State Tax Officer vs. Village International School - Kerala High Court, 21 July 2020

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE T.R.RAVI TUE AY, THE 21ST DAY OF JULY 2020 / 30TH ASHADHA, 1942 W.A.No.573 OF 2020 AGAINST THE JUDGMENT IN WP(C) 31691/2019(J) DATED 06.12.2019 OF HIGH COURT OF KERALA APPELLANTS/ RESPONDENTS: 1 STATE TAX OFFICER, FIRST CIRCLE, THODUPUZHA - 685 584. 2 THE COMMISSIONER OF COMMERCIAL TAXES, COMMERCIAL TAXES DEPARTMENT, TAX TOWERS, KILLIPPALAM, KARAMANA P. O., THIRUVANANTHAPURAM - 695 002. 3 THE SECRETARY, TAXES DEPARTMENT, GOVERNMENT OF KERALA, THIRUVANANTHAPURAM - 695 001. BY SPECIAL GOVERNMENT PLEADER (TAXES) SRI.C.E.UNNIKRISHNAN RESPONDENT/PETITIONER IN WP(C): M/S.VILLAGE INTERNATIONAL SCHOOL, KUMARAMANGALAM P. O., THODUPUZHA, PIN – 685605, REP. BY ITS MANAGING DIRECTOR, R. KESAVADAS. BY ADV. SRI.HARISHANKAR V.MENON THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 21.07.2020, ALONG WITH WA.544/2020, WA.679/2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

W.A.No.573/2020 & connected cases IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE T.R.RAVI TUE AY, THE 21ST DAY OF JULY 2020 / 30TH ASHADHA, 1942 W.A.No.544 OF 2020 AGAINST THE JUDGMENT IN WP(C) 34471/2019(H) DATED 17.12.2019 OF HIGH COURT OF KERALA APPELLANTS/ RESPONDENTS 1 TO 6 IN WP(C): 1 STATE TAX OFFICER, STATE GOODS AND SERVICE TAX DEPARTMENT, 2ND CIRCLE, KALAMASSERRY AT KAKKANAD, COCHIN-682 030. 2 ASSISTANT COMMISSIONER (APPEALS), STATE GOODS AND SERVICE TAX COMPLEX, THEVARA, ERNAKULAM, COCHIN-682 015. 3 THE COMMISSIONER OF STATE TAX, STATE GOODS AND SERVICE TAX DEPARTMENT, TAX TOWERS, KILLIPPALAM, KARAMANA P.O., THIRUVANANTHAPURAM-695 002. 4 ASSISTANT COMMISSIONER OF STATE TAX, STATE GOODS AND SERVICES TAX DEPARTMENT, CIVIL STATION, KAKKANAD, COCHIN-682 030. 5 THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL , STATE GOODS AND SERVICE TAX COMPLEX, THEVARA, ERNAKULAM, COCHIN-682 015. 6 STATE OF KERALA, REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001. SPECIAL GOVERNMENT PLEADER (TAXES) SRI.C.E.UNNIKRISHNAN.

W.A.No.573/2020 & connected cases RESPONDENT/PETITIONER IN WP(C): K.K.SREEKUMAR, PROPRIETOR, M/S PESTOLINE PEST CONTROL SERVICES, ROOM NO 926/D, B PALARIVATTOM P.O.COCHIN-682 025, ERNAKULAM DISTRICT. BY ADV. SRI.TOMSON T EMMANUEL (B/O). THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 21.07.2020, ALONG WITH WA.573/2020, WA.679/2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

