M/S Krishna Steel Rolling Mills New Industrial Development Area, Kanjikode, Palakkad v. Assistant Commissioner of State Tax, Kerala Special Circle, Palakkad; State of Kerala represented by its Secretary, Taxes Department

# **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** **THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU** **TUESDAY, THE 13TH DAY OF NOVEMBER 2018 / 22ND KARTHIKA, 1940** # **WP(C).No.27037 of 2018** ## **PETITIONER/S:** **M/S. KRISHNA STEEL ROLLING MILLS NEW INDUSTRIAL DEVELOPMENT AREA, KANJIKODE, PALAKKAD, REPRESENTED BY ITS PARTNER, SRI.R.ELANGOVAN.** **BY ADVS. SRI.N.MURALEEDHARAN NAIR SRI.S.JAFFERALI** ## **RESPONDENT/S:** - **1 THE ASSISTANT COMMISSIONER OF STATE TAX STAGE GOODS SERVICE TAX DEPARTMENT KERALA SPECIAL CIRCLE, PALAKKAD-678001.** - **2 STATE OF KERALA REPRESENTED BY ITS SECRETARY, TAXES DEPARTMENT GOVT.SECRETARIAT, THIRUVANANTHAPURAM-695001.** **DR THUSHARA JAMES, GP** **THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 13.11.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** WP(C).No.27037 of 2018 2 ## **JUDGMENT** ## **Facts:** The petitioner, a dealer under the KVAT Act, suffered adverse assessment orders for the years 2008-2009 and 2009-2010. Appealed against, those orders were modified on 15.05.2014 and 29.11.2014. In fact, the appellate authority, besides setting aside the assessment orders, remanded the matter. On remand, the assessing authority passed modified orders on 31.10.2017. 2. In the meanwhile, the Kerala Finance Act incorporated Section 31A into the KVAT Act. In terms of that Section, the interest component from the assessees was reduced upto the AY 2010-2011. Under the Act, the Department floated an Amnesty Scheme, requiring the defaulting assessees to apply before 30.09.2017 to take benefit of the scheme under Section 31A of the Act. But the petitioner’s Ext.P1 application, though ostensibly dated 28.09.2017, was received by the Department only after 30.10.2017, the last date. 3. As the Ext.P1 application was beyond the date prescribed in the statutory scheme, the assessing authority disregarded the petitioner's plea for interest waiver. Then, under the Exts.P2 and P3 modified assessment orders, the petitioner paid Rs.1,50,000/- for each assessment year. 4. Again in 2018, the Finance Act introduced an amendment to Section 31A. For the defaulting assessees to take advantage of the Amnesty Scheme, both the filing date and the payment date stood modified: last date for applying was 30.06.2018, and for paying the amount 30.09.2018. Once again the petitioner WP(C).No.27037 of 2018 3 applied. Then, the assessing authority first adjusted Rs.1,50,000/- (which the petitioner paid earlier) towards interest and treated the balance amount as eligible under the amended Section 31A. 5. Thus, through the Ext.P5 order, the assessing authority waived interest on the balance assessment dues after adjusting Rs.1,50,000/- exclusively towards interest. And he demanded the rest of the amount from the petitioner. Under these circumstances, assailing the Ext.P5, the petitioner has filed this writ petition. ## **Submissions:** ## **Petitioner’s:** 6. Sri N.Muraleedharan Nair, the learned counsel for the petitioner, has submitted that the assessing authority ought to have given the benefit under the Amnesty Scheme in terms of the extended date under the amended Section 31A of the Act. According to him, as the dates were substituted for those given earlier under the 2017 Act, the entire scheme under Section 31A stands retrospectively modified or amended. So the authority ought not to have split the petitioner's dues and treated only the balance amount in 2018 as coming under the Amnesty scheme. ## **Respondents‘:** 7. Dr.Thushara James, the learned Government Pleader, on the other hand, has strenuously contended that the Ext.P5 order is unassailable. According to her, the Finance Act is passed every assessment year and it should be treated as an independent enactment confined to that financial year alone. To elaborate, she has WP(C).No.27037 of 2018 4 submitted that though the scheme was very much available in 2017 itself, the petitioner failed to take advantage of it. Therefore, on the assessee's own failure, the Scheme ended. The so called extended period under the 2018 Act must be confined to the dues remained unpaid in 2018. The petitioner having voluntarily paid certain amounts before the amendment was effected to Section 31A cannot take advantage of this payment. 