2022 (1) TMI 1011 - HC - VAT and Sales Tax

Seeking direction to the respondents to allow the petitioner's application for waiver of penalty - Karasamadhana Scheme, 2021 - HELD THAT - In the instant case, it is an undisputed fact that no penalty is sought to be levied against the petitioner under Section 72 (1)(a), 72(1)(b), 74(4) or 72(3-B) of the KVAT Act and consequently, clause No.3 would have no application to the facts of the instant case in so far as the petitioner is concerned - On the other hand, as rightly contended by the learned Senior counsel for the petitioner, it is Clause No.2 of the Scheme that would be applicable to the facts of the instant case and in the light of the undisputed fact that the reassessment was completed on 28.04.2021 as can be seen from the reassessment order, which is clearly much prior to 31.07.2021, the cut off date under the scheme, the petitioner would be entitled to the benefit of 100% waiver of penalty sought to be levied upon him under Section 70(2) R/w Section 39 of the KVAT Act as per the reassessment order dated 28.04.2021. It is also significant to note that the material on record also indicates that the petitioner is not charged with any arrears of tax, which was liable to be paid on or before 31.10.2021 so as to attract Clause No.5.1 of the Scheme; on the other hand, in view of the undisputed fact that the petitioner did not have any arrears of tax but only arrears of penalty relating to reassessment, which was already completed on 28.04.2021, much before the cut off date dated 31.07.2021, the petitioner would clearly be entitled to the benefit of waiver of 100% penalty - the impugned endorsement passed by respondent No.2 is illegal, arbitrary and contrary to the letter and spirit of the scheme and the same deserves to be quashed and necessary directions are to be issued to the respondents to grant waiver of 100% of penalty demanded in the reassessment order dated 28.04.2021 passed by respondent No.2. Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Applicability of the Karasamadhana Scheme, 2021 for waiver of penalty.
2. Interpretation of various clauses of the Karasamadhana Scheme, 2021.
3. Legality of the impugned endorsement rejecting the waiver application.
4. Compliance with the conditions stipulated in the Karasamadhana Scheme, 2021.

Issue-wise Detailed Analysis:

1. Applicability of the Karasamadhana Scheme, 2021 for waiver of penalty:
The petitioner sought quashing of the impugned endorsement that rejected their application for waiver of penalty under the Karasamadhana Scheme, 2021. The petitioner argued that they were entitled to a complete waiver of 100% of the penalty as per Clause 2 of the Scheme. The reassessment proceedings for the assessment year 2016-17 were completed on 28.04.2021, and the petitioner applied for the waiver on 13.08.2021. The respondents contended that the penalty levied was beyond the ambit of the Scheme.

2. Interpretation of various clauses of the Karasamadhana Scheme, 2021:
The court analyzed Clauses 1 to 5.2 of the Scheme, which provide for waiver of penalties under different circumstances. Clause 1 relates to penalties under the Karnataka Sales Tax Act and Central Sales Tax Act. Clause 2 pertains to penalties under the KVAT Act and CST Act. Clause 3 deals with specific penalties under the KVAT Act. Clause 4 addresses penalties under various other enactments. Clause 5 stipulates conditions for the waiver, including full payment of arrears of tax by 31.10.2021 and eligibility for waiver if only arrears of penalty and interest exist.

3. Legality of the impugned endorsement rejecting the waiver application:
The court found that Clause 2 of the Scheme was applicable to the petitioner's case, as the reassessment was completed on 28.04.2021, before the cut-off date of 31.07.2021. The penalty was levied under Section 70(2) R/w Section 39 of the KVAT Act, not under the sections mentioned in Clause 3. Therefore, the petitioner was entitled to a 100% waiver of the penalty. The court held that the impugned endorsement rejecting the waiver application was illegal and arbitrary.

4. Compliance with the conditions stipulated in the Karasamadhana Scheme, 2021:
The court noted that the petitioner had no arrears of tax, only arrears of penalty, fulfilling the conditions under Clause 5.2 of the Scheme. Since the reassessment was completed before the cut-off date and there were no arrears of tax, the petitioner was entitled to the waiver. The court directed the respondents to allow the petitioner's application and grant the waiver of the penalty.

Conclusion:
The court allowed the petition, quashing the impugned endorsement and the demand notice. The respondents were directed to grant the waiver of 100% of the penalty imposed on the petitioner in the reassessment order dated 28.04.2021.

Order:
(i) Petition is allowed.
(ii) The impugned endorsement dated 16.08.2021 is quashed.
(iii) Respondents are directed to allow the petitioner’s application and grant waiver of 100% of the penalty.
(iv) The impugned demand notice dated 28.04.2021 is quashed.