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2017 (11) TMI 864
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....12/88/4)". 2. With that epoch making hollow of 'Ramarajya' in the Budget speech of the Chief Minister of the State of Karnataka in the year 2017-18, the Hon'ble Chief Minister in Paragraph-5 of the State Budget Speech began by saying that "Ramarajya is a concept representing hunger-free, exploitation-free, over all development with deep rooted harmony". In the same Budget Speech, in pursuance to paragraph-488 for the year 2017-18, the Government of Karnataka, Finance Secretariat, promulgated the 'Karasamadhana Scheme, 2017'. Paragraph-488 of the Budget Speech of the Hon'ble Chief Minister on the floor of Legislative Assembly is quoted below:- "488. As we are moving towards replacing the existing Value Added Tax with proposed Goods and Services Tax, I propose a Karasamadhana Scheme to waive 90% of penalty and interest on payment of full tax and remaining 10% of penalty and interest by 31st May 2017. This will enable trade and industry to clear their pending tax liabilities and start with a clean slate in GST". 3. It is this 'Karasamadhana Scheme' which has given rise to the present litigation before this Court and the various Petitioners-Assessees have filed these Wri....
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....ll kinds of interest accrued under the provisions of the KTEG Act/KTPTC & E Act /KTL Act /KAIT Act /KET Act relating to the assessment/ reassessment for all the years upto 31/03/2016 and remaining unpaid upto 15/03/2017. This shall also include all kinds of penalties leviable and interest accrued till the date of filing of application by the dealer or person or proprietor as the case may be under the Scheme. The Scheme further provided that the assessee-dealer who makes full payment of arrears of tax on or before 31.05.2017 shall be granted waiver of 90% of the penalty and interest payable. 6. Clause 2.4 of the 'KSS 2017' further provided that if Appeal or other Application is withdrawn, as was required by the Scheme, the quantum of arrears of tax/penalty and interest for the purpose of this Scheme shall be considered as per the order, against which, Appeal or other Application had been filed, which are since withdrawn to avail the benefits of the said 'KSS 2017'. The withdrawal of such appeal etc., was final and not allowed to be restored under any circumstances and on the other hand, if the State had filed such an Appeal before any higher Appellate Authority like KAT or Hig....
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....pport of withdrawal of Appeal or other Application as per Annexure-II along with Application for waiver of 'arrears of penalty and interest'. Such declaration shall be filed separately under relevant Act for each year relating to 'arrears of penalty and interest'. 3.4 If the dealer or person or proprietor, as the case may be, fails to do so, the Authority/Officer shall pass a speaking order rejecting the Application. 3.5 On satisfaction that the applicant-dealer or person or proprietor, as the case may be is eligible for the benefits of the Scheme, the Assessing Authority/Recovery Officer/ Prescribed Authority shall pass the order waiving the balance amount of arrears of penalty and interest payable by the dealer or person or proprietor, as the case may be, as per Annexure-III separately under relevant Act for each assessment year/each assessment or reassessment order relating to the relevant tax periods/week/month of the year. 3.6 The order of waiver shall be passed within 30 days from the date of making payment as specified in Para 3.3. 3.7 The order of waiver shall be served on the dealer or person or proprietor, as the case may be, within ten....
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....erence in the diagonally opposite stands of the Dealers and Revenue, which has led to the filing of the present writ petitions and calls for the interpretation of the provisions of the 'KSS 2017', in harmony with the provisions of KVAT Act, 2003 and other enactments and arrears of tax, interest and penalty which is sought to be recovered and 90% of interest and penalty of interest was sought to be waived under 'KSS 2017'. 12. The learned Counsels for the Petitioners led by Mr.Tarun Gulati and the Senior Counsel Mr.Udaya Holla along with other Advocates on record have made before the Court the following submissions :- (i) that the dues as per the original assessment orders, against which appeals etc., earlier were pending and were to be withdrawn as a condition of the 'KSS 2017', were required to be determined as per the impugned assessment orders only and not by any further adjudication by the Assessing Authority while undertaking the scrutiny of the Applications under 'KSS 2017' and therefore, the Revenue Authorities were not entitled to make any adjustment of payments or deposits made by the dealer either as a condition for maintaining their appeals or otherwise again....
