VCES payment credited to the wrong head but corrected in time counted as valid compliance under the beneficial scheme.

Payment made under the Service Tax Voluntary Compliance Encouragement Scheme was treated as valid compliance where the amount, initially credited under the wrong accounting heads, was corrected to the service tax head before the statutory deadline. The scheme required declaration, payment of at least fifty per cent by 31 December 2013, balance by 30 June 2014, and discharge acknowledgment after full payment. Once the Department adjusted the amount to the correct tax head within time, the declared tax dues stood paid in accordance with section 107. Denial of the scheme benefit on the basis of the original accounting code was held to be hyper-technical and unsustainable, and issuance of Form VCES-3 was required.

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Issues: Whether the declarant under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 had complied with the requirement of payment of the declared tax dues within the time prescribed under section 107 of the Finance Act, 2013, where part of the amount was initially paid under the wrong accounting head and later corrected to the service tax head.

Analysis: The Scheme required a declaration under section 107(1), payment of not less than fifty per cent of the declared tax dues by 31 December 2013 under section 107(3), and payment of the balance by 30 June 2014 under section 107(4), followed by issuance of discharge acknowledgment under section 107(7) upon full payment. The amount initially credited under the heads of interest and penalty was, on the declarant's request, corrected by the Department to the service tax accounting head before the due date. Once such adjustment was made, the amount stood paid towards tax dues within the statutory time limit. The refusal to grant the benefit on the ground of the original accounting head was treated as a hyper-technical objection inconsistent with the object of the beneficial scheme.

Conclusion: The declarant had satisfied the statutory conditions of section 107, and the denial of VCES benefits was unsustainable. The petitioner succeeded, and the authority was required to issue Form VCES-3.

Ratio Decidendi: Under a beneficial voluntary compliance scheme, payment corrected to the proper tax head within the prescribed time must be treated as valid compliance with the statutory payment requirement, and the benefit cannot be denied on a merely technical objection as to the original accounting code.

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