Coastal Tiles and Sanitaries v. State Tax Officer, Kerala State Goods and Service Tax Department, and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE S.V.BHATTI** **&** **THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS** **WEDNESDAY, THE 24TH DAY OF MARCH 2021 / 3RD CHAITHRA, 1943** ## **WA.No.1684 OF 2020** **AGAINST THE JUDGMENT IN WP(C) 21480/2020(H) OF HIGH COURT OF KERALA** ## **APPELLANT/PETITIONER:** **M/S.COASTAL TILES AND SANITARIES DOOR NO.6/560/1,MANA LANE, KOORKKANCHERY, THRISSUR-680007, REPRESENTED BY ITS MANAGING PARTNER P.M.ABDU HAJEE.** **BY ADVS. SRI.SANTHOSH P.ABRAHAM SMT.S.K.DEVI** ## **RESPONDENTS/RESPONDENTS:** **1 THE STATE TAX OFFICER KERALA STATE GOODS AND SERVICE TAX DEPARTMENT, 1ST CIRCLE, STATE TAX COMPLEX, THRISSUR-680004.** **2 THE COMMISSIONER, KERALA STATE GOODS AND SERVICE TAX DEPARTMENT, TAX TOWER,KARAMANA, THIRUVANANTHAPURAM-695002.** **3 STATE OF KERALA, REPRESENTED BY THE FINANCE SECRETARY, SECRETARIAT, THIRUVANANTHAPURAM-695001.** W.A. No.1684/20 **-:2:-** **4 THE KERALA VALUE ADDED TAX APPELLATE TRIBUNAL, COMMERCIAL TAX COMPLEX, M.G.ROAD, ERNAKULAM-682015.** **BY MOHAMMED RAFIQ, SR.GOVT PLEADER** **THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 24.03.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **-:3:-** W.A. No.1684/20 **==> picture [46 x 12] intentionally omitted <==** ## **JUDGMENT** Dated this the 24[th] day of March, 2021 ## _Bechu Kurian Thomas, J._ The Amnesty Scheme 2020 (for short 'the Scheme') introduced by the Kerala Finance Act, 2020 (for short 'the Act') contemplates clearing of the arrears in its entirety for all assessment years. The issue that arises for consideration is whether under the said scheme, can an appeal filed by the Revenue, relating to one assessment year and pending consideration before Tribunal be included for settlement, if the assessee does not opt for that to be settled. 2. Appellant opted for the benefit of the Scheme for the assessment year 2014-15. Though appellant expressed its willingness to settle the entire arrears, as contemplated under the Scheme, for the assessment year 2014-15, the 1[st] respondent directed the appellant to settle the alleged arrears in respect of the assessment year 2012-13 also. Appellant expressed its disinterestedness to settle the alleged arrears for the assessment year 2012-13. The reason for the disinclination of the W.A. No.1684/20 ## **-:4:-** appellant to settle the alleged arrears for 2012-13 was due to the absence of any arrears for the year 2012-13. According to the appellant, all that remains for the assessment year 2012-13, is an appeal filed by the State, which is pending consideration. 3. Contending that the appeal filed by the State before the Appellate Tribunal does not constitute any 'arrears of tax' to be settled, the assessee approached this Court under Article 226. The learned Single Judge disposed of the writ petition by denying the main relief and after finding that the Scheme has to be read holistically and should not be rendered illusory to the rights conferred under the statute. It was further held that since an appeal filed by the State was pending consideration relating to the year 2012-13, the said year must also be included for settlement under the Scheme. Liberty was granted to the appellant to include the said assessment year also in the Scheme. 4. Aggrieved by the judgment of the learned Single Judge, this appeal is preferred. Appellant insists that since the first appeal preferred by it against the assessment order for the year 2012-13 was allowed, there are no arrears of tax other than for the year 2014-15. It is also contended that, though, against the order of the first Appellate Authority the State has preferred an appeal and the same is pending consideration, no tax for the assessment year 2012-13 can be included for settlement **-:5:-** W.A. No.1684/20 under the Scheme terming an amount as arrears of tax. 5. We have heard Adv.Santhosh P. Abraham on behalf of the appellant as well as Adv.Mohammed Rafiq, learned Senior Government Pleader on behalf of the respondents. 6. The Scheme introduced through section 10 of the Kerala Finance Act, 2020 is intended as a beneficial scheme for settlement of arrears of tax or other amounts due under the Kerala Value Added Tax Act, 2003 and under the Central Sales Tax Act, 1956. For easier reference section 10 of the Kerala Finance Act, 2020 dealing with the Scheme is extracted as below: _“10. Special provision for Reduction of arrears in certain cases_ .-(1) _Notwithstanding anything contained in sub-section (1) of section 174 of the Kerala State Goods and Services Tax Act, 2017 (20 of 2017) and in the Kerala Value Added Tax Act, 2003 (hereinafter referred to as the former Act) or rules made thereunder or in any judgment, decree or order of any court, tribunal or appellate authority, any assessee who is in arrears of tax or any other amount due under the former Act or under the Central Sales Tax Act, 1956 (Central Act 74 of 1956) relating to the period up to and including 30[th] June, 2017, may opt for settling the arrears on payment of, -_ _(i) fifty per cent of the principal amount of the tax in arrears; or_ _(ii) forty per cent of the principal amount of the tax in arrears, if the amount is paid in lump sum within 30 days of receipt of intimation of the assessing authority referred to in sub-section (7)_ : _Provided that in case where the evidence, details and records pertaining to the penalty levied is not utilized or not liable to be utilized for any best judgment assessment under the former Act, the demand relating to such penalty shall be settled under this section on payment of applicable tax relating to the penalty as determined by the_ W.A. No.1684/20 ## **-:6:-** ## _assessing authority._ _Explanation.