VCES Declaration Of BIS Can’t Be Rejected When Pre- and Post-2012 Service Tax Regimes Involve Different ‘Issues’: CESTAT

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chennai Bench, has allowed the appeal filed by the Bureau of Indian Standards (BIS), holding that its declaration under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 (VCES) could not be rejected merely because earlier show cause notices had been issued on a different legal issue. The bench of Ajayan T.V. (Judicial Member) and M. Ajit Kumar (Technical Member) set aside the order of the Commissioner (Appeals) and ruled that the bar under the second proviso to Section 106(1) of the Finance Act, 2013 was not applicable in the facts of the case. BIS, a statutory body responsible for granting “Hallmark” certification for jewellery through approved assaying and hallmarking centres, had filed a declaration under VCES on 24 September 2013 (later revised on 2 December 2013), declaring service tax dues of ₹29.40 lakh for the period July 2012 to December 2012. However, the Department rejected the declaration on the ground that BIS had earlier been issued nine show cause notices (SCNs) for non-payment of service tax on royalty received from hallmarking centres for the period 2004 to March 2012. According to the Department, the second proviso to Section 106(1) barred any declaration on the “same issue” for subsequent periods if a notice had already been issued for a prior period. Both the designated authority under VCES and the Commissioner (Appeals) upheld the rejection, prompting BIS to approach the Tribunal. The central question before the Tribunal was whether the issue involved in the earlier SCNs (pre-1 July 2012) was the same as the issue for which BIS filed its VCES declaration (post-1 July 2012). Prior to 1 July 2012, service tax was levied under Section 66 of the Finance Act, 1994 on specified taxable services defined under Section 65(105). The Department had alleged that BIS was providing “intellectual property service” under Section 65(105)(zzr), contending that “Hallmark” constituted an intellectual property right and that royalty received from hallmarking centres was taxable under that head. Post 1 July 2012, however, the service tax regime underwent a major shift with the introduction of the negative list system. Under the new Section 66B read with Section 65B(44), service tax applied to all services unless specifically exempted or placed in the negative list. The classification-based regime was replaced with a broad, “catch-all” definition of service. The Tribunal held that although the factual activity — collection of royalty from hallmarking centres — remained the same, the legal issue was fundamentally different in the two periods. For the pre-1 July 2012 period, the dispute centred on whether BIS was rendering “intellectual property service” and whether “Hallmark” constituted an intellectual property right. In contrast, for the post-1 July 2012 period, the relevant question was whether the activity of allowing hallmarking centres to operate under the BIS scheme for consideration amounted to a “service” under the newly introduced Section 65B(44), and whether it was covered by the negative list. The Tribunal observed that under the post-2012 regime, it was no longer necessary to establish classification under a specific taxable category like intellectual property service. The scope of taxation had expanded significantly. The Bench categorically held that the “issue” in the earlier SCNs was distinct from the issue involved in the VCES declaration. Therefore, the bar under the second proviso to Section 106(1) — which prohibits declaration on the “same issue” for subsequent periods — was not attracted. The Tribunal relied on the decision in Frankfinn Aviation Services Pvt Ltd v. Assistant Commissioner, Designated Authority VCES, wherein the Delhi High Court had held that the term “issue” must be interpreted strictly and that a declaration cannot be rejected unless the dispute is identical in nature. The Supreme Court later dismissed the Revenue’s challenge to that ruling. The Bench distinguished contrary decisions cited by the Revenue, noting that in those cases the nature of taxable service remained unchanged across periods — unlike in the present matter. Setting aside the impugned Order-in-Appeal, the Tribunal allowed the appeal filed by BIS with consequential relief. Case Details Case Title: Bureau of Indian Standards Versus Commissioner of GST and Central Excise Citation: JURISHOUR-80-CESTAT-2026(Che) Case No.: Service Tax Appeal No. 41913 of 2016 Date: 24.02.2026 Counsel For Appellant: Advocate G. Natarajan Counsel For Respondent: G. Krupa, Authorised Representative Click Here To Read Order Read More: Missing Original Invoices Or Address Can’t Justify Denial of CENVAT Credit: CESTAT

VCES Declaration Of BIS Can’t Be Rejected When Pre- and Post-2012 Service Tax Regimes Involve Different ‘Issues’: CESTAT

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