2023 (8) TMI 1313 - HC - VAT and Sales Tax

Amnesty Scheme - denial of scheme on the ground that the dues have not been completely paid - wilful mis-statement in the return - HELD THAT - Sec. 30(6) would indicate that where a dealer is liable to pay interest under Sub-section (5) or under Sub-section (7) of Sec. 42 and he makes payment of an amount which is less than the aggregate of the amount of tax, penalty and interest, the amount so paid shall be first applied towards the amount of interest. In case of the petitioners, at the relevant time, there was no purchase tax due nor was it payable. What was required to be seen was the actual tax due as per the return actually filed by the dealer and not the return which ought to have been filed. Reading the Section as a whole indicates that the concept of interest on such payments is on the payment of tax due as per returns. In the case of the petitioners, the scrutiny of the actual returns filed indicate that the petitioners had claimed erroneous input tax credit of the purchase tax amount shown in the return, and therefore, such purchase tax was not shown as due in the return. In light of this, it was not actually due and payable, and therefore, the provisions of Sec. 30 could not have been pressed into service. Considering the intention of the amnesty scheme, the interest had to be waived in respect of the tax declared under the scheme, and therefore, the action of the respondents in adjusting the tax paid along with the returns towards the interest is completely contrary to the object, purpose and the terms of the scheme. Even as per the scheme, there is no appeal that would lie against the rejection of a claim thereunder. The Demand Notice dated 30.10.2021 issued by the respondents is quashed and set aside and the action of modifying the assessment order by adjusting the tax paid by the petitioners against interest liability is set aside and the respondents are directed to consider such tax as paid and adjusted against principal tax liability - Petition allowed.

Summary

Issues Involved:
1. Validity of the demand notice dated 30.10.2021.
2. Adjustment of tax paid against interest liability under the VAT Act.
3. Declaration of no further liability under the VAT Act for the year 2016-17.

Summary:

1. Validity of the Demand Notice Dated 30.10.2021:
The petitioners challenged the demand notice issued by the second respondent authority under the amnesty scheme. The court observed that the petitioners had paid the tax due as per the returns filed under the VAT Act for the years 2015-16 and 2016-17. The petitioners filed an application under the Vera Samadhan Yojana, 2019, declaring an outstanding tax amount of Rs. 2,25,53,290/-. Despite paying the tax as per the scheme, the authorities issued a demand notice, which the court found to be contrary to the intention and terms of the amnesty scheme. The demand notice was quashed and set aside.

2. Adjustment of Tax Paid Against Interest Liability:
The petitioners argued that the tax paid along with the returns was illegally adjusted against the interest computed on additional tax liability declared under the scheme. The court noted that the tax liability declared by the petitioners under the amnesty scheme matched the assessed tax amount. The authorities' action of adjusting the tax paid against interest liability created an artificial shortfall of tax payment. The court held that the adjustment was contrary to the object and purpose of the amnesty scheme, which aimed to provide substantial relief to dealers and reduce administrative costs. The court directed that the tax paid should be adjusted against the principal tax liability.

3. Declaration of No Further Liability Under the VAT Act for the Year 2016-17:
The petitioners sought a declaration that they had no further liability under the VAT Act for the year 2016-17, having paid the tax due as per the original intimation under the amnesty scheme. The court observed that the petitioners had paid the full amount of tax declared under the scheme, and the authorities' action of imposing interest and adjusting the tax paid against such interest was illegal. The court held that the petitioners were entitled to complete waiver of interest and penalty under the amnesty scheme and declared that the petitioners had no further liability under the VAT Act for the year 2016-17.

Conclusion:
The court allowed the petition, quashed the demand notice dated 30.10.2021, and set aside the action of adjusting the tax paid against interest liability. The court directed the respondents to consider the tax paid as adjusted against the principal tax liability, thereby providing relief to the petitioners under the amnesty scheme.