Court quashes demand notice, sets aside tax adjustment under VAT Act, grants waiver under amnesty scheme.

The court quashed the demand notice dated 30.10.2021 and set aside the adjustment of tax paid against interest liability under the VAT Act. It found the actions of the authorities to be contrary to the intention and terms of the amnesty scheme, directing that the tax paid should be adjusted against the principal tax liability. The court also declared that the petitioners had no further liability under the VAT Act for the year 2016-17, entitling them to a complete waiver of interest and penalty under the scheme.

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Issues Involved:
1. Validity of the demand notice dated 30.10.2021.
2. Adjustment of tax paid against interest liability under the VAT Act.
3. Declaration of no further liability under the VAT Act for the year 2016-17.

Summary:

1. Validity of the Demand Notice Dated 30.10.2021:
The petitioners challenged the demand notice issued by the second respondent authority under the amnesty scheme. The court observed that the petitioners had paid the tax due as per the returns filed under the VAT Act for the years 2015-16 and 2016-17. The petitioners filed an application under the Vera Samadhan Yojana, 2019, declaring an outstanding tax amount of Rs. 2,25,53,290/-. Despite paying the tax as per the scheme, the authorities issued a demand notice, which the court found to be contrary to the intention and terms of the amnesty scheme. The demand notice was quashed and set aside.

2. Adjustment of Tax Paid Against Interest Liability:
The petitioners argued that the tax paid along with the returns was illegally adjusted against the interest computed on additional tax liability declared under the scheme. The court noted that the tax liability declared by the petitioners under the amnesty scheme matched the assessed tax amount. The authorities' action of adjusting the tax paid against interest liability created an artificial shortfall of tax payment. The court held that the adjustment was contrary to the object and purpose of the amnesty scheme, which aimed to provide substantial relief to dealers and reduce administrative costs. The court directed that the tax paid should be adjusted against the principal tax liability.

3. Declaration of No Further Liability Under the VAT Act for the Year 2016-17:
The petitioners sought a declaration that they had no further liability under the VAT Act for the year 2016-17, having paid the tax due as per the original intimation under the amnesty scheme. The court observed that the petitioners had paid the full amount of tax declared under the scheme, and the authorities' action of imposing interest and adjusting the tax paid against such interest was illegal. The court held that the petitioners were entitled to complete waiver of interest and penalty under the amnesty scheme and declared that the petitioners had no further liability under the VAT Act for the year 2016-17.

Conclusion:
The court allowed the petition, quashed the demand notice dated 30.10.2021, and set aside the action of adjusting the tax paid against interest liability. The court directed the respondents to consider the tax paid as adjusted against the principal tax liability, thereby providing relief to the petitioners under the amnesty scheme.

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