terms of Rule 7 of the Service Tax VCES Rules 2013, the acknowledgement of discharge in form VCES-3 shall be issued within a period of 7 working days from the date of furnishing of details of payment of tax dues in full along with interest, if any, by the declarant.
3.     It would be in the interest of VCES declarants to make payment of the entire service tax dues at the earliest and obtain the discharge certificate within 7 days of furnishing the details of payment. As already clarified in the answer to question No.22 of FAQ issued by CBEC dated 08.08.2013, eligibility of CENVAT credit would be governed by the CENVAT Credit Rules, 2004.
4.      Chief Commissioners are also advised that upon payment of the tax dues in full, along with interest, if any, they should ensure that discharge certificate is issued promptly and not later than the stipulated period of seven days.
Yours sincerely,

(S. Jayaprahasam)
Technical Officer, TRU
Tel: 011-2309 2037

Service recipient is required to reimburse Service Tax paid by the Service provider

We are sharing with you an important judgement of the Hon'ble Allahabad High Court  in the case of M/s Bhagwati Security Services (Regd.) Versus Union of India [2013 (11) TMI 649] on the following issue:


Whether the service provider can get the reimbursement of service tax already paid by him, from the service recipient?

Facts of the case:

M/S. Bhagwati Security Services (Regd.), the Petitioner ("the Assessee" or "the Company") was providing security services under the service Agreement ("the Agreement") to BSNL. The Company deposited service tax to the Department on the basis of demand raised by the authorities. Thereafter, the Company applied for reimbursement of service tax from BSNL, which was denied on the ground that the same was not provided in the Agreement. The Company filed petition in the High Court.
The Hon'ble High Court after going through the Agreement and other legal provisions of the Finance Act and rules thereof held that:

§  Service tax is statutory liability. It is a tax which is required to be collected by the service provider from the person to whom service is provided, and thereafter to be deposited with Government treasury within the prescribed time.

§  Thus, essentially the statute is being imposing the tax upon the person to whom service is being provided and the service provider is merely a collecting agency.

§  BSNL (i.e. service recipient) directed to make reimbursement of service tax to the petitioner without further delay.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.


Court No. – 33

Case :- WRIT TAX No. - 870 of 2007

Petitioner :- M/S Bhagwati Security Services (Regd.)
Respondent :- Union Of India & Others
Petitioner Counsel :- Virendra Kumar,Virendra Singh
Respondent Counsel :- A.S.G.I.,A. Nigam,S.C.,S.Chopra.,Subodh Kumar,Suneel Rai,Sunil Rai 

Hon'ble Sushil Harkauli,J. 

Hon'ble Naheed Ara Moonis,J.
Heard learned counsel for the petitioner and the learned counsel appearing on behalf of
the respondent No.2, and seen the record.There is an agreement between the petitioner and the respondent no.2 i.e.B.S.N.L., under which the petitioner was required to provide security services to the respondent no.2. under agreement between the two parties. The agreement contained the terms of payment.Subsequently service tax was demanded from the petitioner which has been deposited by the petitioner . The petitioner applied before the respondent no.2 for reimbursement of the service tax, which request has been denied by the respondent no.2 by the impugned order. 
Only reason given for denying the reimbursement of the service tax is that the same was not contemplated in the service agreement. Having gone through the agreement and the provisions of the relevant statute, we find that service tax is statutory liability. It is a tax which is required to be collected by the service provider from the person to whom service is provided, and thereafter to be deposited with government treasury within the prescribed time.Thus essentially the statute is being imposing the tax upon the person to whom service is being provided, and the service provider is merely a collecting agency. In that view of the matter, the writ petition is allowed. The respondent no.2 is directed to make reimbursement of service tax to the petitioner without further delay. 
Order Date :- 16.1.2013 


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