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4. The controversy in the present appeal relates to the respondent's (hereafter the tax payer) application under the Voluntary Compliance Encouragement Scheme (hereafter VCES), which was introduced by virtue of Chapter VI of the Finance Act, 2013 (hereafter the 2013 Act).

5. The tax payer is a company engaged in the business of manufacturing and dealing in automobile parts. The tax payer was registered with the Service Tax Department under the category of Interior Decorator, MGC, Communication Training, MRS, ITS, Legal Consultancy Services falling under Section 65 (105) of Chapter V of the 1994 Act.

7. On 11.12.2013, the tax payer, being desirous of availing the benefit of VCES, submitted a declaration as required under Section 107 of the 2013 Act declaring its service tax dues amounting to ₹7,22,89,051/- from the year 2007-08 to 2011-12. In accordance with the terms of the VCES, the tax payer deposited an amount of ₹3,61,44,524/- being 50% of the declared service tax liability under VCES.

8. The Designated Authority proposed to reject the tax payer's application under VCES on the ground that it was ineligible in terms of Section 106 of 1994 Act and the Designated Authority communicated the same to the appellant by a letter dated 09.01.2014. The second paragraph of the said letter sets out the grounds on which the rejection was proposed. The same is reproduced below:

(b) of section 106(2) infructuous. In this regard, we note that the High Court of Bombay, in the case Pace Setter Business Solutions Pvt Ltd Vs Union of India has held the following:
"17. Upon hearing both sides and perusing the impugned order, we are of the view that the payment which has been made and for the past audit objection, for an earlier period cannot be utilised to reject the application as is now made by the present writ petitioner. The application invoking VCES has to be considered and if at all rejected, it must be on the touchstone of the paragraphs of the VCES, 2013 and the wording thereof. The scheme itself cannot be defeated by holding that on the earlier occasion parties like the petitioners have accepted their liability...