2018 (10) TMI 1710

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....these enactments is a compulsory exaction of tax from the subjects, the levy of interest even though the necessary corollary of tax is a compensatory levy in nature, to compensate the State for the loss caused to it by the non-payment of the due tax for the period for which it remains unpaid and the third component, viz., 'penalty' which generally depends upon the presence of guilty animus or mens rea on the part of the taxpayer, is also consequential and depends upon the amount of tax itself being first found to be due, because the calculation of the penalty amount is also based on the amount of tax itself. 24. The first essential component of the entire demand under the assessment orders under the tax laws is always the tax, thereafter only, the determination of interest and penalty can be made. If the tax itself is not due, the question of levying interest and penalty upon that does not arise. 25. Tax is at the foundation of demand under tax laws. Interest and penalty take later or back stages. Take the analogy of three boxes in a puzzle game, one laid over another, where the bottom box is of tax, the middle box is 'interest' and top box is that....

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....ad in conjunction and on sequence with other sub-sections of section 42, upon a harmonious reading would reflect that normally assessee is expected to first square up its liability to pay the tax with the returns itself and thereafter upon passing of the assessment order and if the amount paid falls short of the aggregate amount of tax and other amount (penalty) and interest payable, such amount paid shall be first adjusted against interest. This sequence of payments and adjustments under section 42(6) does not govern the payments and adjustments subject to appellate proceedings under sections 62 or 63 of the Act nor they are applicable to special Schemes like 'KSS 2017' in the present case. The said Scheme is a self contained Code in itself and envisages first the complete payment of tax assessed and then only 10 per cent. of assessed interest and penalty and therefore, adjustment of amount lying deposited or paid after the assessment order should also follow the same sequence and the order of preference. 30. Section 42(6) of the Act contained in only one of the eight enactments covered by the said Scheme, is applicable only where the assessments, payment of tax a....

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....ready made by the dealers and there after still requiring them to pay the arrears of tax as per the impugned assessment orders, without taking into account the payments already made. 34. The normal and ordinary sequence of levying of these three components of demand namely, the tax, interest and penalty should be followed in the beneficial piece of legislation like 'KSS 2017' in the present case. The provisions of section 42(6) of the Act cannot be given an overriding and encroaching effect upon the provisions of the Scheme itself, so as to permit the prior adjustment against the 'inter est' head, as claimed by the Revenue authorities. That will render the computation exercise under clause 3.2 tilted and biased in favour of the Revenue, rather than the normal and ordinary prudence in the computation of total tax and other demands under these enactments. In the considered opinion of this court, the aforesaid manner of computation only serves the purpose of the Scheme and renders the Scheme practically available to the dealers to avail the same for serving the twin objectives of the said Scheme for the sides. 35. The well-settled rule of interpretati....

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....ter of appropriation till the adjudication process has reached a finality and such deposits could only be regarded as 'colourless deposits.' The finding of the learned single judge as regards the payments made pending adjudication being in the nature of 'colourless deposits' requires no interference. 27. The very Scheme as envisaged in its preamble provided for waiver of 90 per cent. of penalty and interest remaining unpaid as on March 15, 2017 ; and further, it provided for payment of tax including arrears and 10 per cent. of penalty resulting in waiver of remaining penalty and interest. The purpose and intent of the Scheme was clear that all tax would be cleared and only a portion of penalty and inte rest need be paid. 28. As per clause 2 of the Scheme, 'any dealer who makes full payment of arrears of tax on or before May 31, 2017 shall be granted waiver of 90 per cent. of arrears of penalty and interest payable'. If section 42(6) is to be made applicable to the provisions of the Scheme, as contended by the State, and payments made pending appeal were to be appropriated first towards interest in accordance with the parent Acts notwithstan....