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M/s. WS Retail Services Private Limited Versus The State of Karnataka, Commercial Tax Officer (Audit) And Assistant Commissioner of Commercial Taxes, Bangaluru

2017 (11) TMI 864 - KARNATAKA HIGH COURT

Waiver of penalty and interest - recovery of tax arrear - Karasamadhana scheme - Section 42 of Chapter-V - Sections 62(4) and 63(7) of the KVAT Act, 2003 - Held that: - Admittedly, the ‘KSS 2017’, is a self contained and special piece of legislation enacted under the special circumstances in the month of March, 2017, to pave the way and to provide the clean slate for the new indirect regime of GST to be implemented from 01.07.2017 with a view to put an end to the pending litigation and also to r .....

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llectors. Though the said provisions made in the Scheme cannot be read as repugnant and in conflict with the provisions of relevant statutes, which the said Scheme covered but the at the same time, it also cannot be said that the usual procedure of assessment, adjudication, appeals and recovery provisions under the statutes themselves can be given the overriding effect over the said Scheme ‘KSS 2017’, even to the extent of undoing the purpose of the Scheme itself. - The stand of the Responde .....

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purposes of the Scheme itself. - Since under the ‘KSS 2017’, the arrears of tax as well as the arrears of interest and penalty were to be determined in terms of the assessment order itself and remaining unpaid as on 15.03.2017, as required in Clause 2.4 quoted above, while scrutinizing the applications as per Clause 3.2 of the ‘KSS 2017’ itself, the Assessing Authority is not entitled to undertake fresh adjudication process of computing or adjusting the amounts deposited, in the manner he ch .....

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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% of assessed interest and penalty and therefore, adjustment of amo .....

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pose of quick recovery of arrears of tax, interest and penalty and putting a quicker end to the litigation for both the parties. - During the pendency of the appeal, the payment or the deposit made by the petitioners-assessees, after the assessment orders are passed, remains the colourless deposit and cannot be adjusted under any specific head of the ‘total demand’ comprising of tax, interest and penalty and the full effect and play of the ‘KSS, 2017’ can be given to the assessee on a benefi .....

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r computing the arrears of tax, interest and penalty is unsustainable in law and illegal and the impugned orders therefore deserve to be quashed and set aside and the writ petitions deserves to be allowed - petition allowed - decided in favor of petitioner. - W.P no 33176/2017, W.P No. 32658/2017 W.P. 32659-670/2017 W.P. 33470-472/2017 W.P 35892/2017 W.P. Nos. 25349, W.P. Nos. 31438-448/2017, W.P. Nos. 25350/2017, W.P. Nos. 30508-518/2017 In W.P No. 33176/2017 - Dated:- 14-11-2017 - MR. DR. VINE .....

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oney without causing harm to the tree (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, .....

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ding 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 common judgment, as certain provisions of the Notification of G.O.No.FD 24 GSL 2017, Bengaluru, Dated 31st March 2017, promulgated the said Karasamadhana Scheme, 2017 , requires interpretation by this Court in the present set of writ p .....

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sed by the Assessing Authority, the remaining 90% of the interest and penalty was to be waived by the Respondent-State. The said waiver was subject to the further condition that the petitioner-assessee will withdraw his pending appeals, revision petitions or writ petitions or any other litigation pending in any Court or Tribunal. Thus, the twin objectives of putting an end to the litigation and quicker recovery of the whole amount of the due tax and 10% of interest and penalty was sought to be a .....

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Act, KTPTC & E Act, KTL Act, KAIT Act and KET Act relating to all the years upto 31/03/2016 and remaining unpaid upto 15/03/2017. 1.2 Arrears of penalty and interest means all kinds of penalties levied and all kinds of interest accrued under the provisions of the KST and CST Acts relating to all the assessment years ending on 31/03/2005 and all kinds of penalties levied and all kinds of interest accrued under the provisions of the KVAT Act and CST Act relating to the tax periods for all the .....

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eme. 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, wh .....

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ther Applications against the order or proceedings relating to arrears of tax and arrears of penalty and interest before any Appellate Authority or Court and if disposal of such Applications is still pending then the dealer or person or proprietor, as the case may be, shall withdraw the Appeal or other Application before availing the benefit of waiver of arrears of penalty and interest under this Scheme. If Appeal or other Application is withdraw, the quantum of arrears of tax/penalty and intere .....

