Service Tax Demand Barred After VCES Discharge Certificate: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench has set aside a service tax demand of ₹18.39 lakh against M/s. ARS Transport, holding that once a taxpayer obtains a discharge certificate under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES), the department cannot initiate further proceedings on the same issue for the same period. The bench of Ajayan T. V. (Judicial Member) and M. Ajit Kumar (Technical Member) has observed the provisions of the VCES scheme under the Finance Act, 2013 and observed that the scheme was designed as a one-time amnesty to encourage service tax defaulters to disclose and pay their tax dues. Once the declarant pays the declared dues and obtains a discharge certificate, the declaration becomes conclusive, and the department is barred from reopening the matter for the period covered by the declaration. ARS Transport had provided site formation, excavation, clearance and earth-moving services to Madras Cements Ltd.between 2008-09 and 2012-13. Based on information received from the departmental audit, the department alleged that the assessee had collected service tax but failed to remit it and had also not filed service tax returns during the period from June 2008 to March 2013. A show cause notice was issued proposing a service tax demand of ₹88.71 lakh along with interest and penalties. During adjudication, the Commissioner adjusted ₹68.92 lakh already paid under VCES, 2013 and confirmed the remaining demand of ₹18.39 lakh, besides imposing penalties under the Finance Act, 1994. The assessee challenged this order before the Tribunal. The appellant argued that before adjudication of the show cause notice, it had filed a declaration under VCES on 12 December 2013, which was duly acknowledged by the department. The declared tax dues were fully paid within the prescribed time, and a discharge certificate was issued on 29 January 2015. It was contended that once such a certificate is issued, the scheme provides complete immunity from interest, penalty and further proceedings for the period covered by the declaration. Since no notice alleging that the declaration was “substantially false” was issued under the provisions of the scheme, the department had no authority to raise any further demand for the same period. The assessee also argued that the activity in question was actually transportation of limestone, which should be classified as Goods Transport Agency (GTA) service, and in such cases the service tax liability lies with the consignor or consignee paying the freight, not the transporter. The department maintained that the demand was valid because the transportation activity was not a standalone GTA service but formed an integral part of site formation and earth-moving services. According to the adjudicating authority, the absence of consignment notes meant that the activity could not be classified as GTA service, and therefore service tax liability remained with the appellant. The Tribunal also referred to the ruling of the Supreme Court of India in the case of Armour Security (India) Ltd. v. Commissioner, CGST, Delhi, where the Court explained that proceedings relating to the “same subject matter” cannot be pursued if they seek to recover overlapping tax liability. Applying this principle, the Tribunal observed that the adjudicating authority attempted to recover tax on an overlapping liability that had already been declared and settled under VCES. The bench emphasised that Section 108 of the VCES provisions grants complete immunity from penalty, interest and further proceedings once the declared tax dues are paid and acknowledged by the designated authority. Since the appellant’s declaration had been accepted without dispute and was not alleged to be false, the Tribunal held that no further demand could be sustained on the same issue for the same period. In view of the statutory immunity provided under VCES, the Tribunal held that the impugned demand was legally unsustainable. CESTAT set aside the order confirming the demand of ₹18.39 lakh, along with the associated interest and penalties, and allowed the appeal filed by ARS Transport with consequential relief as per law. Case Details Case Title: M/s. ARS Transport Versus Commissioner of GST & Central Excise Citation: JURISHOUR-350-CES-2026(CHEN) Case No.: Service Tax Appeal No. 41417/2015 Date: 12.03.2026 Counsel For Appellant: S. Venkatachalam, Advocate Counsel For Respondent: N. Satyanarayanan, Authorised Representative Click Here To Read Order Read More: Fixed Facility Charges for Storage Tanks Not Taxable as ‘Supply of Tangible Goods’: CESTAT

Service Tax Demand Barred After VCES Discharge Certificate: CESTAT

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