Service Tax Amount Paid under VCES Cannot be Reopened or Refunded Later: CESTAT Rules Declaration under Scheme is Final and Binding [Read Order]
The tribunal ruled that once a declaration under the scheme is made and acknowledged, it attains finality and becomes legally binding on both the taxpayer and the revenue authorities.
The Chandigarh Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that any payment made under the Voluntary Compliance Encouragement Scheme (VCES), 2013 cannot be reopened or refunded at a later stage and ruled that the declaration under the scheme if made was final and binding.
M/s Vasu Construction Co (appellant) engaged in providing works contract services, voluntarily paid service tax under the VCES in 2013–14. However, after subsequent judicial rulings clarified that no service tax was payable on such works executed for government authorities, the appellant filed a refund claim in March 2017.
The appellant sought a refund of ₹99,19,010 in service tax along with ₹3,86,760 interest. The appellant claimed that the service tax was mistakenly paid under VCES on works executed for a government authority, which was later held exempt.
The refund claim was rejected by the adjudicating authority and later upheld by the Commissioner (Appeals). Aggrieved, the appellant approached the Tribunal. The counsel for the appellant contended that since service tax was not legally payable, the amount paid should not be treated as tax duty.
The counsel argued that refunds in similar cases had been allowed by other forums. The Counsel submitted that under the scheme, "tax dues" only refer to payable liabilities, and therefore excess payment should be refundable.
The revenue argued that Section 108(2) of VCES expressly prohibits the reopening of declarations once acknowledged. The counsel submitted that section 109 clearly bars refunds of any amount paid under the scheme. The counsel pointed out that the appellant’s claim was also time-barred under Section 11B of the Central Excise Act.
The bench comprising S.S. Garg (Judicial Member) and P. Anjani Kumar (Technical Member) analyzed the scope and intention of VCES and observed that the scheme was designed to promote voluntary compliance and settlement of past liabilities.
The tribunal observed that Section 109 explicitly states that "any amount paid in pursuance of a declaration shall not be refundable under any circumstances." The tribunal observed that the term “any amount” includes even amounts later found not payable.
The tribunal held that the declaration under VCES is final and binding which cannot be challenged later.
The tribunal further observed:
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
“Just as the Revenue cannot reopen the case settled under the scheme, the appellants too cannot reopen it to seek refunds. The legislative intent is clear, and statutory provisions cannot be overridden.”
The Tribunal ruled that payments made under VCES are final, conclusive, and non-refundable, irrespective of later legal developments or exemptions. The declaration under the scheme thus binds both parties permanently. The appeal of the appellant was dismissed.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
