2015 (11) TMI 158 - HC - VAT and Sales Tax

Refund claim - Amensty scheme - settlement of arrears of tax under the KGST Act - Demand of interest - whether the amounts deposited during the pendency of provisional assessment deserve to be refunded, since the appellant-assessee has deposited amounts under the Amnesty Scheme - Held that - If the appellant-assessee is successful before apex court, he would be entitled for refund of entire amount, i.e., two deposits already made and also the amount paid under the Amnesty Scheme. If the apex court holds against the appellant-assessee, so far as liability to pay tax he had already taken the benefit of the Amnesty Scheme. In the present case, by virtue of section 55C, pre-deposit amounts could be appropriated in terms of sub-section (3). With the dismissal of STR before this court as early as March 31, 2009, provisions of section 55C would be applicable. Therefore, if any interest was payable, that would be first adjusted and then balance amount to be paid has to be calculated. The date of submission of application for settlement of arrears was on June 25, 2009 and the amount to be paid as per Amnesty Scheme was intimated on July 3, 2009. Only on July 4, 2009 SLP was filed challenging the order dated March 31, 2009. Mere filing of SLP would not vest the appellant-assessee with any right and it cannot be considered as continuation of revisional proceedings, which is a settled position. - normal rule that payment has to be first adjusted towards interest and then towards principal as provided under section 55C is applicable. - Decided in favour of Revenue.

Issues Involved:
1. Validity of levy under Section 5(2) of the KGST Act.
2. Appropriation of deposits made during the pendency of litigation.
3. Applicability of the amnesty scheme under Section 23B of the KGST Act.
4. Interpretation of Section 55C of the KGST Act regarding appropriation of payments towards interest and principal.

Detailed Analysis:

1. Validity of Levy under Section 5(2) of the KGST Act:
The Tribunal canceled the provisional assessment, deeming the levy under Section 5(2) of the KGST Act unsustainable. However, the Revenue filed a revision before the High Court, which allowed the revision, validating the levy under Section 5(2) and directed the completion of the final assessment. The assessee challenged this decision by filing a special leave petition before the Supreme Court, which is pending consideration.

2. Appropriation of Deposits Made During the Pendency of Litigation:
The assessee argued that the deposits made pursuant to interim orders during the pendency of appeals should be considered as deposits "on account" and thus should be appropriated towards the principal amount. The Department, however, contended that these deposits were adjusted towards interest as per Section 55C of the KGST Act. The learned single judge partly allowed the assessee's claim, directing the appropriation of Rs. 1,80,99,000 towards tax but denied the appropriation of Rs. 2,00,00,000, treating it as an open payment.

3. Applicability of the Amnesty Scheme under Section 23B of the KGST Act:
The State Government introduced the amnesty scheme in 2008, allowing for the settlement of arrears with significant reductions in interest. The assessee applied for settlement under this scheme. The Department computed the total amount payable under the scheme, which the assessee paid under protest, arguing that the deposits made during litigation should be credited towards the principal amount. The assessee contended that Section 23B, with its non obstante clause, overrides other provisions, including Section 55C, and thus the deposits should not be appropriated towards interest.

4. Interpretation of Section 55C of the KGST Act Regarding Appropriation of Payments:
Section 55C mandates that any payment made under the Act should first be appropriated towards interest before adjusting the principal amount. The Department argued that this clear mandate was applicable, and the interim deposits were rightly adjusted towards interest. The assessee, however, argued that Section 23B's non obstante clause should take precedence, and the deposits should be considered differently under the amnesty scheme.

Conclusion:
The court concluded that the normal rule under Section 55C, which requires payments to be first adjusted towards interest, is applicable. The court dismissed the assessee's appeal (W.A. No. 1828 of 2013) and allowed the Revenue's appeal (W.A. No. 1807 of 2013), affirming that the pre-deposit amounts should be appropriated towards interest as per Section 55C. The court noted that if the assessee succeeds before the Supreme Court, they would be entitled to a refund of the entire amount paid, including the deposits and the amount paid under the amnesty scheme.

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