TMI Blog2018 (9) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... eme as envisaged in its preamble provided for waiver of 90% of penalty and interest remaining unpaid as on 15.03.2017; and further, it provided for payment of tax including arrears and 10% 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 interest need be paid. In this particular case, it is clear that the payments made by the respondents for admitting their appeals under various statutory provisions were under dispute and were not referable to any particular component of tax or penalty or interest and were only ‘colourless deposits’. Accordingly, these remittances cannot be deemed to be paid and offset from unpaid amount for calculation of arrears to be waived. Appeal dismissed. - WRIT APPEAL No. 72/2018 (T-RES) AND WRIT APPEAL Nos. 387-485/2018 (T-RES) - - - Dated:- 31-8-2018 - MR. DINESH MAHESHWARI, AND MR. S. SUNIL DUTT YADAV JJ. Appellants: (By Sri. Aditya Sondhi, Additional Advocate General and Sri. Vikram Huilgol, High Court Government Pleader) Respondent: (By Ms. Anupama G. Hebbar, Advocate), Sri Thirumalesh.M, Advocate, Sri Udaya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Budget for the year 2017- 2018, for a Scheme called as Karasamadhana Scheme-2017 (for short the Scheme ). Pursuant to the declaration in the Budget Speech by the Finance Minister, a Notification No. FD 24 CSL 2017, Bengaluru, dated 31.03.2017 came to be issued in order to enable trade and industry to clear their pending tax liabilities and start with a clean slate in GST . (para-488 of the Budget Speech on the floor of the Legislative Assembly). The Scheme provided for waiver of 90% arrears of penalty and interest payable under the respective taxing statutes subject to compliance of certain conditions as stipulated in the Scheme. The relief was sought to be provided:- (a) Relating to the assessment or reassessment for all years up to 31.03.2016 as regards the following Acts: (i) Karnataka Tax on Entry of Goods Act, 1979 (ii)Karnataka Tax on Profession, Trades, Callings and Employments Act, 1976 (iii) Karnataka Tax on Luxuries Act, 1979 (iv) Karnataka Agricultural Income Tax Act, 1957 and (v) Karnataka Entertainments Tax, 1958. (b) Relating to assessment/reassessment orders under the provisions of Karnataka Value Added Tax Act, 2003 for the tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrears of tax, interest and penalty as envisaged under the Scheme. The learned Single Judge, by his order dated 14.11.2017, set aside the endorsement of, rejection of the applications filed by the assessees under the Scheme, while accepting the contention of the assessees that computation of arrears of tax, interest and penalty was to be resorted to by adjustment of amount deposited by the assessees first under the head of tax and thereafter computing the arrears of tax (if deposit did not cover the entire tax liability), interest and penalty. 7. The State is in appeal challenging the said order of the learned Single Judge. 8. The details of the Writ Petitions of various assessees under different taxing statutes who had sought to avail the benefit under the Scheme for the purpose of factual narration is as follows: WRIT APPEAL NUMBER WRIT PETITION NUMBER RESPONDENTS ACT 72/2018 33176/2017 W.S. Retail Services Pvt. Ltd., KVAT CST 387/2018 32658/2017 M/s. La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Universal Digital Connect Ltd. KVAT 485/2018 47080/2017 M/s. Fakhri Sons KVAT 9. The Clauses of the Scheme that are required to be considered as being relevant to the present controversy are as under:- 1.1 Arrears of tax means tax assessed / reassessed as per the provisions of the KST and CST Acts relating to all the assessment years upto 31/03/2005 and tax assessed / reassessed as per the provisions of the KVAT Act and CST Acts relating to the tax periods for all the years commencing from 01/04/2005 upto 31/03/2016 and also tax assessed / reassessed under the provisions of KTEG 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 perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. (a) Clauses 1.1 and 1.2 define arrears of tax for the purpose of the Scheme with regard to; Karnataka Value Added Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest payable and the balance, if any, shall be adjusted towards the tax or any other amount due. 62. Appeals (4) (a) No appeal against an order of assessment shall be entertained by the Appellate 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 which an appeal has been preferred. (c) (i) The Appellate 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 Appellate Authority within a period of thirty days from the date of such application, it shall be deemed that the Appellate 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 satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment and before the date of declaration filed under the KVS Scheme, will therefore have to be taken as part payment towards tax in regard to declarations validly falling under the KVS Scheme. The normal rule that payments will first be adjusted towards interest and then towards principal (income Tax)(sic), based on the Explanations to Section 140A(1) of the 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 the IT Act is applicable to the KVS Scheme. (emphasis supplied) 13. Despite the contention by learned counsel for the State that reliance ought to be placed on the decision in the case of Y. Venugopal Reddy v. Commissioner of Income Tax and Another reported in (1999) 239 ITR 895, the learned Single Judge held that Venugopal Reddy s case was in conflict with the judgment of the Division Bench in the case of Mangilal S. Jain. It appears that the fact that the order in the case of Venugopal Reddy affirmed in Writ Appeal No.5435/1999 was not brought to the notice of the Court. The relevant portions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance (Department of Revenue), Central Board of Direct Taxes, issued 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 .. (emphasis supplied) 16. The Court in the case of Mangilal S. Jain has clarified and rightly held that