Vces 2013

This query is : Resolved

C.A.Pooja Chauhan (Querist)
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06 June 2013 Please tell me:
as per VCES VI section 95 (1) e period covered is 1 October 2007 to 31 Dec 2012.
We have not filed any return during this period .
Assessee is having tax of that period from 1 October 2007 to 31 Dec 2008 which were not paid.
1) Can we exclude period 1 october 2007 to 31 March 2008.?
2) Can department ask tax of that period?
3) What will be liability of assessee for that period? If not included in the scheme.
I will appreciate your early reply.

TKKKKKK

TKKKKKK (Expert)
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06 June 2013 why are you excluding that period?? file the return and pay the tax. The declarant upon payment of amount in default shall get immunity from – interest, penalty, any other proceedings under Service Tax.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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03 August 2025 Your questions concern the **Voluntary Compliance Encouragement Scheme (VCES) 2013**, specifically regarding **coverage period, exclusions, and departmental power to demand outside the scheme**. Here's a detailed breakdown addressing each of your points:

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### ✅ **Context Recap:**

* **VCES Scheme Period**: 1 October 2007 to 31 December 2012
(as per Section 95(1)(e) of the Finance Act, 2013)
* You have **not filed any return during this period**.
* You have **outstanding tax dues** from **1 October 2007 to 31 December 2008**.

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### ❓ 1) **Can you exclude the period 1 October 2007 to 31 March 2008 from VCES declaration?**

🔹 **No, you cannot selectively exclude periods** within the eligible window (1 Oct 2007 – 31 Dec 2012) if you had **taxable services and tax dues** during that time.

However:

* You can **declare only the unpaid tax dues**. If for some reason you believe **no tax was due during Oct 2007 – Mar 2008**, then you may not declare that part — but this must be justifiable based on records.

Otherwise:

* If **tax was due but not paid**, it **should be included in your VCES-1 declaration** to avoid future litigation or penalty.

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### ❓ 2) **Can the Department demand tax for the period 1 October 2007 to 31 March 2008 if it's not included in VCES?**

✅ **Yes, absolutely.**

Section 106(2) of the VCES makes it clear that:

> “Where the declaration made under sub-section (1) of section 106 has been accepted by the designated authority... no notice of demand shall be served for the tax dues declared.”

But for **any period NOT covered in VCES**:

* The **department retains full authority** to issue:

* **Show Cause Notices (SCNs)**,
* Demand tax,
* Impose **interest** and **penalty** under **Section 73** of the Finance Act, 1994.

So, if you **exclude any part of the eligible period** (e.g. Oct 2007–Mar 2008), and if the department later finds **tax was payable**, they **can and will initiate recovery action** for that period.

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### ❓ 3) **What will be the liability of the assessee for that excluded period (Oct 2007–Mar 2008)?**

If that period is not included in your VCES declaration and:

* You **had taxable services**,
* And **Service Tax was due and not paid**,

Then liability will be as follows:

| Component | Applicability |
| --------------- | ---------------------------------------------------------------------------------------------- |
| **Service Tax** | Full tax amount due |
| **Interest** | From due date till date of payment |
| **Penalty** | Upto 100% (discretionary; may be waived or reduced under Section 80 if reasonable cause shown) |

So, **you lose the benefit of immunity** under VCES (no penalty, no interest) if you don’t declare the entire dues.

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### ✅ Best Practice Recommendation:

* **Include the full period (1 Oct 2007 – 31 Dec 2012)** in your VCES declaration if there is **any unpaid tax**.
* This ensures:

* No future demands,
* No penalty/interest,
* Peace of mind with full immunity under Section 108 of Finance Act, 2013.

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Would you like help drafting or reviewing your **VCES-1 declaration** or calculating dues for a particular year?

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