8. To distinguish the legislative devices such as substitution, incorporation and so on, Dr.Thushara James has relied on a few precedents referred to incourse of time. ## **Discussion:** 9. Indeed, the petitioner first suffered adverse assessment orders and had them modified on remand from the appellate authority, as seen from Exts.P2 and P3. In terms of Section 31A of the KVAT Act, introduced through Kerala Finance Act, 2017; the petitioner could have taken advantage of the Amnesty Scheme for interest waiver. For that, he had to apply before 30.19.2017. Admittedly, the petitioner's application reached the assessment authority beyond that date. Then, on 09.01.2018, the petitioner paid Rs.3,00,000/- (Rs.1,50,000/- for each of the two Ays) to discharge the tax arrears for each of the two assessment years. Later, in 2018, Section 31A was amended through Finance Act, 2018. Therefore, it is apposite to examine the provision both pre- and post-amendment: Section 31A of the Act originally stood: - “ **31A. Reduction of arrears in certain cases** -(1) Notwithstanding anything WP(C).No.27037 of 2018 5 contained in this 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 this Act or under the Central Sales Tax Act, 1956 (Central Act 74 of 1956) relating to the period up to and including 31[st] March, 2011, may opt for settling the arrears on payment of the principal amount of the tax in arrears and thirty per cent of the penalty amount by availing a complete reduction of the interest on the tax amount and on the penalty amount. (2) Notwithstanding anything contained in the Kerala Revenue Recovery Act, 1968 (15 of 1968) reduction of arrears under sub-section(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 sub-section(1) the assessing authorities shall withdraw the revenue recovery proceedings against such assessees which will then be binding on the revenue authorities and such assessees 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 under this section. (4) All arrears including tax and penalties pertaining to a year shall be settled together under this section. (5) An assessee who intends to opt for payment of arrears under subsection(1) shall submit an application to the assessing authority on or before 30[th] September 2017. (6) The arrears for the purpose of settlement under this section shall be calculated as on the date of submission of application. (7) On receipt of an application 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 shall intimate the same to the dealer, and thereupon the dealer shall remit the amount in equal monthly instalments on or before 31[st] December 2017. Provided that an assessee who opts to settle his arrears under subsection (1) has remitted any amount relating to the arrears for obtaining a stay voluntarily or by way of an order or decree or judgment passed by any court or tribunal or appellate authority and, if the case is pending before such authority, the amount so paid shall be treated as that paid under this option. (8) There shall not be any refund subsequently for the amount settled under this scheme, under any circumstances.” ## 10. Through the Finance Act, 2018 Section 31A stood amended: “(a) In sub-section (5) for the words and figures “30[th] September, 2017” the words and figures “30[th] June, 2018” shall be substituted. (b) in sub-section (7), for the words and figures, “31[st] December, 2017”, the words and figures “30[th] September, 2018” shall be substituted.” WP(C).No.27037 of 2018 6 11. By then, the assessing authority adjusted the amounts the petitioner had remitted. In the wake of the amended section 31A, the petitioner, on 28.06.2018, submitted another application. Then the assessing authority issued the Ext.P5 order. With the reduced interest and because of the petitioner’s previous payment, there remained unpaid Rs.3,53,504/- as the outstanding tax amount. The assessing authority arrived at this figure after adjusting the petitioner’s payment towards interest under the amended provision. 