the appropriation under Explanation to Section 140A of the Income Tax Act would apply only where liability had attained finality. Though as regards the Kar Vivad Samadhan Scheme 1998, the Central Board of Direct Taxes had issued a circular No.FC/149-145/98 DPL dated 03.09.1998 wherein it was specifically pointed out that the part payments would be appropriated first towards tax and then towards interest, it would still not alter the appropriation as contemplated under Explanation to Section 140A. In fact, the Court merely relied on the circular as being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of appropriation was never contemplated, and further impressed upon the arbitrary classification and resultant discrimination as compared to assessees who had not even filed appeals or actively pursued the disputes to its logical end. 22. The learned Single Judge has placed reliance on the following judgments in coming to the conclusion that the payments made were colourless deposits:- Nestle India Limited v. Asstt. Commissioner of C.Ex., Mysore-II reported in 2003 (154) E.L.T. 567 (Kar.). Relevant portions of para-6 are extracted hereinbelow:- 6 ..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 appeal. Such amount is bound to be refunded when an appeal is allowed with consequential relief. The Court also has allowed interest from the date of the order of the Tribunal till payment. The said judgment was challenged by the Union of India in a Special Leave Petition (Civil) No....../96 in CC No.3522/96. The Supreme Court dismissed the said Special Leave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al under these sections as not being pre-deposits. In the case of Vatech Wabag Limited v. Deputy Commissioner of Sales Tax, Midnapur Charge and Others reported in [2017] 100 VST 1 (Cal), the Calcutta High Court when faced with challenge to the constitutionality of Section 84(1) of the West Bengal Value Added Tax Act, 2003 which is analogous to Section 63 of the KVAT Act in mandating payment of entire undisputed amount and fifteen per cent of amount under dispute prior to filing of appeal, the Court noted that the word payment is capable of different meanings in the context that it is used. The Court noticed that the word payment can mean payment of a pre-deposit in one context and the payment of a tax in another context within the same section of a taxing enactment. The relevant portions of the Calcutta High Court s decision are reproduced below:- It is submitted on behalf of the petitioners that, the second proviso to Section 84(1) of the Act of 2003 requires payment of tax in dispute for the purpose of maintaining an appeal against an order in original. The requirement of payment is an exaction rather than a pre-deposit. The Act does not postulate a pre- deposit. Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a deposit or a pre-deposit in the context of clause (b) and the payment of a tax in the context of clause (a). Viewed from such perspective, there is no violence to the user of the words in the second proviso to Section 84(1) of the Act of 2003. It can be contended that, the words in the second proviso are clear and that, clause (b) does not speak of a deposit or a pre-deposit for a person or the Court to read the word payment while regulating clause (b) as a payment of a deposit. This contention assumes that, the Section 84 requires a payment of tax of 15 per cent of the tax in dispute to prefer an appeal. That assumption, with the greatest of respect, is not available in the context. The State has not imposed a tax to prefer an appeal. Learned Additional Advocate General says that, the State does not read Section 84 to be so. According to him, it is a deposit which would abide by the result of the appeal, that is to say that, on the appellant succeeding in the appeal, the amount deposited in terms of the second proviso to Section 84(1) would be refunded to the appellant along with interest. Deposit of 15 per cent.(sic) tax in dispute in terms of the second proviso to Section 84 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant- assessee had made two payments, one in pursuance of the appellate order dated 29.09.2006 and another on 14.03.2007 in terms of order of Sales Tax Appellate Tribunal. On 31.08.2007 final order of Sales Tax Appellate Tribunal in respect of provisional assessment was passed favouring assessee appellant granting full relief and setting aside entire demand. The Revenue had filed an application for condonation of delay along with revision. On 31.03.2009 such revision was allowed. By virtue of this order, benefit given by the Tribunal was set aside and the appellant-assessee was under an obligation to pay tax and other amounts demanded by the Department. Much later, on 25.06.2009 assessee filed an application seeking benefit under Amnesty Scheme. According to senior counsel arguing for the appellant-assessee, since the order of the Tribunal was in their favour, there was no obligation on them to seek benefit under Amnesty Scheme. During pendency of Revision Petition No. 76/2008 before High Court, Amnesty Scheme was introduced. Sub-clause (7) of Section 23B does not indicate that assessee cannot take benefit if the litigation pending is at the instance of Revenue. Therefore, as on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t adjusted towards interest and then towards principal as provided under section 55C is applicable. Hence, W.A. No. 1828/2013 filed by appellant assessee is dismissed and W.A. No. 1807/2013 filed by revenue is allowed. (emphasis supplied) 26. It is clear that in view of the discussion supra, the payments made which are referred to by any nomen-clature being made while preferring an appeal or as a prerequisite to consider the application for stay being statutorily mandated cannot be the subject matter 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% of penalty and interest remaining unpaid as on 15.03.2017; and further, it provided for payment of tax including arrears and 10% 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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