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....the dues of tax, interest and penalty up to the period from 01.04.2005 till 31.03.2016 covered by the said Scheme and remaining unpaid upto 15.03.2017, while the said Scheme was promulgated on 31.03.2017 have to be computed only with reference to the order passed by the Assessing Authority against which appeal etc., was pending and the authorities cannot shift the date of such dues to a later date than 15.03.2017 and if such adjustment as contended by the Revenue is to be allowed, those dues as on 15.03.2017 will be a different amount than the one determined by the Revenue Authorities in the present cases now and therefore, such authorities cannot be allowed to go against the clear language of the Scheme itself. (vii) that the assessees have lost their valuable right to object to the imposition of demand of tax, interest and penalty in their appeals or writ petitions, which were required to withdraw as a condition precedent and the Scheme in Clause 2.4 quoted above, clearly stipulated that the quantum of arrears of tax, penalty and interest for the purpose of this Scheme, shall be considered as per the order against which the Appeal or Application had been filed and theref....
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....GST regime, such Scheme was announced by the State Government to put an end to the pending litigation and for effecting quick and hassle free spontaneous recovery of the arrears of tax etc., due to be recovered from the Dealers which was subject to the pendency of such litigation. 13. The learned counsel for the petitioners- assessees relied upon several case laws and also the learned Addl.Advocate General on the other side and a brief review of these case laws will be made hereinafter at the appropriate place. 14. On the other hand, Mr.Aditya Sondhi, learned Addl.Advocate General appeared for the Respondent- State and Commercial Tax Department, has vehemently submitted that the provisions of 'KSS 2017', have to be harmoniously read with the provisions of KVAT Act, 2003 and Chapter-V comprising from Sections 35 to 57 of the KVAT Act, 2003, including Section 42 of the Act provides for "Payment and recovery of tax, penalties, interest and other amounts, issuance of clearance certificates" and in the framework of the said provisions, the provisions of Section 42(6) of the Act clearly stipulate that the amount paid by the dealer which falls short of the aggregate of the tax or an....
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....maintaining the appeals before the next higher authority under the provisions of KVAT Act, 2003, the maintainability of the appeal does not depend upon the minimum deposit of 30% of the demand due, as contended, but on the other hand, the provisions of Section 62 stipulates and envisages the payment of whole of the demand of tax, interest and penalty at the time of filing of the appeal and the appellate authority only in its discretion can stay the payment of 70% of the tax and other amounts, if the appellant-dealer makes the payment of the balance 30% of the tax and other amounts. He urged that the power to grant stay to the extent of 70% of the demand does not mean that the appeal itself is not maintainable, if the balance amount of 30% is not paid and therefore, the assessees cannot invoke the concept of colourless deposits or trust money, while they filed the appeals in the present cases and therefore, they cannot claim as a matter of right the adjustment of such payment of tax and other amounts first in the head of 'tax' and thereafter only under the heads of 'interest' and 'penalty', contrary to the specific provisions of Section 42(6) of the Act. Similar provision of Section....
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....deemed, in the public interest, to have been paid. (c) Notwithstanding anything contained in this Act, the deferred payment of tax under clause (a) shall not attract interest under sub section (2) of Section 36, provided the conditions laid down for payment of the tax deferred are satisfied. (4) Any other amount due under this Act shall be paid within ten days from the date of service of the order or proceedings imposing such amount, unless otherwise specified. (5) The Commissioner or the Government may, subject to such conditions as they may specify, remit by an order the whole or any part of the interest payable in respect of any period by any person or class of persons. (6) Where the amount paid falls short of the aggregate of the tax or any other amount due and interest payable, the amount so paid shall first be adjusted towards interest payable and the balance, if any, shall be adjusted towards the tax or any other amount due. (7) A registered dealer, furnishing a revised return in accordance with this Act which shows a greater amount of tax to be due than was paid or payable in accordance with the original return, shall pay with th....
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.... unless it is accompanied by satisfactory proof of the [payment of tax and other amount] not disputed in the appeal. (b) The tax or other amount shall be paid in accordance with the order [or proceedings] against which an appeal has been preferred. (c) (i) The Assessing Authority may, in its discretion, [stay payment of seventy per cent of tax] and other amount, if the appellant [makes payment of the balance thirty per cent of the tax] and other amount along with prescribed form of appeal.] (ii) Where any application made by an applicant for staying proceedings of recovery of any tax or other amount has not been disposed of by the Assessing Authority within a period of thirty days from the date of such application, it shall be deemed that the Assessing Authority has made an order staying proceedings of recovery of such tax or other amount [subject to [payment of thirty per cent of the tax] and other amount disputed] and furnishing of sufficient security to the satisfaction of the Assessing Authority in regard to the [balance seventy percent of such tax] or amount within a further period of fifteen days] (d) Where an order staying proceedings of r....
