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2025 (5) TMI 852 - HC - VAT / Sales TaxRejection of application filed by the petitioner No. 1-Company under Vera Samadhan Yojna 2019 - rejection on the ground that the petitioner No. 1-Company has not paid the full amount against the outstanding amount intimated to the petitioner No. 1-Company - HELD THAT - It would be germane to refer to the Amnesty Scheme 2019 which is a benevolent Scheme for recovery of the old outstanding dues in pending Appeals to reduce the cost of litigation of the Government. As per the provisions of the Clause 8 of the Amnesty Scheme the petitioner was required to give the benefit of the Scheme on payment of the first installment being 10% of the total outstanding dues to be paid before 15th March 2020 and remaining 90% to be paid from April 2020 in eleven equal installments. Clause 8(4) of the Scheme provides that if the monthly installment is not paid within time then such installment can be paid with 1.5% interest per month before the 20th Day of the next month. The petitioner has not paid the 6th and 7th Monthly installments within the due date and therefore the petitioner did not pay the interest amount of Rs. 1, 175.07/- as per the Amnesty Scheme - The respondent-Authority therefore on the ground that the petitioner did not pay the 6th and 7th monthly installments with interest literally interpreted the provisions of Clause 8(4) of the Amnesty Scheme and rejected the Application of the petitioner on the ground that full amount is not paid. Such literal interpretation of benevolent Scheme could not have been made by the respondent-Authority without giving any intimation to the petitioner for outstanding amount of interest if any to be paid. The impugned order dated 23rd February 2022 could not have been passed rejecting the application filed by the petitioner under the Amnesty Scheme. Conclusion - The petitioner is entitled to the benefit of the Amnesty Scheme despite the shortfall in interest payment due to lack of prior intimation and the benevolent nature of the Scheme. The impugned order dated 23rd February 2022 is hereby quashed and set aside and the respondents are directed to give the benefit of the Amnesty Scheme to the petitioner and refund the amount of Rs.4, 78, 833/- which was recovered subsequently from the attached Bank Account of the petitioner after adjustment of the interest amount of Rs. 1, 175.07/- along with interest at the rate of 9% per annum from the date of such recovery till the date of payment of such refund amount to the petitioner - Petition allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Entitlement to benefit under the Amnesty Scheme despite shortfall in interest payment Legal framework and precedents: The Amnesty Scheme, 2019, is designed as a benevolent measure to facilitate recovery of outstanding dues and reduce litigation costs. Clause 8 of the Scheme mandates payment of 10% of dues by 15th March 2020, with the balance payable in eleven equal monthly installments. Clause 8(4) specifically provides that if an installment is paid late, it must be paid with 1.5% interest per month before the 20th of the subsequent month. Further, the Scheme stipulates that failure to pay the amount due with interest results in denial of benefits under the Scheme. Court's interpretation and reasoning: The Court examined the payment schedule and found that the petitioner had paid the entire principal amount of Rs. 4,81,779/- by 19th January 2021, which was well within the extended deadline of 31st August 2021 as per Circular dated 05.07.2021. However, the petitioner delayed payment of the 6th and 7th installments, resulting in an interest liability of Rs. 1,175.07/- which remained unpaid. The respondent-Authority took a literal interpretation of Clause 8(4), rejecting the petitioner's application for non-payment of the full amount, including interest. The Court held that such a literal interpretation of a benevolent Scheme without prior intimation to the petitioner about the outstanding interest was unjustified. The Court emphasized that the petitioner was never informed about this shortfall before rejection of the application, and the petitioner was under the bona fide belief that the entire amount had been paid. Key evidence and findings: The payment records and schedule demonstrated that the petitioner paid all principal installments before the extended deadline but was late in two installments, incurring interest. The petitioner was not notified of the outstanding interest before rejection. The respondent recovered Rs. 4,89,092/- from the petitioner's bank account post-rejection. Application of law to facts: The Court applied the principle that benevolent schemes should be construed liberally and not defeated by hyper-technical or literal interpretations that cause hardship without notice. The absence of any prior communication regarding the interest shortfall was critical to the Court's conclusion that rejection was premature and unjust. Treatment of competing arguments: The respondent argued that Clause 8(4) mandated strict compliance with payment terms including interest, and failure to pay full amount justified rejection. The respondent also pointed to a later Circular (26th May 2022) allowing further time for payment of interest, which the petitioner did not avail. The Court noted that the rejection predated the Circular and the petitioner was not given opportunity to pay outstanding interest before rejection. Conclusions: The Court concluded