2016 (4) TMI 404 - HC - VAT and Sales Tax

Waiver of penalty for the quarters II, III and IV for the year 2006-07 - under the Amnesty Scheme of the Department of Trade & Taxes and Government of National Capital Territory of Delhi - Already paid demand of tax and interest in terms of the rectification orders - Interpretation sought to be placed by the Respondents on the relevant clause is not consistent with the overall purpose of the Amnesty Scheme and the main purpose was to incentivise self-compliance by the dealer with the tax demand - Held that - While it is true that the Petitioner had paid tax and interest for the period in question even prior to the Amnesty Scheme, the fact remains that the Petitioner had challenged the levy of penalty for the same period and the said challenge is pending in the appeal before the AT. It is anomalous that the person who pays part tax and interest would be entitled, while calculating the tax dues, under clause 3 of the Amnesty Scheme to seek waiver of penalty whereas the person who paid the tax and interest and challenged the levy of penalty would not be entitled to seek waiver. In other words the Scheme is sought to be interpreted in such a manner that compliance with part of the demand, i.e., payment of tax and interest but not penalty, would make a person ineligible to the Amnesty Scheme qua the penalty amount under challenge whereas a person who defaults in paying the tax and interest as well as penalty would be entitled to be benefit of the Amnesty Scheme and claim waiver of penalty. As no reasons have been given by Respondent No. 2 in the so-called order dated 23rd July 2014 in DSC Form 3 for rejecting the claim of the Petitioner, the impugned order is set aside and the petitioner is entitled to claim the benefit of the said Amnesty Scheme. - Decided in favour of appellant

Issues Involved:
1. Rejection of the Petitioner's request under the Delhi Tax Compliance Achievement Scheme 2013 (Amnesty Scheme) for waiver of penalty.
2. Interpretation of the term "tax dues" under the Amnesty Scheme.
3. Applicability of the Amnesty Scheme to cases where tax and interest have been paid, but penalty is under challenge.
4. Validity of the rejection order issued by the Respondent.

Issue-wise Detailed Analysis:

1. Rejection of the Petitioner's request under the Amnesty Scheme for waiver of penalty:
The Petitioner, Siemens Limited, sought quashing of Form DSC-3 dated 23rd July 2014, issued by the Respondents, which rejected the Petitioner's request for waiver of penalty for the quarters II, III, and IV for the year 2006-07 under the Amnesty Scheme. The Petitioner had paid the tax and interest as per rectification orders but challenged the penalty before the Appellate Tribunal (AT).

2. Interpretation of the term "tax dues" under the Amnesty Scheme:
Section 2 (1) (d) of the Amnesty Scheme defined "tax dues" to include the amount of tax assessed in terms of notice of assessment or assessment order, whether pending in objection/revision before the Objecting Hearing Authority (OHA) or in appeal/revision before appellate authority/Tribunal or any higher court. Explanation 3 to Clause 2 (1) (d) stated that the Scheme does not cover cases of notice of assessment of penalty issued without any relation to tax deficiency. The Petitioner argued that the penalty was related to tax deficiency, thus falling under the Scheme's ambit.

3. Applicability of the Amnesty Scheme to cases where tax and interest have been paid, but penalty is under challenge:
The Petitioner's counsel argued that under the FAQs issued by the Department of Trade & Taxes (DT&T), the waiver of penalty was permissible even if the penalty was under challenge, provided the tax and interest were paid. The Respondent's counsel countered that the Scheme did not apply if tax and interest were fully paid before 31st August 2013. The Court found the Respondents' interpretation inconsistent with the Scheme's purpose, which aimed to incentivize compliance. The Court noted that it would be anomalous to deny the benefit to those who paid tax and interest but challenged the penalty, while allowing it to those who defaulted on all counts.

4. Validity of the rejection order issued by the Respondent:
The Court observed that the Respondent's rejection order dated 23rd July 2014 lacked reasons. Instead of remanding the matter for a fresh decision, the Court examined the Petitioner's entitlement under the Amnesty Scheme. The Court concluded that the Petitioner satisfied the Scheme's conditions, falling within Explanation I to Clause 2 (1) (d) and outside the scope of Explanation 3. The Court held that denying the Scheme's benefit to the Petitioner, who had paid tax and interest but challenged the penalty, would be contrary to the Scheme's objective.

Conclusion:
The Court set aside the impugned order dated 23rd July 2014 and held that the Petitioner was entitled to claim the benefit of the Amnesty Scheme. The Respondents were directed to grant the waiver of penalty within two weeks. The petition was allowed, and pending applications were disposed of accordingly.

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