Voluntary compliance scheme cannot be used while prior litigation on the same service tax issue remains pending.

The Karnataka High Court read the Service Tax Voluntary Compliance Encouragement Scheme, 2013 as barring a declaration where a notice or determination order had already been issued for the same period or issue under the second proviso to Section 106. It rejected the attempt to separate liability under Section 73 from liability under Section 73A, holding that the Scheme governed overall service tax liability and was intended to buy peace and end litigation. Because the assessee's earlier appeal on the same dispute was still pending, the declaration could not be used while the same lis remained alive. The declaration was therefore rejected as ineligible.

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Issues: Whether the assessee's declaration under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 was barred by the second proviso to Section 106 because a prior appeal on the same issue was pending, and whether the distinction sought between liability under Section 73 and Section 73A could save the declaration.

Analysis: The second proviso to Section 106 was held to create a clear bar where a notice or order of determination had already been issued in respect of any period on any issue, and the Scheme was read as covering the overall service tax liability without creating separate compartments between tax not levied or short-paid under Section 73 and tax wrongly collected but not deposited under Section 73A. The Court held that the pendency of the assessee's earlier appeal on the same dispute prevented the assessee from keeping that lis alive while simultaneously seeking the Scheme's benefit for a later period. The Scheme's object of buying peace and ending litigation would be defeated if such a distinction were accepted.

Conclusion: The declaration was rightly rejected, as the assessee was ineligible to avail the Scheme while keeping pending litigation alive on the same issue.

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