2022 (9) TMI 620 - HC - VAT and Sales Tax

Seeking waiver of penalty as provided under the Karasamadhana Scheme, 2021 - completion of reassessment - only penalty in arrears relating to reassessment - 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 24.09.2020 and 28.04.2021 as can be seen from the reassessment orders, 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 orders dated 24.09.2020 and 27.04.2021. 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 24.09.2020 and 27.04.2021, much before the cut off date dated 31.07.2021, the petitioner would clearly be entitled to the benefit of waiver of 100% penalty and consequently, the impugned endorsement passed by respondents No.2 and 3 are illegal, arbitrary and contrary to the letter and spirit of the scheme and the same deserves to be quashed. The contention urged by the respondents that waiver of penalty levied upon the petitioner under Section 70(2) in the reassessment orders dated 24.09.2020 and 27.04.2021 do not come within the scope and ambit of the scheme since Section 70(2) does not find a place in Clause No.3 of the scheme is concerned, the said contention is clearly erroneous in as much as the said penalty is undisputedly in relation to reassessment proceedings, which were completed on 24.09.2020 and 27.04.2021 much prior to the cut off date dated 21.07.2021 as contemplated in Clause 2 of the Scheme, which is applicable to the facts of the instant case as is clear from the reassessment orders dated 24.09.2020 and 27.04.2021, which have been passed under Section 70(2) R/w Section 39 of the KVAT Act and consequently, Clause No.3 of the Scheme is clearly inapplicable to the petitioner and the said contention cannot be accepted. Petition allowed.

Summary

Issues Involved:
1. Applicability of the Karasamadhana Scheme, 2021 to the penalties levied under the KVAT Act.
2. Entitlement of the petitioner to waiver of penalties under the said Scheme.
3. Correctness of the impugned endorsements rejecting the waiver applications.

Detailed Analysis:

1. Applicability of the Karasamadhana Scheme, 2021 to the penalties levied under the KVAT Act:
The petitioner sought waiver of penalties under the Karasamadhana Scheme, 2021, which grants a waiver of 100% of arrears of penalty and interest payable under various tax laws, including the KVAT Act, for assessments/re-assessments completed on or before 31.07.2021. The court analyzed the Scheme's provisions, noting that Clauses 1 to 4 are distinct and independent, each covering different scenarios and tax laws. Specifically, Clause 2 applies to penalties under the KVAT Act for assessments completed before the cut-off date.

2. Entitlement of the petitioner to waiver of penalties under the said Scheme:
The court found that the petitioner's reassessment orders dated 24.09.2020 and 27.04.2021 were completed before the cut-off date of 31.07.2021, making the petitioner eligible for the waiver under Clause 2 of the Scheme. The penalties in question were levied under Section 70(2) read with Section 39 of the KVAT Act, not under the sections specified in Clause 3 of the Scheme, which deals with different penalties. Therefore, Clause 3 was deemed inapplicable, and Clause 2 was found to be the relevant provision.

3. Correctness of the impugned endorsements rejecting the waiver applications:
The court held that the respondents erroneously rejected the petitioner's waiver applications on the grounds that the penalties fell outside the Scheme's scope. The endorsements were found to be illegal and contrary to the Scheme's intent. The court emphasized that the petitioner had no arrears of tax, only penalties, and the reassessments were completed before the cut-off date, fulfilling the conditions for waiver under Clause 2. Consequently, the impugned endorsements were quashed.

Conclusion:
The court allowed the petition, quashing the impugned endorsements and directing the respondents to grant the petitioner a 100% waiver of the penalties imposed in the reassessment orders dated 24.09.2020 and 27.04.2021. The decision underscored the independent and non-overlapping nature of the Scheme's clauses, affirming the petitioner's entitlement to the waiver under Clause 2.