Penalty waiver under sales tax relief circular upheld where arrears were paid within the stipulated time.

Penalty under section 12-B(4) of the Karnataka Sales Tax Act was covered by Circular No. 3 of 1999-2000, which granted one-time relief by waiving penalty and part of the interest for specified assessment years if arrears were paid before 30 June 1999. The Court construed the circular according to its remedial object and accepted that the assessee's tax arrears and penalty related to the same assessment year and were paid within the stipulated time. It rejected the department's narrower reading that both tax and penalty had to remain due before waiver could be claimed, describing that construction as unreasonable and absurd. The assessee was therefore entitled to waiver of the penalty.

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Issues: Whether the penalty levied under section 12-B(4) of the Karnataka Sales Tax Act, 1957 for the relevant assessment year was covered by Circular No. 3 of 1999-2000 and liable to be waived when the arrears of tax had been paid before 30 June 1999.

Analysis: The circular was issued pursuant to the budget speech announcing a one-time relief measure to waive penalty under section 12-B(4) and part of the interest under section 13(2) for assessment years up to 1996-97, provided the arrears were paid before the specified date. The Court read the circular in light of that object and held that the assessee's case was within its scope because the tax arrears and the penalty related to the same assessment year and the arrears had been paid within time. The departmental construction, which required both tax and penalty to remain due before waiver could be claimed, was rejected as leading to an unreasonable and absurd result.

Conclusion: The assessee was entitled to waiver of the penalty under the circular, and the State's challenge failed.

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