- Arrears for the purpose of this section shall include the tax remaining unpaid as on the date of option, under clause (a) of sub-section (1) of section 74 of the former Act pursuant to the payment of compounding fee mentioned therein._ _(2) Notwithstanding anything contained in the Kerala Revenue Recovery Act, 1968, (15 of 1968) reduction of arrears under subsection (1) shall be applicable to those cases in which revenue recovery proceedings have been initiated and the assessing authorities shall have the power to collect such amounts on settlement under sub-section (1) and where the amount is settled under subsection (1) the assessing authorities shall withdraw the revenue recovery proceedings against such assessee which will then be binding on the revenue authorities and such assessee shall not be liable for payment of any collection charges._ _(3) The assessee shall withdraw all the cases pending before any appellate or revisional authority, tribunal or courts for opting for settling the arrears under this section and shall file a declaration to this effect along with the option mentioned under sub-section (5)._ _(4) All arrears including tax, interest and penalties pertaining to an assessee shall be settled together under this section._ _(5) An assessee who intends to opt for payment of arrears under subsection (1) shall submit an option to the assessing authority on or before 30[th] November, 2020:_ _Provided that with respect to demands generated after 30[th] November, 2020, the option may be filed within thirty days, on receipt of the assessment order and in such cases the final payment of tax and other amounts due as per this section shall be completed on or before 31[st] March, 2021._ _(6) The arrears for the purpose of settlement under this section shall be calculated as on the date of submission of option._ _(7) On receipt of the option under sub-section (5), the assessing authority shall determine the amount of tax and other amounts due from the assessee under sub-section (1) and shall intimate the same to the assessee, and thereupon the assessee shall remit the amount in installments or lump sum, as the case may be, on or before 31[st] March, 2021:_ **-:7:-** W.A. No.1684/20 _Provided that the first installment thereof, for those who opt for payment as specified in clause (i) of sub-section (1) shall not be less than twenty percent of the amount determined therein and such amount shall be paid within thirty days of receipt of the said intimation and the balance amount to be paid in installments, subject to a maximum of four installments._ _(8) Notwithstanding anything contained in section 91 of the former Act, if an assessee who opts to settle his arrears under sub-section (1) has remitted or deposited any amount relating to the arrears after the service of demand notice, including the tax paid under clause (a) of sub-section (1) of section 74, of the former Act such amount shall be given credit as tax before reckoning the arrears to be settled under sub-section (6) and the assessee shall furnish the proof of payments made in this regard:_ _Provided that any amount paid towards penalty or its interest shall not be given credit._ _(9) Notwithstanding anything contained in this Act, or in any judgment, decree or order of any court, tribunal or appellate authority, there shall not be any refund or any adjustment subsequently for the amount settled under this scheme, under any circumstances._ _(10) The form and manner of submission of option, intimation and payment, shall be as may be specified by the commissioner._ _(11) Cases involved in Appeals filed by an officer empowered by the Government under sections 60 and 62 of the former Act and pending final orders can also be opted to be settled under this scheme, reckoning the demand in the original assessment order._ _(12) Assessees who have opted to settle their arrears under section 31A or section 31B of the former Act during previous years, but had failed to make payments may also opt to settle their cases under this section, and the amounts, if any, paid earlier shall be given credit as tax before reckoning the arrears to be settled under sub-section (6) and the assessee shall furnish the proof of payments made in this regard, however that no refunds shall be allowed._ _(13) The provisions of the Kerala Value Added Tax Act, 2003 (30 of 2004) and the rules made thereunder, including those relating to definitions, authorities, power to rectification of error, powers of revision suo-motu shall, as far as may be, mutatis mutandis, apply, in relation to the settlement of arrears under this section._ **-:8:-** W.A. No.1684/20 _(14) The arrears to be settled under this section shall not include any amount of tax retained by any assessee under garnishee orders of competent court or any amount of tax deducted by the awarder under section 10 and retained by him.”