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Assessing Authority/Recovery Officer/Prescribed Authority shall scrutinize the Application and workout the actual arrears of tax, penalty and interest payable by the dealer or person or proprietor, as the case may be, upto the date of filing of Application and if any discrepancies are found in the amount of arrears of tax and arrears of penalty and interest payable upto the date of Application as declared by the dealer or person or proprietor in his Application, then the concerned Assessing Auth .....

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ll payments should be made on or before 31/05/2017. The dealer or person or proprietor, as the case may be shall file a declaration in support 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 .....

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ssessment 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 dealer or person or proprietor, as the case may be, in correct quantification of the .....

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dent-Authorities against the outstanding interest demand as per the assessment order passed by the first Adjudicating Authority and not against the amount of tax found due to be paid, so as to determine the arrears of tax or arrears of interest and penalty , as defined in the KSS 2017 quoted above. 9. This adjustment of amount paid during the pendency of the appeals etc., which were required to be withdrawn by the Dealers first against the head of interest and not against the tax as per the asse .....

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these payments or deposits subject to appeals against the outstanding interest amount first and only the balance amount can be adjusted against the tax or penalty parts of the total demand raised by the Assessing Authority. 10. This obviously resulted in more demand of arrears of tax, interest or penalty, upon such scrutiny of the applications filed by the Dealers in comparison to the arrears of tax computed by them by first adjusting the deposits against the tax dues and then paying the balance .....

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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 assessmen .....

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) that the Scheme KSS 2017 is a special delegated legislation and the provisions of Section 42(6) of the KVAT Act, 2003, cannot be imported and implanted in the said KSS 2017 , so as to cause any prejudice to the Dealers overriding the clear terms of the Scheme itself; (iii) that whatever the amounts are deposited, once the assessment order is passed by the Assessing Authority they are only deposits and not payments by the dealer against any specific head of tax, interest or penalty and therefor .....

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question of determining the quantum of penalty which requires generally the presence of mens rea on the part of the dealer and is computed as a percentage of tax amount also cannot arise, if tax due is not there. In other words, the amount of deposit made in pursuance of the impugned assessment order, subject to their right to contest such adjudication before the Appellate Forums, is nothing but a trust money with the Department, which the Respondents cannot adjust first against the interest and .....

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as indicated in the form of KSS 2017 , cannot be defeated by the authorities now, misinterpreting the provisions of the said Scheme. (vi) They also contended that 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 .....

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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 .....

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lty and interest, the Certificate of waiver can be granted to the Dealers, finally putting an end to the process and the litigation and recovering the arrears of tax etc., in terms of the said Scheme finally. (viii) The learned counsels contended that Clauses 3.8 and 4 of the said Scheme, on the other hand, indicate that the Assessing Authority will help the Dealers in the correct quantification of the amounts of interest and penalty and for removal of difficulties, the Commissioner of Commercia .....

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ted tax liability of the Dealer and then only the minimal remaining balance towards the tax and penalty amount as per the original assessment orders. Such was not the intention of the specially enacted and self contained beneficial Scheme in the form of KSS 2017 , announced by the Hon ble Chief Minister just before the new indirect tax regime in the form of GST (Goods and Services Tax), which substituted levy of amount of VAT tax, Service Tax, Excise Duty etc., and this new tax regime of the GST .....

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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 .....

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e adjusted towards the interest payable and the balance, if any, shall be adjusted towards the tax or any other amount due. 15. The learned AAG contended that there is no use of word deposit in the provisions of KVAT Act, 2003 and other enactments involved under the said Scheme unlike Central Excise Act, 1944 and the only provision for adjustment of amount deposited by the assessee, even though which may be subject to an appeal filed by them has to be made under Section 42(6) of the Act only and .....

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ject to complying with the other conditions of the Scheme like withdrawal of the appeals and payments of whole of the arrears of tax and 10% of arrears of interest and penalty only, they could be given the waiver of remaining 90% of interest and penalty in terms of the provisions of the said KSS 2017 and therefore, there is nothing wrong in the stand taken by the Department in the present cases. 16. Mr.Aditya Sondhi, learned AAG further contended that the entire KSS 2017 , itself is a voluntary .....