12. The petitioner's bone of contention is that the amendment by way of substitution relates back, as if the earlier date under the 2017 Act never existed and as if the dates fixed in 2018 amendment alone existed all thorugh. In that event, the petitioner's paying Rs.3 Lakh would be treated as payment under the amended Act which, according to the petitioner's counsel, has retrospective effect. The Department, on the other hand, contended that by the time the petitioner paid the amount, there was no Amnesty Scheme available because the date came to an end, and the amendment came only after the assessing authority had adjusted the petitioner's remittance. 13. To resolve this dispute, we will examine the phraseology employed in the amendment. As we have already seen, the amendment is by way of substitution. True, as contended by the Government Pleader, the Finance Act is in annual legislative affair; it carries enactments and amendments affecting a basket of Legislations. In other words, through the device of the Finance Act 2017, the WP(C).No.27037 of 2018 7 Legislature incorporated a new provision into the KVAT Act: Section 31A. Then in 2018, again through the Finance Act of that year, the Legislature effected another amendment to Section 31A. In effect, Section 31A stood amended: the figures “30.09.2017“ in Sub-Section (5) of Section 31A stood substituted wth “30.06.2018“. Correspondingly in Sub-Section (7), “31.12.2017“ stood substituted with 30.09.2018. 14. Simply put, the legislatture substituted one date with anoher. Nothing more, nothing less. The word “substitute” ordinarily would mean “to put (one) in place of another”; or “to replace”. In Black’s Law Dictionary, Fifth Edition, at page 1281, the word “substitute”, as quoted in _Government of India v. Indian Tobacco Associaiton_ _**[[]**_[1] _**[]]**_ , has been defined to mean “To put in the place of another person or thing”, or “to exchange”. In Collins English Dictionary, the word “substitute” has been defined to mean “to serve or cause to serve in place of another person or thing”; “to replace (an atom or group in a molecule) with (another atom or group)”; or “a person or thing that serves in place of another, such as a player in a game who takes the place of an injured colleague”. 15. As far as back as in 1951, the Supreme Court has held in _Shamrao V. Parulekar v. District Magistrate, Thana, Bombay_ _**[[]**_[2] _**[]]**_ that the construction of an amended Act is now governed by technical rules and that we must first be clear regarding the proper canons of construction. The rule is that when a subsequent Act amends an earlier one in such a way as to incorporate itself, or a part of itself, 1 **[[]]** AIR 2005 SC 3685 2 **[[]]** AIR 1952 SC 324 WP(C).No.27037 of 2018 8 into the earlier, then the earlier Act must thereafter be read and construed(unless that would lead to a repugnancy, inconsistency or absurdity) as if the altered words had been written into the earlier Act with pen and ink and the old words scored out so that thereafter there is no need to refer to the amending Act at all. 16. In _Ramkanali Colliery of BCCL v. Workmen by Secy., Rashtriya Colliery Mazdoor Sangh_ _**[[]**_[3] _**[]]**_ , a Division Bench of the Supreme Court has considred the effect of the expression “substituted”. Quoting with approval _Bhagat Ram Sharma v. Union of India_ _**[[]**_[4] _**[]]**_ , the Court has stated that it is a matter of legislative practice to provide while enacting an amending law, that an existing provision shall be deleted and a new provision substituted. If there is both repeal and introduction of another provision in place thereof by a single exercise, the expression “substituted” is used. Such deletion has the effect of the repeal of the existing provision and also provides for introduction of a new provision. There is thus no real distinction, the Court has felt, between repeal and amendment or substitution in such cases. If that aspect is borne in mind, we have to apply the usual principles of finding out the rights of the parties flowing from an amendment of a provision. 