W.A.No.573/2020 & connected cases IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE T.R.RAVI TUE AY, THE 21ST DAY OF JULY 2020 / 30TH ASHADHA, 1942 W.A.No.679 OF 2020 AGAINST THE JUDGMENT IN WP(C) 31298/2019(J) DATED 06.12.2019 OF HIGH COURT OF KERALA APPELLANTS/ RESPONDENTS IN W.P.(C): 1 STATE TAX OFFICER, FIRST CIRCLE, STATE GST DEPARTMENT, FIRST CIRCLE, CHANGANASERY - 686 101. 2 THE DEPUTY COMMISIONER, STATE GST DEPARTMENT, KOTTAYAM - 686 001. 3 THE INSPECTING ASSISTANT COMMISSIONER, STATE GST DEPARTMENT, KOTTAYAM - 686 001. 4 THE COMMISSIONER OF STATE TAX, KILLIPALAM, KARAMANA P.O, THIRUVANANTHAPURAM - 695 002 5 THE SECRETARY TO TAXES, GOVERNMENT OF KERALA, THIRUVANANTHAPURAM - 695 001 SPECIAL GOVERNMENT PLEADER (TAXES) SRI.C.E.UNNIKRISHNAN RESPONDENT/S: REJI K.K., AKKU FURNITURE AND APPLIANCES, VAKATHANAM P.O, PIN 686 538 BY ADV. SRI.SANTHOSH P.ABRAHAM (B/O) THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 21.07.2020, ALONG WITH WA.544/2020, WA.573/2020, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

W.A.No.573/2020 & connected cases K. Vinod Chandran & T.R.Ravi, JJ. ----------------------------------------------- W.A.Nos.573 of 2020, 544 of 2020 & 679 of 2020 ----------------------------------------------- Dated, this the 21st day of July, 2020 JUDGMENT Vinod Chandran, J. The short question to be considered in the appeals is as to whether the application filed under the Amnesty Scheme introduced by Section 31A of the Kerala Value Added Tax Act, 2003 ['KVAT Act' for brevity] can be rejected on the ground that there is an appeal intended by the State from the order of the first appellate authority.

The learned Single Judge found that the intention in introducing an Amnesty Scheme was to bring an expeditious end to the pending litigation while the State is also assured of recovery of tax dues. Reading the scheme as such it was found that there is no provision by which the application can be rejected on the mere contemplation of an appeal before the statutory authorities. The rejection was based on a Circular of the Tax Department, which was held to travel beyond the statutory provisions under the guise of a clarification.

W.A.No.573/2020 & connected cases

We have heard Sri.C.E.Unnikrishnan, learned Special Government Pleader (Taxes) for the State and Sri.Harisankar V. Menon, Sri.Tomson T.Emmanuel and Sri.Santhosh P.Abraham for the respondents.

The learned Special Government Pleader argues that there is no anomaly in the provision and that the Circular was introduced only to explain the provision as such. There is no provision in the Scheme introduced to withdraw an appeal filed by the State. It is for the assessee to opt for filing an application under the Scheme and the State is reserved with the power to accept it or reject it. There being no lacuna or ambiguity in the provisions, there was no reason for the learned Single Judge to interfere with the Circular, since the rejection can be sustained even on a plain reading of the provision.

The learned Counsel for the respondents points out that the provision under Section 31A only provides for determination of the amounts of tax and other amounts due from the dealer, on an application being filed by the assessee under Section 31A. It is also pointed out that the rejection has been made on the contemplation of filing an appeal by the State which is not a permissible exercise

W.A.No.573/2020 & connected cases under Section 31A. The assessee-respondent in W.A.No.573 of 2020 specifically points out that if the rejection is sustained, then necessarily he will have a better benefit for reason of a subsequent Amnesty Scheme introduced by the State in the next consecutive year. The assessee having remitted the entire amounts of tax under the Amnesty Scheme, he would be entitled to refund of 60% of the tax.

Section 31A is a non-obstante provision, by which an option is provided to any assessee having arrears of tax or any other amounts to pay the principal amount of tax in arrears, upon which the assessee would stand absolved from the interest due and also any penalty imposed. The proviso also mandates that for such settlement to be arrived at, the assessee shall also be liable to pay applicable tax relating to a penalty which is not utilized or not liable to be utilized for a best judgment assessment. Sub-section (2) requires that in every case where revenue recovery is initiated to collect arrears due; when a settlement is arrived at under sub-section (1), the revenue recovery proceedings shall stand withdrawn for reason of the settlement binding the Revenue authorities. Sub-section (3) mandates that the assessee shall withdraw

