2016 (4) TMI 404 - HC - VAT and Sales Tax

Court grants Amnesty Scheme benefit, directs penalty waiver within 2 weeks.

The Court set aside the rejection order and held that the Petitioner was entitled to the benefit of the Amnesty Scheme, despite challenging the penalty ... Amnesty Scheme - waiver of penalty as part of 'tax dues' - Explanation I and Explanation 3 - scope of 'tax dues' and exclusion of penalties unrelated to tax deficiency - Contemporanea expositio - binding effect of departmental FAQs as contemporaneous interpretation - Incentivising self-compliance - purposive construction of amnesty provisionsAmnesty Scheme - waiver of penalty as part of 'tax dues' - Explanation I and Explanation 3 - scope of 'tax dues' and exclusion of penalties unrelated to tax deficiency - Incentivising self-compliance - purposive construction of amnesty provisions - Entitlement of the petitioner to waiver of penalty under the Amnesty Scheme for quarters II, III and IV of 2006-07 despite having paid tax and interest and having penalty challenged before the Appellate Tribunal. - HELD THAT: - The Court construed the Scheme purposively to advance its objective of incentivising self-compliance. Explanation I to Clause 2(1)(d) brings pending assessment orders within 'tax dues', while Explanation 3 excludes only those penalty assessments that have no relation to tax deficiency. Where penalty is levied in relation to the tax deficiency and the dealer has paid tax and interest but is challenging penalty in appeal, treating such dealers as ineligible would produce an anomalous result - allowing a defaulter who paid neither tax nor interest to claim waiver of penalty while denying relief to a dealer who paid tax and interest but challenged only penalty. The Court held that in such circumstances the penalty falls within the ambit of 'tax dues' (being related to the tax deficiency) and that the petitioner, having paid tax and interest and having the penalty under challenge, is entitled to claim benefit of the Amnesty Scheme. The Court accordingly set aside the Form DSC-3 rejecting the claim and directed respondents to grant waiver of penalty within two weeks. [Paras 19, 23, 24, 25]Petitioner entitled to claim benefit of the Amnesty Scheme; impugned rejection set aside and respondents directed to grant waiver of penalty.Contemporanea expositio - binding effect of departmental FAQs as contemporaneous interpretation - Amnesty Scheme - authoritative construction by department - Whether the Department's FAQs, though accompanied by a disclaimer, constitute a contemporaneous exposition binding on the Department for interpreting the Amnesty Scheme. - HELD THAT: - The Court found that the answers in FAQ Nos. 2 and 13 reflect the department's contemporaneous understanding of the Scheme and are consistent with the Scheme's object. Despite the FAQ disclaimer that the Scheme text is authoritative, the Court held that the department's own contemporaneous public interpretation qualifies as contemporanea expositio and binds the Department in interpreting its Scheme where the construction adopted conforms with the Scheme's purpose. [Paras 21]Departmental FAQs held to constitute contemporanea expositio and to be binding on the Department for the purpose of construing the Amnesty Scheme.Final Conclusion: The writ petition is allowed: the Form DSC-3 dated 23rd July 2014 rejecting the petitioner's claim under the Amnesty Scheme is set aside; the petitioner is entitled to waiver of the penalty for the quarters in 2006-07 within the Scheme and respondents are directed to pass an order granting waiver within two weeks. Issues Involved:1. Rejection of the Petitioner's request under the Delhi Tax Compliance Achievement Scheme 2013 (Amnesty Scheme) for waiver of penalty.2. Interpretation of the term 'tax dues' under the Amnesty Scheme.3. Applicability of the Amnesty Scheme to cases where tax and interest have been paid, but penalty is under challenge.4. Validity of the rejection order issued by the Respondent.Issue-wise Detailed Analysis:1. Rejection of the Petitioner's request under the Amnesty Scheme for waiver of penalty:The Petitioner, Siemens Limited, sought quashing of Form DSC-3 dated 23rd July 2014, issued by the Respondents, which rejected the Petitioner's request for waiver of penalty for the quarters II, III, and IV for the year 2006-07 under the Amnesty Scheme. The Petitioner had paid the tax and interest as per rectification orders but challenged the penalty before the Appellate Tribunal (AT).2. Interpretation of the term 'tax dues' under the Amnesty Scheme:Section 2 (1) (d) of the Amnesty Scheme defined 'tax dues' to include the amount of tax assessed in terms of notice of assessment or assessment order, whether pending in objection/revision before the Objecting Hearing Authority (OHA) or in appeal/revision before appellate authority/Tribunal or any higher court. Explanation 3 to Clause 2 (1) (d) stated that the Scheme does not cover cases of notice of assessment of penalty issued without any relation to tax deficiency. The Petitioner argued that the penalty was related to tax deficiency, thus falling under the Scheme's ambit.3. Applicability of the Amnesty Scheme to cases where tax and interest have been paid, but penalty is under challenge:The Petitioner's counsel argued that under the FAQs issued by the Department of Trade & Taxes (DT&T), the waiver of penalty was permissible even if the penalty was under challenge, provided the tax and interest were paid. The Respondent's counsel countered that the Scheme did not apply if tax and interest were fully paid before 31st August 2013. The Court found the Respondents' interpretation inconsistent with the Scheme's purpose, which aimed to incentivize compliance. The Court noted that it would be anomalous to deny the benefit to those who paid tax and interest but challenged the penalty, while allowing it to those who defaulted on all counts.4. Validity of the rejection order issued by the Respondent:The Court observed that the Respondent's rejection order dated 23rd July 2014 lacked reasons. Instead of remanding the matter for a fresh decision, the Court examined the Petitioner's entitlement under the Amnesty Scheme. The Court concluded that the Petitioner satisfied the Scheme's conditions, falling within Explanation I to Clause 2 (1) (d) and outside the scope of Explanation 3. The Court held that denying the Scheme's benefit to the Petitioner, who had paid tax and interest but challenged the penalty, would be contrary to the Scheme's objective.Conclusion:The Court set aside the impugned order dated 23rd July 2014 and held that the Petitioner was entitled to claim the benefit of the Amnesty Scheme. The Respondents were directed to grant the waiver of penalty within two weeks. The petition was allowed, and pending applications were disposed of accordingly.