VCES payments may still qualify for CENVAT credit or refund when credit is otherwise legally admissible.

Amounts paid under the Voluntary Compliance Encouragement Scheme may remain eligible for CENVAT credit or refund treatment where the underlying credit is otherwise legally admissible and not barred by the scheme. The Tribunal relied on its earlier view and Board circulars indicating that unutilized credit under Rule 5 of the Cenvat Credit Rules, 2004 can be recognised in accordance with law. The Revenue's contrary position was not accepted because no later conflicting authority was shown. The assessee was therefore entitled to relief, and the impugned order was set aside.

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Issues: Whether the amount paid under the Voluntary Compliance Encouragement Scheme was refundable or available as CENVAT credit to the assessee.

Analysis: The claim was examined in the light of the Tribunal's earlier decision relied upon by the assessee, together with the Board circulars clarifying availability of CENVAT credit where the credit remains unutilized under Rule 5 of the Cenvat Credit Rules, 2004. The Tribunal followed the earlier view that once the service tax liability declared under the scheme had been discharged, the corresponding amount did not cease to be eligible for CENVAT credit where such credit was otherwise legally admissible. The contrary stand of the Revenue was not supported by any later or conflicting authority.

Conclusion: The assessee was held entitled to the amount paid under the scheme and the impugned order was set aside.

Final Conclusion: The dispute was resolved in favour of the assessee, with relief flowing from the acceptance of entitlement to refund or credit treatment of the amount paid under the scheme.

Ratio Decidendi: Amounts paid under the Voluntary Compliance Encouragement Scheme do not lose their character for CENVAT credit or refund treatment where such credit is otherwise legally admissible and is not barred by the scheme provisions.

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