Amnesty Scheme credit prevails over statutory appropriation where advance payment was made in anticipation of the scheme.

The Kerala HC held that a payment made after announcement of an Amnesty Scheme but before its formal commencement could not be appropriated first towards interest under section 55C of the Kerala General Sales Tax Act, 1963, where the payment was made as a bona fide advance against the proposed scheme and was requested to be adjusted under it. The Court treated the statutory appropriation rule as incapable of defeating the beneficial operation of a scheme already declared to commence from the relevant date. The departmental adjustment of the amount towards interest was therefore unsustainable, and the assessee was entitled to credit of the payment under the Amnesty Scheme.

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Issues: Whether the amount paid by the assessee after the announced Amnesty Scheme but before its formal commencement could be appropriated towards interest under section 55C of the Kerala General Sales Tax Act, 1963, instead of being given credit under the Amnesty Scheme.

Analysis: The scheme was publicly announced as a policy measure to operate from a specified future date, and the assessee paid a portion of the arrears as a token of bona fides with a specific request that it be adjusted against the liability under the scheme. Section 55C permits appropriation of payments first towards interest, but the Court held that the statutory mode of appropriation could not defeat the beneficial operation of a scheme that had already been declared and was intended to commence from the first day of the relevant period. Treating the voluntary payment made in anticipation of the scheme as if it were a regular recovery payment would produce an anomalous result and frustrate the object of the Amnesty Scheme.

Conclusion: The departmental appropriation of the amount towards interest was unsustainable. The assessee was entitled to credit of the payment under the Amnesty Scheme, and the impugned order was set aside.

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