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ax dues first and only thereafter against the interest and penalty as contended by them. The learned AAG further submitted that unlike the provisions of the other Enactments and particularly under the Central Excise Act, 1944, wherein Section 35-F of the Act specifically provides for deposit of a duty for 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 .....

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tself 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 Secti .....

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of Section 42 of Chapter-V and Sections 62(4) and 63(7) of the KVAT Act, 2003 :- 42. Payment and recovery of tax, penalties, interest and [other amounts, issuance of clearance certificates] (1) Every registered dealer shall furnish returns to the prescribed authority, and the tax payable shall be paid in such manner as may be prescribed, within the period specified and on an application by a dealer, the Government or Commissioner may permit, subject to such conditions as may be prescribed, payme .....

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e tax payable in respect of any period and also permit payment of such tax before the expiry of any deferred period, subject to the condition that in respect of such industrial unit the Government has already notified deferred payment of tax under the provisions of the Karnataka Sales Tax Act, 1957 (Karnataka Act 25 of 1957).] (b) Notwithstanding anything contained in this Act but subject to such conditions as the Government may, by general or special order specify, where a dealer to whom incent .....

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all 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 .....

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th 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 assessed, or any other amount due under this Act from a dealer, or any other person, may without prejudice to any other mode of collection be recovered. - (a) as if it were an arrears of land revenue; or (b) by attachment and sale or by sale wi .....

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imposed by him. (10) Where a dealer or other person who has appealed or applied for revision of any order made under this Act and has complied with an order made by the appellate or the revising authority in regard to the payment of the tax or other amount, no proceedings for recovery under this Section shall be taken or continued until the disposal of such appeal or application for revision. (11) The High Court may, either suo motu or on an application by the Commissioner or any person aggriev .....

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dance with the provisions of sub-section (1) of Section 35 is outstanding from such dealer, issue a clearance certificate in the prescribed form.] 62. Appeals (1) xxxxxx (2) xxxxxx (3) xxxxxx (4) (a) No appeal against an order of assessment shall be entertained by the Assessing Authority 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 .....

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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 .....

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er amount disputed along with the prescribed form of appeal. (b) The Appellate Tribunal shall dispose of such appeal within a period of [three hundred and sixty-five days] from the date of the order staying proceedings of [recovery of seventy per cent of tax] or other amount and, if such appeal is not so disposed of within the period specified, the order of stay shall stand vacated after the said period and the Appellate Tribunal shall not make any further order staying proceedings of recovery o .....

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f the implementation of the said Scheme carved out the special provisions in the said Scheme for achieving the twin objectives of the quicker and easy recovery of the arrears of tax and other demands and putting an end to the pending litigation. Naturally, it was a beneficial and welfare Scheme to provide the win-win situation for both the tax payers and the tax collectors. Though the said provisions made in the Scheme cannot be read as repugnant and in conflict with the provisions of relevant s .....

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s 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 .....

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urpose 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 achieving the twin purposes of the Scheme itself. 22. It does not behove the State to contend before the Court that .....

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n order to appreciate the rival contentions raised before this Court, one has to understand the basic Scheme of levy of tax, interest and penalty itself under the taxing statutes. While the tax as per the charging provisions of 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 whi .....

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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 3 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 of Penalty . That first two boxes of penalty and interest having the connecting hole at the bottom. If one was to .....

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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 .....

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the colourless deposit. 28. Since under the KSS 2017 , the arrears of tax as well as the arrears of interest and penalty were to be determined in terms of the assessment order itself and remaining unpaid as on 15.03.2017, as required in Clause 2.4 quoted above, while scrutinizing the applications as per Clause 3.2 of the KSS 2017 itself, the Assessing Authority is not entitled to undertake fresh adjudication process of computing or adjusting the amounts deposited, in the manner he chose or apply .....

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id 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% of assessed interest and penalty and therefore, adjustment of amount lying d .....

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ion 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 .....

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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 ar .....

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lowed to be first satisfied and adjusted out of the payments and deposits already made by the Dealers and thereafter 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 4 .....

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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 interpretation of Tax laws that in case the two views are possible, the one favourable to the assessee should be adopted, clearly leads this Court to the aforesaid conclusion. The stand of the Revenue on the contrary therefore is not in consonance with the over all objective .....

