2020 (11) TMI 839 - HC - VAT and Sales Tax

Amnesty Scheme - auction - recovery of arrears of tax - It is the petitioner's contention that this forfeited amount must go to reduce the liability of the petitioner, for the realization of which the Government had resorted to the auction procedure under Revenue Recovery Act - HELD THAT - The auction steps initiated by the respondents have to be seen as for the purposes of realization of tax dues from the petitioner. It would follow, therefore, that any amount realized by the Government through the auction procedure that was resorted to for the purposes of realization of the dues from the petitioner, must go to reduce the liability of the petitioner to the Government. Although, it is a fact that the auction sale did not materialize, the forfeited amount must be seen as a portion of the sale consideration that the auction purchaser had paid, but which stood forfeited to the Government on account of the default committed by him in making the payment of the balance consideration. The said amounts forfeited to the Government should go to reduce the liability of the petitioner to the State Government. The Ext.P5 amnesty application preferred by the petitioner should be considered as a valid one for the purposes of the amnesty scheme, and the respondent should now act on the same and compute the balance amount payable by the petitioner in accordance with the amnesty scheme - Petition allowed.

Summary

Issues:
1. Interpretation of the Kerala Revenue Recovery Act regarding the forfeited amount from auction proceedings.
2. Application of forfeited amount to reduce the liability of the petitioner under the amnesty scheme.

Analysis:
The judgment dealt with the interpretation of the Kerala Revenue Recovery Act in the context of a petitioner who opted for an amnesty scheme after being in arrears of tax under the KVAT Act. The petitioner had arrears for the assessment years 2009-2010 and 2010-2011, which led to auction proceedings initiated by the 3rd respondent to recover the tax dues. A prospective purchaser paid 15% of the bid amount but failed to pay the balance, resulting in the forfeiture of the amount to the Government. The petitioner contended that this forfeited amount should reduce their liability under the amnesty scheme. The respondents argued that the forfeited amount should benefit the Government, citing Section 49(3) of the Kerala Revenue Recovery Act.

Upon considering the submissions and the circumstances, the court found that the auction steps were taken to realize tax dues from the petitioner. Even though the auction sale did not materialize, the forfeited amount was deemed as part of the sale consideration that should reduce the petitioner's liability to the Government. The petitioner had included the forfeited amount in their application for the amnesty scheme. The court held that the amnesty application should be considered valid, directing the authorities to grant credit of the forfeited amount to the petitioner while processing the application. The additional 4th respondent was instructed to compute the balance amount payable by the petitioner under the amnesty scheme and inform them within two weeks.

In conclusion, the judgment clarified that the forfeited amount from failed auction proceedings should reduce the petitioner's liability under the amnesty scheme, emphasizing the purpose of auction steps for tax realization and ensuring fair treatment in such cases.