Service tax compliance scheme interest was confined to pre-scheme payments, not the entire declared dues.

Interest under the Service Tax Voluntary Compliance Encouragement Scheme could not be levied on the entire declared dues where part of the tax was paid after the scheme was introduced and before the cut-off date. The clarification issued by CBEC was read to mean that immunity from interest and penalty attached only to the tax dues declared under the scheme, while amounts already paid before the scheme could still attract liability under the ordinary service tax law. The demand was therefore confined, if at all, to the pre-scheme payment, and the impugned interest demand was set aside to that extent.

---

---

Issues: Whether interest under the Service Tax Voluntary Compliance Encouragement Scheme could be levied on the entire declared service tax dues, or only on the amount paid before the scheme was introduced.

Analysis: The dispute concerned a part payment made before the scheme and further payments made after the scheme and before the cut-off date. The clarification issued by the Central Board of Excise and Customs stated that immunity from interest and penalty applied only to the tax dues declared under the scheme, and that tax dues already paid before the scheme could still attract liability under the ordinary service tax law. On that basis, the respondents could not levy interest on amounts paid after the scheme was introduced and could proceed only in respect of the amount paid before the scheme.

Conclusion: Interest could not be demanded on the entire declared amount and was confined, if at all, to the pre-scheme payment alone. The impugned demand was set aside to that extent, and the petitioner succeeded on the principal challenge.

---