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TMI Blog2017 (11) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... low 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 Writ Petitions which are being disposed of by this com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PTC & 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 Clause 2.4 of the 'KSS 2017' further provided that if Appeal or other Application is withdrawn, as was required by the Scheme, the quantum of arrears of tax/penalty and interest for the purpose of this Scheme shall be considered as per the order, against which, Appeal or other Application had been filed, which are since withdrawn to avail the benefits of the said 'KSS 2017'.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 High Court, the benefit of Scheme was not available to the Dealers. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or 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 days from the date of such order. 3.8 The Assessing Authority/Recovery Officer/Prescribed Authority shall help the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 against the head of 'interest' and then claim the recovery of remaining arrears of tax without taking into account the payment or deposits alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 therefore, this clear language of Clause 2.4 cannot be deviated and departed by the Assessing Authorities and the administrative job of scrutinizing of application contained in Clause 3.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 any other amount due and interest payable, the amount so paid shall first be adjusted towards the interest payable and the balance, if any, shall be adjusted towards the tax or any other amount d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 63 for appeals to the Appellate Tribunal also provides for a power to grant stay to the extent of 70% of tax or other amounts, subject to the payment of 30% of the tax or other amounts disputed in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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 that revised return the tax so payable in such manner as may be prescribed. (8) Any amount, which remains unpaid under this Act after the due date of payment, shall be recoverable from a dealer in the manner specified under this Act. (9) Any tax due or assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 recovery of any tax or other amount is passed in any proceedings relating to an appeal under sub-section (1), the Assessing Authority shall dispose of the appeal within a period of [two hundred forty days] from the date of such order. (e) xxxxxx 63. Appeal to the Appellate Tribunal (1) xxxxxxxxxx (2) xxxxxx (3) xxxxx (4) xxxxxx (5) xxxxx (6) xxxx ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 incongruous and unsustainable and the same defeats the purpose of the Scheme for the Dealers, who voluntarily opted for the same giving up their valuable rights of disputing the entire liability as per the adjudication orders passed by the Assessing Authorities and putting an end to the litigation and paying the remaining arrears of tax, interest and penalty as per the provisions of the Scheme and thus giving finality to the dispute and achie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of the entire demand raised by the Assessing Authority being deleted, reduced or upheld by the appellate authority exists. Therefore, that deposit or that payment cannot be allowed to be 'adjusted' or considered as a general revenue of the State itself, unless and until the Appellate Authorities or the Courts determines the issues finally and subject to such decisions only, the 'adjustment' of the 'payment' or 'deposits' can be made by the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 thereafter further call upon the Dealers to pay the arrears of tax, without taking into account the deposits already made by the dealer and the set off of such deposits in the first instance has to be made against the arrears of tax and thereafter, if some balance amount remains, the Department can adjust it against the interest and thereafter under the head 'penalty'. 32. Unless this sequence of adjustment or computation of arrears is followed, it will defeat the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent 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 which is akin to Section 42(6) of the KVAT Act, 2003, cited before this Court and the general law will be inapplicable to the matters covered by the 'Kar Vivad Samadhan Scheme'. Hon'ble Justice R.V.Raveendran, (as His Lordship's then was) speaking on behalf of the Bench, held as under:- "12. In this case, admittedly a revision was pending. If the KVS scheme had not been brought into force, and if the revision had been taken to its logical conclusion, there were two possi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 case is on all fours with the case on hand before this Court and answers all the contentions raised on behalf of the Respondents-Department fully. 39. In Union of India and Others v. NITDIP Textile Processing Private Limited and Another[(2012) 1 SCC 226], the Hon'ble Apex Court also dealing with the same Scheme, namely 'Kar Vivad Samadhan Scheme, 1998' under Income Tax law, in paragraph-48 observed that 'Kar Vivad Samadhan Scheme' is a complete code in itself and the Courts must construe the provisions of the S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 settled law that if two views are possible then the one which is in favour of the assessee must be adopted". 41. On the issue of the 'deposit' under Section 35-F of the Central Excise Act, as to its character and nature, the learned counsel for the petitioners also relied upon the decision of the learned Single Judge of this Court in Nestle India Limited v. Asst.Commissioner of Central Excise, Mysore-II, [2003(154) E.L.T. 567(Kar.)] and the learned Single Judge held in paragraph-6 as under:- "In the case of Suvidhe Limited v. Union of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 the 1st day of the relevant financial year, for a specified period, it may not be proper for the State/Department to augment the revenue collection by resorting to coercive steps before the defaulters get an opportunity to apply for and obtain the benefit of the Scheme, which otherwise can only defeat or frustrate the Scheme itself and in turn, the 'Policy' of the Government. In the above circumstances, this Court finds that the course pursued by the respondents; issuing Ext. PA rejecting Ext. P2 preferred by the petitioner seeking the amount deposited as a tok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 purposes, but also in respect of undisputed liability, when recovery of all arrears is not the sole purpose but is interwined with settlement of the dispute. In such event, a case of an honest assessee being unequally treated is prima facie made out. 45. The aforesaid judgments cited by the learned counsel for the petitioners support the construction and interpretation as also the conclusions arrived at by this Court hereinbefore. 46. On the other hand, the learned Addl.Advocate General Mr.Aditya Sondhi, relying upon the decision of the Gujarat High Court in the case of St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 has not been elaborated, explained or stated. It is pointed out that, if the payment made under section 140A is adjusted towards interest, then such adjustment would be disadvantageous in comparison to the assessee who has not paid the tax at all. There may be anomalies or the Scheme may be more beneficial to the greater defaulter than to the honest taxpayer or the taxpayer who has complied with the provisions but the Scheme has to be read as it is. In these circumstances, I do not consider that any case for interference is made out. The contention that the payment under section 140A should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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