VCES tax dues under Finance Act 2013 s.110: interest on unpaid balance only, not full declared liability; bank attachment lifted.

The dominant issue was whether, under s.110 of the Finance Act, 2013 governing the VCES, interest could be recovered on the entire declared tax liability despite substantial part payment, or only on the unpaid balance. The HC held that "such dues" in s.110 refers to the unpaid portion alone, since only unpaid amounts can constitute "dues," and reading it as the entire liability would impermissibly add words and invite the casus omissus principle. Applying the rule that where two constructions are possible in taxing statutes the one favourable to the assessee should prevail, the HC found that levying interest on the entire liability lacked authority of law. The impugned order was quashed; interest was directed to be recomputed only on the unpaid balance and bank attachment released upon payment.

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Issues:
The judgment involves the interpretation of the Finance Act, 2013 regarding the payment of tax dues under an amnesty scheme, specifically focusing on whether interest should be levied on the entire tax liability or only on the unpaid portion.

Details of the Judgment:

Issue 1: Payment under the Amnesty Scheme
The petitioner, a firm engaged in civil construction work, participated in the "Service Tax Voluntary Compliance Encouragement Scheme" under the Finance Act, 2013. The petitioner declared a tax liability of Rs. 57,89,270 and made partial payments according to the scheme's conditions. The dispute arose when the petitioner failed to pay the balance amount on time and interest was imposed on the entire tax liability by the respondents.

Issue 2: Interpretation of the Finance Act, 2013
The respondents argued that the petitioner forfeited the benefits of the scheme by not adhering to the payment conditions, making them liable for interest on the entire tax liability. They relied on Section 108 of the Finance Act, 2013, which grants immunity from penalties and interest only if the tax dues are paid in full and on time. The respondents contended that strict adherence to the scheme's terms is necessary, as per the Kerala High Court's ruling in Kasmisons Builders Pvt Ltd. Vs Assistant Commissioner of Service Tax.

Issue 3: Interpretation of Section 110 of the Finance Act, 2013
The petitioner invoked Section 110 of the Finance Act, 2013, which states that interest shall be recovered for the unpaid tax dues. The court interpreted this provision to mean that interest should be levied only on the unpaid portion of the tax liability, not the entire amount. Citing the principle that interpretations favoring the assessee should be applied, the court emphasized that the petitioner should only be liable for interest on the outstanding balance.

Conclusion:
The court held that interest cannot be levied on the entire tax liability of Rs. 57,89,270. The impugned order was quashed, directing the respondents to recalculate the interest only for the unpaid amount of Rs. 13,89,270. Once this interest is paid, the attachment of the petitioner's bank account should be released. The writ petition was allowed with no costs, and connected miscellaneous petitions were closed.

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