2025 (2) TMI 739 - HC - VAT / Sales Tax

Refund of excess amount realized by Respondents in terms of Settlement Scheme of 2022 - Dismissal of Jharkhand Karadhan Adhiniyamon Ki Bakaya Rashi Ka Samadhan Act 2022 - rejection of exemption from payment of additional tax and surcharge - HELD THAT - A perusal of Settlement Scheme would reveal that under Settlement Scheme term admitted tax is defined to mean an amount of tax admitted as being payable as per the return filed by an assessee and the term disputed amount means the amount of tax interest or penalty which determined as payable by an assessee pursuant to an order of assessment/re-assessment/scrutiny or any other order and which is not admitted and for such demand a litigation has been filed by an assessee - under the Scheme amount of admitted tax clearly represents an amount which is admitted by assessee whereas disputed amount means amount of tax interest or penalty which is in dispute pursuant to a litigation filed by an assessee. The Scheme clearly provides that assessee is liable to pay 40% of the amount of tax in dispute provided the same has not been declared/considered in any order/assessment/re-assessment. In the present case it is not in dispute that the petitioner admitted an amount of Rs. 33, 79, 374/- being the admitted amount of tax payable by it as per its return. However pursuant to an adjudication order an amount of Rs. 6, 27, 82, 418/- was determined against the petitioner - balance between disputed tax and admitted tax was the amount in dispute i.e. in the present case Rs. 5, 94, 03, 043/-. Under the Scheme Petitioner was only liable to deposit 40% of the disputed amount and there was 60% waiver but while computing the tax liability Settlement Officer first deducted the amount of pre-deposit from the amount in dispute and thereafter extended the benefit of waiver under the scheme which is clearly travelling beyond the contours of the scheme itself. Admittedly Settlement Scheme is a beneficial scheme and Hon ble Supreme Court in its judgment rendered in the case of Government of Kerala and Another v. Mother Superior Adoration Convent 2021 (3) TMI 93 - SUPREME COURT has held that even in tax statutes exemption provisions should be liberally considered in accordance with the object sought to be achieved. In a beneficial legislation literal formalistic interpretation should be eschewed to give full effect to the provisions of the beneficial legislation. The impugned order passed by the appellate authority is set aside and further order of settlement to the extent amount of pre-deposit of 49, 00, 000/- has been directed to be adjusted from the amount in dispute before extending the benefit of settlement is set aside. Conclusion - i) The calculation of tax liability under the Settlement Scheme must not deduct pre-deposits from the disputed amount before applying the waiver. ii) The petitioner is entitled to a refund of the excess amount paid due to the misapplication of the Scheme. iii) The petitioner is entitled to interest on the refunded amount at 6% per annum from the date of deposit until the refund is made. Petition disposed off.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

1. Whether the calculation of tax liability under the Jharkhand Karadhan Adhiniyamon Ki Bakaya Rashi Ka Samadhan Act, 2022 (Settlement Scheme of 2022) was correctly applied by the authorities, particularly in relation to the treatment of pre-deposits.

2. Whether the petitioner is entitled to a refund of the excess amount paid under protest due to the alleged misapplication of the Settlement Scheme.

3. Whether the petitioner is entitled to interest on the refunded amount from the date of deposit until the refund is made.

ISSUE-WISE DETAILED ANALYSIS

1. Calculation of Tax Liability under the Settlement Scheme

Relevant legal framework and precedents: The Jharkhand Karadhan Adhiniyamon Ki Bakaya Rashi Ka Samadhan Act, 2022, and its corresponding Rules of 2023, provide the framework for settling tax disputes. The Scheme offers a waiver of 60% of the disputed tax amount, requiring payment of only 40% of the disputed amount. The terms 'admitted tax' and 'disputed amount' are defined under the Scheme.

Court's interpretation and reasoning: The Court interpreted the Scheme to mean that the waiver applies to the disputed amount without first deducting any pre-deposits made by the petitioner. The Court emphasized that the intent of the Scheme is to provide relief from disputed taxes and not to penalize those who have made pre-deposits.

Key evidence and findings: The Court noted that the petitioner had made a pre-deposit of Rs. 49,00,000/- during the appeal process, which was deducted from the disputed amount before calculating the waiver, leading to an excess payment of Rs. 29,40,000/-.

Application of law to facts: The Court applied the provisions of the Settlement Scheme and found that the authorities incorrectly calculated the waiver by deducting the pre-deposit from the disputed amount first, which is contrary to the Scheme's provisions.

Treatment of competing arguments: The petitioner argued that the pre-deposit should not be deducted before applying the waiver, while the respondents contended that the pre-deposit reduces the disputed amount. The Court sided with the petitioner, finding that the respondents' approach would result in unfair treatment of those who made pre-deposits.

Conclusions: The Court concluded that the calculation method used by the authorities was erroneous and contrary to the Scheme's intent. The correct method should not deduct pre-deposits before applying the waiver.

2. Entitlement to Refund

Relevant legal framework and precedents: The Settlement Scheme does not explicitly address the refund of excess payments made under protest, but general principles of equity and fairness apply.

Court's interpretation and reasoning: The Court held that the petitioner is entitled to a refund of the excess amount paid due to the incorrect application of the Scheme.

Key evidence and findings: The Court found that due to the miscalculation, the petitioner paid Rs. 29,40,000/- more than required under the correct interpretation of the Scheme.

Application of law to facts: The Court applied equitable principles to order a refund of the excess amount paid.

Treatment of competing arguments: The respondents did not provide a compelling argument against the refund, as the excess payment was a result of their miscalculation.

Conclusions: The Court ordered the respondents to refund the excess amount to the petitioner.

3. Entitlement to Interest on Refund

Relevant legal framework and precedents: The Court referenced principles of restitution and fairness, which support the payment of interest on amounts wrongfully retained.

Court's interpretation and reasoning: The Court determined that the petitioner is entitled to interest on the refunded amount from the date of deposit until the refund is made, at a rate of 6% per annum.

Key evidence and findings: The Court found that the respondents retained the excess amount without legal justification, warranting compensation through interest.

Application of law to facts: The Court applied the principles of restitution to award interest on the refunded amount.

Treatment of competing arguments: The respondents did not provide a substantial argument against the payment of interest.

Conclusions: The Court ordered the respondents to pay interest on the refunded amount at 6% per annum from the date of deposit.

SIGNIFICANT HOLDINGS

The Court established the following core principles and holdings:

1. The calculation of tax liability under the Settlement Scheme must not deduct pre-deposits from the disputed amount before applying the waiver.

2. The petitioner is entitled to a refund of the excess amount paid due to the misapplication of the Scheme.

3. The petitioner is entitled to interest on the refunded amount at 6% per annum from the date of deposit until the refund is made.

Final determinations: The Court set aside the appellate authority's order and directed the respondents to refund the excess amount with interest, completing the process within eight weeks.