Settlement scheme computation must credit pre-deposits after waiver, not reduce statutory benefit first

Under the settlement scheme, pre-deposits and amounts paid during proceedings were not to be deducted before applying the statutory waiver on disputed tax. The authorities' method of first reducing the pre-deposit and then granting the waiver wrongly curtailed the benefit of a beneficial scheme and placed an assessee who had already paid money in a worse position than one who had paid nothing. The correct approach was to determine the settlement amount on the disputed liability as prescribed by the scheme and then credit the amounts already deposited. The excess recovered under the mistaken computation was refundable with interest.

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Issues: Whether, under the settlement scheme, the amount already deposited as pre-deposit or during the pendency of proceedings was required to be adjusted before granting the statutory waiver on the disputed tax, and whether the excess amount collected under the mistaken computation was refundable with interest.

Analysis: The scheme defined admitted tax and disputed amount separately, and provided different waiver percentages for assessed tax and disputes relating to declaration forms and certificates. The computation adopted by the authorities first reduced the pre-deposit from the disputed demand and then applied the waiver, which had the effect of diminishing the statutory benefit available to the assessee. The Court held that this method was contrary to the object and language of the beneficial scheme, because it would place an assessee who had already made payments in a worse position than one who had paid nothing. The proper construction was to compute the settlement amount on the basis of the disputed liability as contemplated by the scheme and then give credit for the amount already deposited. Since the authorities had applied the scheme incorrectly, the assessee had paid excess amount under protest.

Conclusion: The adjustment of pre-deposit before extending the waiver was impermissible, the settlement and appellate orders to that extent were set aside, and the assessee was entitled to refund of the excess amount with interest.

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