17. _Indian Tobacco Associaiton_ has noted that substitution of a provision results in repeal of the earlier provision and its replacement by the new provision. After quoting a handful of decided cases, it further contextually observes that the State Government by substituting the new rule in place of the old one never intended to keep alive the old rule. Having regard to the totality of the 3 **[[]]** (2001) 4 SCC 236 4 **[[]]** AIR 1988 SC 740 WP(C).No.27037 of 2018 9 circumstances, the Court held that the substitution had the effect of just deleting the old rule and making the new rule operative. Eventually, it has upheld the legislative practice of an amendment by substitution being incorporated in the text of a statute which had ceased to exist and held that “the substitution would have the effect of amending the operation of law during the period in which it was in force.“ In _Koteswar Vittal Kamath v. K. Rangappa Baliga_ _**[[]**_[5] _**[]]**_ , the Supreme Court emphasized the distinction between ‘supersession’ of a rule and ‘substitution’ of a rule. It has held that the process of substitution consists of two steps : first, the old rule is made to cease to exist and, next, the new rule is brought into existence in its place. 18. In sum, I may hold, based on the above precedents, that when the legislature amends an existing provision in a statute by way of substitution, the effect is the substituted provision stands repealed and the amended provision is substituted in the place of earlier provision in the earlier Act, as if the substituted provision is there in the earlier act from the inception. 19. As seen from the above judicial assertions, an amendment by way of substitution obliterates whatever has existed earlier. In fact, it would introduce a legal fiction as if what was substituted had been existing all along. That accepted, I must conclude that the last date for applying was 30.6.2018 and for remitting was 30.9.2018. And those dates, so to speak, have remained unaltered. 20. Therefore, in the face of those dates enabling the assessee to take advantage of the scheme, the petitioner's payment of Rs.3 lakhs must be treated as 5 **[[]]** AIR 1969 SC 504 WP(C).No.27037 of 2018 10 if it were under the amended Act. Then, the petitioner is entitled to the benefit. 21. I may examine this issue from another perspective. Section 31A enables “an assessee who is in arrears of tax or any other amount due under this Act . . . relating to the period up to and including 31st March, 2011, may opt for settling the arrears”. This option must be on his paying “the principal amount of the tax in arrears and thirty per cent of the penalty amount by availing a complete reduction of the interest on the tax amount and on the penalty amount”. The expression “period up to” is vital. To my mind that holds the key. If the Legislature had any other intention and wanted to confine it to a particular assessment year, say 2018, it would have very plainly employed a device of referring to the period from beginning to end. That is, any given period of 2018 ending by another particular date of that year. Once for the same arrear of 2009-2010 and 2010-2011, the assessing authority gave the benefit of the Scheme after deducting the amount that the petitioner paid earlier, though it is not a fresh debt or arrear. So the petitioner wants the same treatment for the assessment year immediately preceding 2018. 22. Under these circumstances, I hold that Ext.P5 to the extent of denying the petitioner the benefit of interest waiver and adjusting Rs.3 lakhs to the principal cannot be sustained and is accordingly set aside. Consequently, the assessing authority will consider the petitioner's entire payment, including Rs.3 lakhs paid earlier, as under the Amnesty Scheme in force and extend full benefit to him accordingly. The petitioner will pay the balance amount, if any, by 30.11.2018. WP(C).No.27037 of 2018 11 The writ petition stands allowed to the extent indicated above. No order on costs. Sd/- **DAMA SESHADRI NAIDU JUDGE** sd WP(C).No.27037 of 2018 12 ## **APPENDIX** **PETITIONER'S/S EXHIBITS:** **EXHIBIT P1 TRUE COPY OF THE APPLICATION FOR AMNESTY SCHEME 2017 DATED 28/09/2017. EXHIBIT P2 TRUE COPY FOR THE MODIFIED ORDER PASSED BY 1ST RESPONDENT FOR THE YEAR 2008-09 DATED 31/10/2017. EXHIBIT P3 TRUE COPY OF THE MODIFIED ORDER PASSED BY 1ST RESPONDENT FOR THE YEAR 2009-10 DATED 31/10/2017. EXHIBIT P4 TRUE COPY OF THE COVERING LETTER DATED 09/01/2018. EXHIBIT P5 TRUE COPY OF THE ORDER PASSED BY 1ST RESPONDENT FOR THE YEAR 2008-09 AND 2009-10 DATED 28.06.2018.** sd