VCES discharge and evidence-based quantification left no surviving service tax demand or penalty.

VCES discharge of declared dues, together with the record of Form 26AS, work orders and reconciliation statements, left no surviving service tax liability or penalty where the broader demand was not supported by reliable evidence of receipt. The adjudicating authority found that some receipts were taxable only to the extent reflected in statutory records, that certain post-exemption-period receipts remained taxable, and that manpower supply receipts were taxable. It also held that the show cause notice used inconsistent and unsupported quantification, so liability could be sustained only on actual receipts and applicable abatements. The final quantified demand was nevertheless neutralised by valid VCES payment.

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Issues: (i) whether the demand of Service Tax and penalties could survive when the respondent had disclosed and paid dues under the Voluntary Compliance Encouragement Scheme and the record showed partial or no taxable receipts for several work orders; (ii) whether the quantification of the works contract and manpower supply liabilities made in the show cause notice was sustainable on the evidence relied upon.

Issue (i): whether the demand of Service Tax and penalties could survive when the respondent had disclosed and paid dues under the Voluntary Compliance Encouragement Scheme and the record showed partial or no taxable receipts for several work orders.

Analysis: The record showed that the adjudicating authority examined the seized material, Form 26AS, reconciliation statements, work orders and the VCES declaration. It was found that some of the disputed receipts were not supported by reliable evidence of receipt in the manner assumed in the notice, while certain receipts were taxable only to the extent reflected in the statutory tax records. It was further found that the respondent had declared the dues under VCES and discharged the tax and interest within the scheme, and that the excess payment was not refundable under the scheme. On that basis, the authority concluded that no outstanding tax liability survived and that penalties were not exigible.

Conclusion: The issue was decided against the Revenue and in favour of the assessee.

Issue (ii): whether the quantification of the works contract and manpower supply liabilities made in the show cause notice was sustainable on the evidence relied upon.

Analysis: The notice was found to have proceeded on inconsistent figures and unsupported segregation of values, while several items were accepted only to the extent of amounts actually reflected in Form 26AS. For some projects, the authority held that the demand could not extend beyond the receipts proved by the records; for others, the receipts falling after the relevant exemption period were held taxable. In respect of manpower supply, the receipts were accepted as taxable. The overall computation made by the adjudicating authority was therefore based on evidence of actual receipt, applicable abatement, and the period-wise taxability reflected in the record.

Conclusion: The quantified liability as finally determined by the adjudicating authority was upheld, but it stood neutralised by the valid VCES discharge, with no further demand surviving.

Final Conclusion: The appeal failed because the adjudicating authority had correctly appreciated the evidence, the statutory tax position, and the effect of the VCES payments, leaving no surviving demand or penalty warranting interference.

Ratio Decidendi: Where the assessee has discharged the declared tax dues under VCES and the evidence does not support the show cause notice's broader quantification, no further Service Tax demand or penalty survives.

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