2020 (7) TMI 617 - HC - VAT and Sales Tax

High Court: State appeals not aligned with Amnesty Scheme purpose. Section 31A of Kerala VAT Act upheld. Impact of subsequent scheme on pending applications.

The High Court upheld the Single Judge's decision, ruling that rejecting applications under the Amnesty Scheme based on the contemplation of a State ... Rejection of application filed under the Amnesty Scheme introduced by Section 31A of the Kerala Value Added Tax Act, 2003 - rejected on the ground that there is an appeal intended by the State from the order of the first appellate authority - Circular No.2/2020 - HELD THAT:- There is no ambiguity in the provision which introduced the Amnesty Scheme. It provides for settlement of all pending tax dues and even the tax applicable, with reference to a penalty imposed where there is no best judgment assessment made or contemplated. The requirement is, filing of an application before the dates specified and the withdrawal of the appeals filed by the assessee. There is no requirement of a specific provision requiring the State to withdraw the appeal filed, since the settlement arrived at on the basis of the statutory provision is binding on the Department. Here we emphasize sub-section (2), which contemplates cases in which revenue recovery proceedings have already been initiated; which proceedings have to be withdrawn when the matter is settled under Section 31A. That the State's appeal would be rendered infructuous on a settlement arrived at under Section 31A is an inevitable consequence on deposit of amounts determined under sub-section (7) - there is no power given to the State to reject an application and the requirement under sub-section (7); on the filing of an application, is determination of the amounts due as tax, and other amounts, and intimation for the purpose of settlement in installments not exceeding six and not travelling beyond 31.03.2020. Circular No.2/2020, which was issued on the basis of an Amnesty Scheme introduced in the year 2020. There was a specific contemplation of cases in which appeals have been filed by the State, wherein the requirement is to make settlement on the basis of the demand raised in the original assessment order. There are no reason to interfere with the impugned judgments of the learned Single Judge - appeal dismissed. Issues:1. Rejection of application under Amnesty Scheme based on the contemplation of an appeal by the State.2. Interpretation of provisions under Section 31A of the Kerala Value Added Tax Act, 2003.3. Validity of Circular issued by the Tax Department in relation to the Amnesty Scheme.4. Power of the State to reject applications under the Scheme.5. Impact of subsequent Amnesty Scheme on pending applications.Issue 1: Rejection of application under Amnesty Scheme based on the contemplation of an appeal by the State:The main issue in the appeals was whether an application filed under the Amnesty Scheme introduced by Section 31A of the KVAT Act could be rejected solely on the grounds of a potential appeal by the State from the order of the first appellate authority. The Single Judge found that the rejection based on the contemplation of an appeal was not in line with the purpose of the Amnesty Scheme, which aimed to expedite the resolution of pending tax disputes while ensuring tax recovery. The rejection was deemed to go beyond the statutory provisions and was based on a Circular of the Tax Department, which was considered to overstep its authority.Issue 2: Interpretation of provisions under Section 31A of the Kerala Value Added Tax Act, 2003:Section 31A of the KVAT Act provides a mechanism for settlement of tax arrears by the assessee, absolving them from interest and penalties upon payment of the principal tax amount. The section mandates the withdrawal of all pending appeals by the assessee and requires settlement of all pending tax dues and penalties. The provision is non-obstante, providing an option for settlement and outlining the procedure for determining the amounts due and the timeline for remittance.Issue 3: Validity of Circular issued by the Tax Department in relation to the Amnesty Scheme:The Circular issued by the Tax Department, which was relied upon for rejecting applications under the Amnesty Scheme, was found to address cases where appeals had already been filed by the State. The Circular indicated that assessees with pending appeals were not eligible for the Scheme. However, the absence of a specific provision for the withdrawal of State appeals under Section 31A was highlighted, as the settlement under the Scheme was considered binding on the Department, rendering State appeals unnecessary upon settlement.Issue 4: Power of the State to reject applications under the Scheme:The State's power to reject applications under the Amnesty Scheme was questioned, with the Special Government Pleader arguing that the rejection was justified even without the Circular. It was emphasized that the Scheme did not provide for the withdrawal of State appeals, as the settlement itself rendered such appeals infructuous. The absence of a specific provision requiring the State to withdraw appeals was considered unnecessary due to the binding nature of the settlement on the Department.Issue 5: Impact of subsequent Amnesty Scheme on pending applications:The Court also considered the impact of a subsequent Amnesty Scheme introduced in 2020 on pending applications under the 2019 Scheme. It was noted that the 2020 Scheme included provisions for cases where State appeals had been filed, requiring settlement based on the original assessment order. The absence of such provisions in the 2019 Scheme meant that allowing appeals under the 2019 Scheme could lead to the State having to refund amounts already deposited by the assessee under the subsequent Scheme.In conclusion, the High Court upheld the judgments of the Single Judge, rejecting the appeals and emphasizing the binding nature of settlements under the Amnesty Scheme on the State, which rendered State appeals unnecessary upon settlement. The Court found no ambiguity in the provisions of Section 31A and upheld the validity of the Scheme while highlighting the procedural requirements and the absence of specific provisions for State appeal withdrawals.