that the petitioner was entitled to the benefit of the Amnesty Scheme despite the shortfall in interest payment, due to lack of prior intimation and the benevolent nature of the Scheme. Issue 2: Obligation of the respondent-Authority to provide prior intimation before rejecting the application Legal framework and precedents: Administrative fairness and principles of natural justice require that a party be given an opportunity to rectify defects or pay outstanding dues before rejection of an application under a Scheme. Court's interpretation and reasoning: The Court held that the respondent-Authority erred in rejecting the petitioner's application without giving any notice or intimation regarding the unpaid interest amount. The Court underscored that the petitioner had paid the principal amount within the extended time and was unaware of any shortfall. Key evidence and findings: There was no communication on record from the respondent-Authority informing the petitioner of the outstanding interest liability before the impugned order dated 23rd February 2022. Application of law to facts: The Court applied the principle that rejection of a benefit under a Scheme without notice of defects violates the Scheme's benevolent purpose and principles of fairness. Treatment of competing arguments: The respondent contended that the Scheme's terms were clear and the petitioner was bound to comply. The Court rejected this argument on the ground that strict compliance cannot override the need for fair notice in a benevolent Scheme. Conclusions: The Court concluded that prior intimation was mandatory and its absence vitiated the rejection order. Issue 3: Entitlement to refund of amounts recovered post-rejection Legal framework and precedents: If recovery is made in excess or in violation of Scheme provisions, refund with interest is warranted. Court's interpretation and reasoning: Since the Court quashed the rejection order and held that the petitioner was entitled to the Scheme benefit, the amount recovered from the petitioner's bank account in excess of the interest due was to be refunded. Key evidence and findings: The petitioner demonstrated a calculation showing a refund amount of Rs. 4,78,833/- after adjusting the interest liability of Rs. 1,175.07/-. Application of law to facts: The Court ordered refund of the excess amount with interest at 9% per annum from the date of recovery till payment. Treatment of competing arguments: The respondent did not dispute the refund calculation but argued that the petitioner could have paid interest after the Circular dated 26th May 2022. The Court held that since the rejection order was prior to the Circular, this argument did not preclude refund. Conclusions: The petitioner is entitled to refund of Rs. 4,78,833/- with interest as calculated. Issue 4: Interpretation of Clause 8 and related provisions of the Amnesty Scheme Legal framework and precedents: Clause 8(4) of the Amnesty Scheme stipulates payment schedule and penal interest for delayed installments. Condition No. 3 of the intimation mandates payment of penal interest before the 20th of the subsequent month. The Scheme denies benefits if full amount is not paid. Court's interpretation and reasoning: The Court acknowledged the literal terms but emphasized that the Scheme is benevolent and must be interpreted in a manner that advances its purpose. The Court found that strict literal interpretation without notice leads to injustice. Key evidence and findings: Payment records showed delayed payments of 6th and 7th installments, with interest unpaid. Circular dated 05.07.2021 extended deadlines, which the petitioner complied with for principal payments. Application of law to facts: The Court balanced the Scheme's strict provisions with equitable considerations and procedural fairness. Treatment of competing arguments: The respondent stressed strict compliance; the petitioner highlighted benevolent intent and lack of notice. The Court sided with the latter. Conclusions: The Court held that the Scheme's provisions should not be applied in a hyper-technical manner to defeat its benevolent purpose. Issue 5: Effect of Circular dated 26th May 2022 granting further time for payment of outstanding interest Legal framework and precedents: The Circular allowed assessees to pay outstanding interest and avail Scheme benefits even after initial rejection. Court's interpretation and reasoning: The Court noted that the petitioner did not avail this opportunity, but the rejection order predates this Circular. Hence, the petitioner's failure to act post-Circular does not justify the original rejection. Key evidence and findings: The petitioner's appeal against rejection was dismissed on the ground that no appeal lies against rejection of the Scheme application. Application of law to facts: The Court found no fault in the petitioner for not applying after Circular since the rejection was already in place without notice. Treatment of competing arguments: Respondent argued the petitioner could have paid interest post-Circular; Court held this argument irrelevant to initial rejection. Conclusions: The Circular did not cure the procedural defect of rejection without notice. 3. SIGNIFICANT HOLDINGS The Court held:
The Court established the core principle that benevolent schemes like the Amnesty Scheme must be interpreted liberally and fairly, ensuring procedural fairness and opportunity to comply before denial of benefits. Final determinations:
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