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....e 'KSS 2017', even to the extent of undoing the purpose of the Scheme itself. 20. There has to be a harmonious and balanced reading of the two legislations together. Even though the said Scheme of subordinate and delegated legislation is not as such an Act passed by the Legislative Assembly, nonetheless, it has the same force of a statute which an Act or even the Rules enacted by the State Government have and neither any redundancy or repugnancy per se can be attributed to the provisions made in the 'KSS 2017' itself and if at all, there is any doubt or a grey area, the interpretation of the terms of Scheme should undoubtedly be made in favour of the tax payers and Dealers as per the well settled provisions of interpretation applicable to the taxing statues namely that the benefit of doubt or benefit in case of two views being possible, the one which is more favourable to the Dealers has to be adopted by the Courts. 21. Viewed from this angle and few of the propositions laid down for interpreting similar Schemes even under the Income Tax Act, and VAT or other Tax laws, it clearly appears to this Court that the stand of the Respondents-Department in the present cases, is incon....
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....of Tax, the middle box is 'Interest' and top box is that of 'Penalty'. That first two boxes of penalty and interest having the connecting hole at the bottom. If one was to fill up the water in all three of them, (clearing off the arrears of demand) unless the bottom box of 'Tax' is filled up, nothing will come in the middle box of 'Interest' and unless middle box of interest is filled up, nothing will come in the top box of 'Penalty'. 26. This analogy reflects and explains the scheme of imposition of tax, interest and penalty in the Tax Laws and the Scheme 'KSS 2017' viz., first the arrears of tax have to be cleared off by the dealer and there is no waiver of tax amount in the Scheme. The waiver is only of arrears of penalty and interest to the extent of 90% is given, if 10% of the same is paid by the dealer. 27. The question which therefore arises is that whatever the amount is paid in pursuance of the assessment order or after the assessment order is passed by the Assessing Authority, whether it is described as a 'deposit' or 'payment' of tax or other amounts, such payment remains subject to the adjudication by the Appellate Authority or by the Courts, where the uncertainty....
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.... of any special law like the 'KSS 2017'. The Scheme 'KSS 2017' does not envisage any such 'adjustment' or adjudication but only talks of "work out the actual arrears of tax and penalty and interest payable by the Dealers". This working out has to be done only as per the impugned assessment orders, which were the subject matter of appeals, revisions or writ petitions. The Revenue Authorities are not entitled to undertake the fresh adjudication or adjustment process which is not envisaged in the Scheme itself. 31. The amount deposited or paid by the dealer after the point of time of assessment orders, which is the subject matter of challenge, whether it is called a 'payment of tax or other amounts' or a 'deposit', does not give it the different colour or payment of demand in water tight silos of tax, interest and penalty and therefore, in the absence of any specific and clear provisions in the Scheme itself specifying as to how the amounts lying deposited with the Department during the pendency of the appeals etc., are to be adjusted, the Department cannot be allowed to take a pro-revenue approach like a money lender to first set off and satisfy the demand of interest and thereaft....
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....consonance with the over all objective and clear provisions of the ''KSS 2017', promulgated with the avowed purpose of quick recovery of arrears of tax, interest and penalty and putting a quicker end to the litigation for both the parties. 36. The aforesaid conclusions are supported with the following discussion of the judgments, wherein such a purposive interpretation of similar Schemes under the Income Tax law and as well as other Tax laws were rendered by the different Courts including the Apex Court of the Country. 37. At this stage, the brief review of the case laws discussed at the bar would be opportune. 38. The Division Bench of this Court in Mangilal S.Jain v. Commissioner of Income Tax and Others (ILR 2003 KAR 2066) dealt with a similar controversy under 'Kar Vivad Samadhan Scheme, 1998', under Income Tax law announced in the Finance Act, 1998 and the Court held that any payments made towards tax arrears after the date of assessment and before the date of declaration filed under 'Kar Vivad Samadhan Scheme', will have to be taken as part payment towards tax in regard to declaration under the said Scheme and Explanation to Section 140-A(1) of the Income Tax Act whi....