_ 7. A perusal of the above provisions will reveal that the scope, purport and intent of the Scheme is to settle the entire arrears of tax. It is intended to effectuate recovery of the entire amount of tax in arrears by giving certain reductions or waivers. The conditions stipulated for availing the benefit under the Scheme have to be strictly complied with. It is a complete code in itself and is exhaustive of the matters dealt with. A few of the highlights of the Scheme propounded by the Government in 2020 are hundred percent waiver of interest and penalties, 60% waiver of the balance tax arrears if the outstanding dues are paid in a lump sum and 50% waiver of the balance tax arrears, if outstanding dues are paid in instalments. The Scheme is applicable for all pending tax arrears, including cases remaining in appeal. Taxpayers, who had failed to settle arrears under the previous Amnesty Scheme, are also given the option to take the benefit under the Scheme and any amount paid under the earlier Amnesty Scheme is also stipulated to be given due credit. 8. When benefits are claimed under schemes of amnesty, the assessees are bound to comply strictly with the conditions and there is no scope for any equitable consideration. Reliance for the above proposition W.A. No.1684/20 **-:9:-** can be placed upon the decisions in **Hemalatha Gargya v. Commissioner of Income Tax, A.P. and Another** [(2003) 9 SCC 510] and **Union of India and Others v. Nitdip Textile Processors Private Limited and Another** [(2012) 1 SCC 226]. 9. A reading of section 10(1) of the Act indicates that the option for settlement under the Scheme is in respect of the “arrears of tax or any other amount due”. Neither the word 'arrears of tax' nor 'amount due' have been defined. In the absence of any specific definition given to the words 'arrears of tax', one has to go by the general concept of these words. Arrears can generally be described as amounts overdue or remaining unpaid. 'Arrears' means that which remains unpaid though due or as money owed but not yet paid. (See Law Lexicon by P.Ramanatha Aiyar, 4[th] Edition) The Oxford Advanced Learner's Dictionary explains the term 'arrears' as money that is owed and has not been paid at the right time. 10. In cases where dispute arises whether tax is in arrears or not, the same can be determined only through assessment orders. Tax falls in arrears only after an assessment order and consequent demand is made. When the assessment order is set aside in appeal and consequential orders have not been passed by the assessing officers determining tax as due, no amount of tax can be said to be in arrears. 11. In the absence of any alleged amount coming within the scope **-:10:-** W.A. No.1684/20 of the words “arrears of tax', as per the scheme, the authorities cannot compel settlement of the same, unless such settlement is at the volition of the assessee himself. Sub-clause (4) and (6) of section 10 of the Act also refers to “all arrears” in contradistinction to the word “tax that may fall in arrears”. Viewed in the above light, we are of the firm opinion that the words “arrears of tax” in section 10(1) of the Kerala Finance Act, 2020 will not include any amount which is subject to an appeal filed by the State and pending consideration. 12. We cannot agree with the contention of the learned Government Pleader that section 10(11) of the Act would cover instances where appeals are preferred by the State and the said sub-clause when read along with section 10(4) conveys that all arrears are liable to be settled together, including those involved in appeals filed by the State. It can be easily discerned from section 10(11) that the said provision only gives an option to the assessee to settle even the appeals, if any, preferred by the Government. The said clause is in the nature of an option given to the assessee to settle those cases also. The said provision cannot be construed as a mandate to the assessee to settle such cases also. The option to the assessee cannot be elevated to the status of a mandate or a compulsion. The State is also not put to any prejudice on account of the above view we have taken. If the appeal of the State is later allowed, the **-:11:-** W.A. No.1684/20 assessee will be bound and liable for the entire amount determined. 13. Having considered the issue in the above perspective, we are of the view that the assessee is entitled to get the benefit of the Amnesty Scheme for the year 2014-15 without reference to the pending appeal filed by the State for the year 2012-13. 14. In the above circumstances, we set aside the judgment of the learned Single Judge and declare that the appellant is eligible to opt for the Amnesty Scheme, 2020 for settling arrears of the assessment year 2014-15 without including the amount that may fall in arrears for the year 2012-13. Needless to mention, the appeal for the year 2012-13 is a totally independent issue and the consideration of the said appeal on merits shall not be affected, under any circumstances whatsoever, on account of the appellant claiming the benefit of the Amnesty Scheme for the year 201415. This writ appeal is allowed as above. **Sd/S.V.BHATTI JUDGE Sd/BECHU KURIAN THOMAS JUDGE** vps /True Copy/ PS to Judge