W.A.No.573/2020 & connected cases all pending appeals before the statutory authorities, Tribunal or the Courts. Sub-section (4) insists for all pending arrears of tax and penalties to be settled together under sub-section (1). Sub-section (5) provides for the submission of an option before 30.09.2019 and by a proviso extends the period by 30 days from the date of demand in the event of a demand generated after 30.09.2019. The proviso also mandates any such settlement to be finalized by deposit of amounts before 31.03.2020. Sub-section (6) contemplates the arrears for the purpose of settlement to be determined as on the date of submission of option. By sub-section (7) it is provided that on receipt of the option under sub-section (5), the assessing authority shall determine the amount of tax and other amounts due from the dealer under sub-section (1) and intimate the same to the dealer for the purpose of remittance, by a maximum of six installments on or before 31.03.2020. Sub-section (8) goes one step ahead and provides that when any amounts have been remitted after the service of demand notice towards the arrears, on an option for settlement being applied for, such remittance or deposit made shall be given credit as tax paid under sub-section (1) of Section 74 and such

W.A.No.573/2020 & connected cases credit shall enure to the assessee as one made under the option exercised. The proviso to sub-section (8) excludes any deposit made by way of penalty or interest from being credited towards tax. Sub-section (9) prohibits any refund or any adjustment subsequently of the amounts settled under the Scheme.

The Circular subsequently issued by the Department, produced as Exhibit P5 in W.P(C) No.31691 of 2019 from which W.A.No.573 of 2020 arises, however speaks of the appeals filed by the State being continued and the assessees, who are respondent in such appeals, being not eligible for availing the provisions of the Scheme. Immediately we have to notice that even the Circular only speaks of cases in which appeals have already been filed by the State. The rejection orders in two cases contemplate the filing of an appeal. Exhibit P4 in W.P(C) No.31691 of 2019 from which W.A.No.573 of 2020 arises, rejects the application on the ground that a second appeal has been proposed against the order of the first appellate authority. Exhibit P8 in W.P(C) No.34471 of 2019 from which W.A.No.544 of 2020 arises rejects the application since steps have been taken by the Department to file a second

W.A.No.573/2020 & connected cases appeal. Exhibit P7 in W.P(C) No.31298 of 2019 from which W.A.No.679 of 2020 arises speaks of an appeal having been filed already.

We agree with the learned Special Government Pleader that there is no ambiguity in the provision which introduced the Amnesty Scheme. It provides for settlement of all pending tax dues and even the tax applicable, with reference to a penalty imposed where there is no best judgment assessment made or contemplated. The requirement is, filing of an application before the dates specified and the withdrawal of the appeals filed by the assessee. We agree with the learned Special Government Pleader that there is no specific provision for the withdrawal of the State's appeals; which mandate according to us is not required to be specified for reason of the same being an inevitable consequence of the settlement. The Scheme offers a mode of settlement, which if availed of by the assessee, by paying up the amounts as per the determination made on the option exercised, he is absolved from all liabilities pending against him. There is no requirement of a specific provision requiring the State to withdraw the appeal filed, since the settlement arrived at on the basis of the

W.A.No.573/2020 & connected cases statutory provision is binding on the Department. Here we emphasize sub-section (2), which contemplates cases in which revenue recovery proceedings have already been initiated; which proceedings have to be withdrawn when the matter is settled under Section 31A. That the State's appeal would be rendered infructuous on a settlement arrived at under Section 31A is an inevitable consequence on deposit of amounts determined under sub-section (7).

In this context, we also have to notice that there is no power given to the State to reject an application and the requirement under sub-section (7); on the filing of an application, is determination of the amounts due as tax, and other amounts, and intimation for the purpose of settlement in installments not exceeding six and not travelling beyond 31.03.2020. 10. We also notice Circular No.2/2020, which was issued on the basis of an Amnesty Scheme introduced in the year 2020. There was a specific contemplation of cases in which appeals have been filed by the State, wherein the requirement is to make settlement on the basis of the demand raised in the original assessment order. Such a provision is absent in the Scheme brought in for 2019. We

W.A.No.573/2020 & connected cases cannot but observe that in W.A.No.573 of 2020 if we allow the appeal, under the Amnesty Scheme of 2020 the State would have to refund amounts already deposited by the assessee. For all the above reasons we do not find any reason to interfere with the impugned judgments of the learned Single Judge. We reject the appeals, with no order as to costs. K.VINOD CHANDRAN JUDGE T.R.RAVI JUDGE Vku/- []