Settlement scheme computation must ignore pre-deposit adjustment before waiver calculation, with excess recovery refundable with interest.

Under the settlement scheme, the disputed demand had to be computed on the full disputed amount, without first deducting the assessee's pre-deposit before applying the 40% settlement payment and 60% waiver. The Court treated the scheme as beneficial legislation and held that a contrary computation would unfairly place an assessee who had already paid part of the demand in a worse position than one who had paid nothing. The authorities' method was therefore inconsistent with the scheme, making the excess recovery unsustainable. The assessee was entitled to refund of the excess amount with interest.

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Issues: Whether, under the settlement scheme, the amount pre-deposited by the assessee was required to be first deducted from the disputed demand before computing the 40% settlement amount, and whether the excess amount recovered on the contrary basis was liable to be refunded with interest.

Analysis: The scheme distinguished between admitted tax and disputed amount. It provided 40% payment of the disputed amount with 60% waiver for assessed tax disputes. The settlement mechanism did not warrant reducing the disputed amount by the pre-deposit before applying the waiver formula, because that would place an assessee who had already paid part of the demand in a worse position than one who had paid nothing. The scheme being beneficial in nature required a construction that advanced its object and gave full effect to the intended waiver. On that basis, the computation adopted by the authorities was held to be inconsistent with the scheme, and the excess collection became unsustainable.

Conclusion: The adjustment of pre-deposit before computing the settlement amount was impermissible, and the assessee was entitled to refund of the excess amount with interest.

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