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e, 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 .....

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me had not been brought into force, and if the revision had been taken to its logical conclusion, there were two possibilities: (a) If the appellant succeeded in the revision, his liability to tax should stand reduced and consequently payment of interest would also be reduced or wiped out; or (b) If the revision were dismissed, the liability of the Assessee to pay tax and interest as per the order of the assessing authority would have stood undisturbed. Thus the claim for interest as also the cl .....

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ning portion of the disputed income and waiver of interest as also the penalty if any. 13. If any amount paid towards arrears during the pendency of the litigation (by way of appeal, revision, etc.) is to be irreversibly adjusted against the interest under Section 140A, that would render infructuous the pending litigation (in this case pending revision petition). Surely that cannot be and in fact is not the intention. As noticed above, if the appellant had succeeded in the revision petition, his .....

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d certain clarifications by circular 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 .....

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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 Schem .....

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with therein. Therefore, the courts must construe the provisions of the Scheme with reference to the language used therein and ascertain what their true scope is by applying the normal rule of construction. Keeping this principle in view, let us consider the reasoning of the High Court . 40. In Union of India and Others v. Onkar S.Kanwar and Others [(2002) 7 SCC 591], the Hon ble Apex Court again with reference to the Kar Vivad Samadhan Scheme, 1998 , which also covered the Excise Duty disputes .....

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madhan Scheme (Removal of Difficulties) Order seems does state that the show-cause notice should be pending adjudication. However, the same Order also talks of the show-cause notice being in respect of the same matter on which the show-cause notice has been issued to the main declarant. Then the Order provides that a settlement in favour of the declarant will be deemed to be full and final in respect of other persons also. This Order has to be read as a whole. If read as a whole, it is clear tha .....

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ing. 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 .....

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so 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 India reported in 1996 (82) E.L.T. 177 (Bom), the Division Bench considered an identical question and ruled that the deposit under Section 35F is not a payment of duty, but is only a pre-deposit for availing a right of appe .....

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dras High Court in somewhat identical circumstances has ordered refund along with 15 percent interest. It is also to be noticed at this stage that the respondents themselves in the light of dismissal of SLP by the Supreme Court has chosen to issue circular instructions dated 2-1-2002. They have stated that such refund application under Section 11B(1) need not be insisted upon in the light of the judgment of the Supreme Court. In these circumstances, the endorsement at Annexure-H has no legs to s .....

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iation or disbursal by the Revenue Department. Paragraph-7 of the said judgment is also quoted below for ready reference:- 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 ₹ 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 .....

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itioner-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 be .....

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opriating the said amount against interest portion under the cover of Section 55 C, is not correct or sustainable. Accordingly, Ext. P4 is set aside. The respondents are directed to pass fresh orders quantifying the liability of the petitioner, In the application preferred for extending the benefit under the Amnesty Scheme , giving credit to a sum of ₹ 75,000/- paid by him vide Ext.P2, as payment towards a portion of the liability under the Scheme, and effect appropriation, in tune with th .....

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n Scheme , cannot be put to more disadvantageous position in comparison to a disputant assessee and the purpose of such Scheme is not only the recovery of all the arrears, but it is interwined with settlement of the disputes. The relevant portion of the said judgment is quoted below for ready reference:- Looking to the Scheme of the Act one plausible view appears to be, that as the Scheme does not apply where there is no dispute between the assessee and the Revenue and the tax determined and arr .....

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nterest 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 wi .....

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se 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 State of Gujarat v. Essar St .....

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refore, unlike Section 62(4) of the KVAT Act, 2003, the provisions being different in Gujarat, the Court took a view there that the deposit is in the nature of pre-deposit, whereas under the Karnataka law, there is no use of word deposit under the provisions relating to appeal or in Section 42 of the Act. 48. This judgment is of no application to the present case, as this Court has held that during the pendency of the appeal, the payment or the deposit made by the petitioners-assessees, after th .....

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nce placed by the learned AAG on the judgment of the learned Single Judge of this Court in V.Venugopala Reddy v. Commissioner of Income Tax & Another [(1999) SCC online KAr 623], under KVSS, 1998 under Income Tax law, is of little avail to the Respondents-State. The learned 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 Samadh .....

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ly 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 s .....

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