Settlement of tax arrears under the service tax scheme fixes reduced payable amounts for service tax, interest and penalties.

Settlement under the Service Tax Dispute Resolution Scheme, 2008 fixes amounts payable for declared tax arrear by reference to prescribed reduced rates determined according to whether the arrear arose from an adjudicating authority's determination or from a show cause or demand notice. The Scheme treats service tax amounts and interest/penalty components separately, caps certain service tax treatment, and provides that where penalty exceeds the related service tax amount the service tax amount shall be considered the penalty.

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