2026 (3) TMI 594 - AT - Service Tax

VCES discharge bars subsequent tax demands or proceedings when a declaration is accepted and overlaps with declared liability.

VCES discharge provides immunity from penalty, interest and further proceedings once a declaration is accepted and a discharge acknowledgement issued; ... Immunity under Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) - bars a subsequent demand or proceedings for the same issue and period - Expression “same subject matter” - Overlapping tax liability - beneficial legislation that offered a one-time amnesty for service tax defaulters - Whether the appellant have disclosed his tax dues under the VCES scheme and the designated authority having acknowledged the discharge of such dues under the scheme, can issue a notice for tax dues during the same period. Immunity under VCES - same issue / same subject matter bar - HELD THAT:- The Tribunal held that once a declarant furnishes details and receives an acknowledgement of discharge under the VCES, section 108 grants immunity from penalty, interest and further proceedings in respect of the declared tax dues. Applying the proviso to Section 106(1) and the conclusive effect in Section 108(2), the court treated a later show-cause notice seeking recovery of an overlapping liability as proceedings on the same issue and therefore barred. The Tribunal relied on the principle in the cited Supreme Court in the case of M/S ARMOUR SECURITY (INDIA) LTD. Vs COMMISSIONER, CGST, DELHI [2025 (8) TMI 991 - SUPREME COURT], authority that the bar applies where proceedings seek to assess or recover an identical liability or where there is even the slightest overlap in tax liability, and concluded that the portion of demand already verified and settled under VCES could not be reopened. [Paras 6, 7, 10, 11] Demand insofar as it overlaps with tax dues acknowledged and discharged under the VCES is barred and cannot be sustained Final Conclusion: The impugned order was set aside insofar as it sought to recover tax on the same issue and period already discharged under the VCES; the appellant is entitled to consequential relief in accordance with law. Issues: Whether a discharge acknowledged under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) bars a subsequent demand or proceedings for the same issue and period.Analysis: Section 106(1) and the second proviso thereto restrict declarations where a notice or order has been issued earlier on the same issue; Section 107(7) contemplates issuance of an acknowledgement of discharge on full payment of declared tax dues; and Section 108(1) provides immunity from penalty, interest and further proceedings upon payment and issuance of the discharge acknowledgement. Where a VCES declaration has been accepted and a discharge certificate issued without any allegation of substantial falsity, subsequent proceedings seeking to assess or recover a liability that overlaps with the declared and discharged dues fall within the bar created by Section 108(1). The concept of 'same subject matter' or 'same issue' encompasses proceedings that seek to assess or recover an identical liability or that have even a slightest overlap in tax liability or obligation. The legality of classifying the activity as site formation service or as GTA service is not required to be examined once the declared liability for the relevant issue and period has been discharged under VCES and accepted without dispute.Conclusion: The discharge under VCES bars the subsequent demand and proceedings in respect of the same issue and period; the impugned demand is unsustainable and is set aside in favour of the assessee.