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....ircular No. F 149/145/98/DPL, dated 3.9.1998, under Section 96 of the Finance (No. 2) Act, 1998. The said Section 96 enables the Central Government to issue from time to time, such orders, instructions and directions to the authorities as it may deem fit, for the proper administration of the KVS Scheme and the authorities concerned with execution of the scheme are required to observe and follow such orders and instructions. The relevant portions of the clarifications (questions 4 and 7 and their answers) are extracted below: "Q-4: Where the tax arrear comprises tax and interest, how will the part payment be first appropriated-towards tax or interest ? Ans: The part payments are appropriated first towards tax and then towards interest. The normal rule that payments will first be adjusted towards interest and then towards principal (income-tax), based on the Explanations Section 140A(1) of IT Act and general law, will be inapplicable to matters covered by the KVS Scheme. The Learned Single Judge has lost sight of the above aspects and has wrongly proceeded as if the explanation to Section 140A(1) of IT Act is applicable to the KVS Scheme". This cas....
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....full and final settlement in respect of all other persons on whom show-cause notice was issued in respect of the same matter. Thus read as a whole the words "pending adjudication" cannot be read to exclude cases where the proceedings are still pending in appeal. Even otherwise the Order has to be read along with the Kar Vivad Samadhan Scheme. Under the Kar Vivad Samadhan Scheme, a party can file a declaration so long as the proceedings are pending. Thus, even though the show-cause notice may have been adjudicated upon and an appeal is pending, a party could still take the benefit of the Kar Vivad Samadhan Scheme and file a declaration. The object of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order is to give benefit of a settlement by the main party (i.e. the Company in this case) to all other co-noticees. This being the object, a classification, restricting the benefit only to cases where the show-cause notice is pending adjudication, would be unreasonable. If read in this manner the Order would be discriminatory. An interpretation which leads to discrimination must be avoided. In any event this would clearly be a case where two views are possible. It is sett....
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...."7. It cannot be denied that the demand against the petitioner was raised consequent to the order of adjudication. Section 35F of the Act under which the petitioner was required to deposit the amount of Rs. 50 lakhs speaks of 'deposit pending appeal'. It is clear that the amount so deposited remains a deposit pending appeal and is thereafter available for appropriation or disbursal consistently with the final order maintaining or setting aside the order of adjudication". 43. The learned Single Judge of the Kerala High Court in M/s.Alwaye Sugar Agency v. Commercial Tax Officer, Alwaye & Others [(2011) 42 VST 517], also dealt with a similar controversy as is involved in the present case and under the provision of 'Amnesty Scheme' announced in Kerala in the Budget Speech of 2010, the learned Single Judge directed that a sum of Rs. 75,000/- deposited by the petitioner-assessee under the said Scheme, cannot be adjusted against the interest portion under Section 55C of the Act, which is also akin to Section 42(6) in KVAT Act and the Court allowed the Writ Petition with the following observations:- "More so since, once the Scheme is announced and specified to be commenced from....
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.... and require the payment of reduced liability of the disputed tax maximum to such extent the same is outstanding, along with full admitted tax, if the same is outstanding, and to grant immunity from liability of interest, penalty and prosecution, etc. In case there are no arrears of tax but only of interest and penalty, demand in respect of such arrears is reduced to half. That construction saves the provision from the vulnerability to fall foul of article 14 on the ground of hostile discrimination. A person who for any reason has not paid admitted tax but is honest in his declaration is placed at a disadvantage position vis-a-vis a person not so transparent assessee whose tax declaration is not found acceptable and addition in income has been made, interest and penalties levied and also with those assessees who have recourse to even a wholly untenable dispute the benefit of reduction in tax liability is extended to admitted tax liability as well, inasmuch as a non-disputant assessee is prohibited to get any benefit under the KVSS, a disputant assessee will get benefit not only in respect of tax arrear in respect of which a dispute is pending, settlement of which is one of the purp....
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....ned Single Judge in that case had observed in paragraph-10 of the judgment as under:- "10. The Provisions of Section 140A by its Explanation would have no force, had there been any specific provision under the Kar Vivad Samadhan Scheme, 1998. Since the KVS Scheme does not contemplate adjustment of the amount paid under Section 140A towards tax, the arguments raised by learned counsel for the petitioner cannot be accepted. Question No.4 of the clarification dated September 3, 1998, also does not help the petitioner's case, because, it refers to the payments which are made after the tax arrears are computed and thereafter any part payment is made. The clarification given by the Government dated January 18, 1999, has only used the words "the Scheme is different from section 140A." This also does not help the petitioner, for, it is nowhere stated in this clarification that the amount paid under section 140A has to be adjusted towards tax. The amount has been paid admittedly under section 140A and the Explanation to section 140A is clear in requiring adjustment of the payment first towards interest-liability. Even in the Budget Speech, the contention raised by the petitioner ha....