Settlement certificate under arrears scheme discharges tax and penalty liability arising from the same settled arrears.

Acceptance of an assessee's application under the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2010 and issuance of a settlement certificate under Section 8(1) were treated as bringing finality to the liabilities covered by the scheme. The view that the settlement extended only to tax arrears and not to penalty was rejected as a misconception, because the certificate discharged the assessee from further obligations arising out of the settled arrears. The Tribunal's order was therefore unsustainable, and the settlement was held to cover the penalty consequence linked to the same arrears.

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Issues: Whether, on acceptance of the assessee's application under the Tamil Nadu Sales Tax (Settlement of Arrears) Act, 2010 and issuance of the settlement certificate, the Tribunal was right in proceeding on the basis that the settlement covered only tax arrears and not the penalty liability.

Analysis: The assessee had settled the arrears by paying the tax dues together with the stipulated interest, and the application was accepted under the statutory settlement scheme. Once a certificate was issued under Section 8, sub-section (1) of that provision discharged the assessee from further obligations arising out of the settled arrears. The Tribunal's view that the settlement was confined only to tax and did not extend to penalty was held to be a misconception, because the settlement certificate brought finality to the liability covered by the scheme.

Conclusion: The Tribunal's order could not be sustained. The revision was allowed and the Tribunal's order was set aside, with the settlement treated as having discharged the assessee from the further liability in question, including the penalty consequence arising from the same arrears.

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