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Seshasayee Paper And Boards Ltd v/s State Of Kerala, Rep. By The Secretary

    S.T.R.V.No.221 OF 2008

    Decided On, 09 June 2011

    At, High Court of Kerala


    For the Petitioners: E.K.Nandakumar, Advocate. For the Respondents: Government Pleader.

Judgment Text

C.N.Ramachandran Nair, J.

Revision is filed against the order of the Tribunal sustaining balance demand of tax and interest on the respondent/assessee for the assessment year 2001-2002.

2. We have heard the learned counsel appearing for the petitioner and the learned Government Pleader for the State.

3. Assessee, a dealer in paper, remitted tax at 4% on paper sold during the year 2001-2002. However, rate of tax on paper was increased during the financial year from 4% to 8%.

Since returns filed and tax paid was at 4% as against 8% payable, assessee was in arrears of substantial amount of tax.

Even before assessment was taken up, the assessee made an application on 20.2.2004 for settlement of liability under the Amnesty Scheme under Section 23B(2) of the KGST Act, which provides for waiver of default interest upto 70%. The application filed for settlement under the Amnesty Scheme produced as Annexure-A shows that the said application was filed by the petitioner under protest. The Assessing Officer passed an order on 26.2.2004 in terms the petitioner's request and accordingly tax and reduced interest was settled at Rs.5,61,682/-. However, when assessment was completed on 16.6.2005 based on return filed through Annexure-D produced before this Court, it is seen that the balance amount of tax due was Rs.5,88,786/-, which is more than the amount of tax stated as due and paid by the petitioner under the Amnesty Scheme. While completing the assessment, the Assessing Officer by applying Section 55C credited the payment towards interest first and then demanded the balance tax and interest. Under the assessment so made demand of tax is Rs.5,88,786/- the interest demanded is Rs.4,41,589/-. The petitioner filed appeal against the assessment without challenging turn over assessed or rate of tax applied but for the purpose of cancellation of demand of tax and interest for the reason that once liability is settled under Section 23B, there is no justification for assessment and demand of tax. The 1st appellate authority remanded the matter granting partial relief to the petitioner, that is, to give Amnesty benefit for the payments made. On Second Appeal filed by the Department, the Tribunal reversed the 1st Appellate Authority's order and restored the assessment on the ground that the petitioner is not entitled to the Amnesty benefit claimed by them.

4. The question to be considered is whether the petitioner, who was allowed to settle liability under the Amnesty Scheme before assessment was rightly declined the benefit in the course of completion of assessment. Inorder to consider this question, we have to necessarily consider the scope of Section 23B of the KGST Act, the relevant portion of which is extracted hereunder.

23B. Reduction of interest in certain cases:-

(1) Notwithstanding anything contained in this Act, or in any judgment, decree or order of any Court or Tribunal, an assessee, who is in arrears to pay tax or any other amount due under this Act upto the period ending on 31st March, 2003 may opt for settling arrears, by availing a reduction of interest, by paying theamount as shown below:-

(i) outstanding tax amount along with 30 per cent of interest already due on the date of payment, if paid on or before 29th February, 2004.

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(4) Where any second appeal or revision filed by the Government is pending against any order or proceedings giving rise to any demand and an assessee has opted to avail himself of the benefit under this section in respect of such demand, such appeal or revision may be continued as if the dealer had not opted for the benefit under this section.

5. Admittedly, when Annexure-A application was filed under Section 23B for settlement, assessment was not completed. When assessment is pending, the tax due and payable by the dealer can be the tax due under the returns filed. The contention of the assessee also is that once tax due under the return is settled under the Amnesty Scheme no further demand can be raised. However, the contention of the Government Pleader is that settlement of arrears of tax or any other amount due under the KGST Act only is covered by the sub sections above and the tax liability of a dealer is determined based on regular assessment in terms of other provisions of the Act. In fact, settlement under the Amnesty Scheme itself contemplated under Section 23B is after determination of liability under the statute, which is through a process of assessment. Sub section 4 above makes it clear that even after settlement appeal or revision pending can be pursued and the dealer will be entitled to the benefit. There is nothing in Section 23B barring a dealer from settling a liability even before the completion of assessment by making payment of the tax due in terms of the returns filed and the interest accrued thereon less deduction admissible. However, what happens in such a situation is that if the tax or interest determined on assessment is more than the amounts offered by the assessee in the returns filed based on which settlement is made, the basis of settlement under Section 23B goes and the settlement will be subjected to assessment. In other words, if in the course of assessment tax becomes due from the dealer, then the dealer cannot be said to have settled liability by paying off the full arrears of tax in terms of Section 23B and so much so, the dealer will forfeit the Amnesty benefit availed by it. This is exactly what happened in this case, because as against the payment of Rs.5,55,022/- towards tax on assessment the petitioner is called upon to pay a further sum of Rs.5,88,786/-. The learned Government Pleader contended that, in this case, the settlement under Section 23B is made conditional by the assessee by making the application specifically under protest. Pending assessment the Amnesty benefit granted can only be conditional subject to assessment and when additional demands are raised settlement ceases to be in accordance with the statutory provisions.

6. If the petitioner's contention is accepted, then settlement of liability under Section 23B will debar the assessing officer from making the regular assessment under Section 17(3) of the Act. We do not find any provision under Section 23B barring statutory authorities from exercising their jurisdiction in regard to assessment, appeal, revision or any proceedings. The statutory scheme authorises settlement of tax and interest due from the defaulter which necessarily means that settlement should be after determination of liability in assessment and if not such settlement will be subject to assessment. Since the assessee's application was conditional and assessment was not over amnesty granted in any case was subj

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ect to assessment. Counsel for the petitioner rightly contended that there is no revocation of amnesty order by the officer and so much so it binds the officer. However, since we have found that regular assessment is permissible under the statute even after settlement of liability based on returns filed and pending assessment, the assessment itself has the effect of neutralizing or reversing the Amnesty benefit granted by the Officer. It is also seen that the Assessing Officer had not computed the liability at the time of granting Amnesty benefit but just accepted the offer made by the petitioner based on returns filed. So much so, the Tribunal's order does not call for any interference by this Court.The Sales Tax Revision is therefore dismissed as devoid of merit.