Karnataka High Court
M/S Kailash Bar And Restaurant vs The State Of Karnataka on 24 September, 2018
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 24TH DAY OF SEPTEMBER, 2018
BEFORE
THE HON'BLE Dr.JUSTICE VINEET KOTHARI
W.P.Nos.10549-550/2018 (T-RES)
BETWEEN
M/S. KAILASH BAR & RESTAURANT
No.13/1, KALASIPALYAM
BENGALURU-560002
(REPRESENTED BY ITS PROPRIETOR
DAYASHANKAR R. VAGELE)
...PETITIONER
(By Mr. ATUL K. ALUR, ADV.,)
AND
1. THE STATE OF KARNATAKA
REPRESENTED BY ITS FINANCE SECRETARY
GOVERNMENT OF KARNATAKA
VIDHANA SOUDHA, AMBEDKAR VEEDHI
BENGALURU-560001.
2. THE DEPUTY COMMISSIONER OF
COMMERCIAL TAXES (AUDIT)-3.6
ROOM No.27, II FLOOR
BMTC BUILDING, DVO-3
SHANTHI NAGAR, BENGALURU-560 027.
...RESPONDENTS
(By Mr. T.K. VEDAMURTHY, AGA)
THESE WRIT PETITIONS ARE FILED UNDER ARTICLES
226 & 227 OF THE CONSTITUTION OF INDIA PRAYING TO
QUASH THE PROCEEDINGS DRAWN BY/ISSUED BY THE
RESPONDENT-2 DATED 20-7-2017 AT ANNEXURE-K FOR THE
PERIOD 2013-14 IN SO FAR AS THE PETITIONER IS
CONCERNED & ETC.,
Date of Order 24-09-2018 W.P.Nos.10549-550/2018
M/s. Kailash Bar & Restaurant Vs.
The State of Karnataka & Anr.
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THESE PETITIONS COMING ON FOR PRLY. HEARING THIS
DAY, THE COURT MADE THE FOLLOWING:
ORDER
Mr. Atul K. Alur, Adv. for Petitioner. Mr. T.K. Vedamurthy, AGA for Respondents.
Learned counsels at the Bar, submitted that the controversy involved in the present case regarding interpretation of the Karasamadhana Scheme, 2017 is covered by the decision of this Court in the case of M/s. WS Retail Services Private Limited -vs- The State of Karnataka and Others decided on 14.11.2017, which has been upheld by the Division Bench of this Court with the dismissal of the appeal filed by the Revenue in the case of The State of Karnataka and Others -vs- M/s. WS Retail Services Private Limited decided on 31.08.2018.
2. The relevant extracts from the judgments of the Single Judge and the Division Bench of this Court are quoted below:
"51. Thus on the aforesaid legal analysis, this Court is of the clear opinion that the rejection of the applications filed by the petitioners-
Date of Order 24-09-2018 W.P.Nos.10549-550/2018 M/s. Kailash Bar & Restaurant Vs. The State of Karnataka & Anr.3/8
assessees under the Scheme 'KSS 2017', after adjustment of the amounts deposited by them after the assessment orders were passed, first under the head 'interest' and thereafter computing the arrears of tax, interest and penalty is unsustainable in law and illegal and the impugned orders therefore deserve to be quashed and set aside and the writ petitions deserves to be allowed.
52. The Writ petitions are accordingly allowed and quashing and setting aside the impugned orders passed by the Respondents- Authorities of the Department, the matters are remanded back to the concerned authorities for re-computing the arrears of tax, interest and penalty, in the manner indicated above in this judgment and then pass appropriate orders and subject to payments already made by the petitioners-assessee or further payments to be made by them in accordance with the provisions of the Scheme as interpreted by this Court above, the waiver of the interest and penalty to the extent of 90% shall be granted to the petitioners- assessees under the said Scheme. The said exercise be completed within a period of three months from today."
Date of Order 24-09-2018 W.P.Nos.10549-550/2018 M/s. Kailash Bar & Restaurant Vs. The State of Karnataka & Anr.
4/8Division Bench Order "26. It is clear that in view of the discussion supra, the payments made which are referred to by any nomen-clature being made while preferring an appeal or as a prerequisite to consider the application for stay being statutorily mandated cannot be the subject matter of appropriation till the adjudication process has reached a finality and such deposits could only be regarded as 'colourless deposits.' The finding of the learned Single Judge as regards the payments made pending adjudication being in the nature of 'colourless deposits' requires no interference.
27. The very Scheme as envisaged in its preamble provided for waiver of 90% of penalty and interest remaining unpaid as on 15.03.2017; and further, it provided for payment of tax including arrears and 10% of penalty resulting in waiver of remaining penalty and interest. The purpose and intent of the Scheme was clear that all tax would be cleared and only a portion of penalty and interest need be paid.
28. As per Clause 2 of the Scheme, "any dealer who makes full payment of arrears of tax on or before 31.05.2017 shall be granted waiver Date of Order 24-09-2018 W.P.Nos.10549-550/2018 M/s. Kailash Bar & Restaurant Vs. The State of Karnataka & Anr.
5/8of 90% of arrears of penalty and interest payable". If Section 42(6) is to be made applicable to the provisions of the Scheme, as contended by the State, and payments made pending appeal were to be appropriated first towards interest in accordance with the parent Acts notwithstanding the Scheme, it would then lead to an absurdity where even assessees making payments for compliance with condition of paying full tax and 10% of interest and penalty arrears in terms of Clause 3.3, would have their payments appropriated towards interest first by operation of Section 42(6) of the KVAT Act or other provisions which are in pari-materia. By the time final application and declaration is moved before the Assessing Authority/Recovery Officer/Prescribed Authority to waive the balance amount, no or very little interest would be left unpaid and the contemplated benefit would never be accorded. Hence, the only way of reconciling the provisions of the Scheme to give effect to the object of granting 90% waiver of penalty and interest is to adjust the payments made pending adjudication first towards tax and then, towards interest and penalty arrears.
29. The contention of the State as regards appropriation in spite of the Scheme Date of Order 24-09-2018 W.P.Nos.10549-550/2018 M/s. Kailash Bar & Restaurant Vs. The State of Karnataka & Anr.
6/8being enacted in exercise of executive power has been rightly rebutted by the respondents by contending that the Scheme framed by the Government ought to be treated as self-contained code and if not, the result would be an absurd consequence as dealt with above.
30. In this particular case, it is clear that the payments made by the respondents for admitting their appeals under various statutory provisions were under dispute and were not referable to any particular component of tax or penalty or interest and were only 'colourless deposits'. Accordingly, these remittances cannot be deemed to be paid and offset from unpaid amount for calculation of arrears to be waived. Unlike in the case of Assistant Commissioner v. ACC Ltd. (supra) where the deposits were no longer under dispute by reason of dismissal of appeal having attained finality, in the present case, the deposit amounts were still under dispute as of the cut-off date for calculation of arrears, i.e. 15.03.2017 as specified in Clauses 1.1 and 1.2 of the Scheme. These deposit amounts being under dispute, cannot be deemed to be paid, and hence, cannot be offset from arrears, to give effect to the object of the Scheme and to avoid absurdity. Any payments made Date of Order 24-09-2018 W.P.Nos.10549-550/2018 M/s. Kailash Bar & Restaurant Vs. The State of Karnataka & Anr.
7/8under the Scheme and the adjustment of deposit after withdrawal of appeal and after the promulgation of the Scheme, must be by appropriation first towards tax arrears. The explanation through an allegory of three boxes in a puzzle game made in paras-25 and 26 of the impugned order very aptly indicates the sequence of appropriation which is to be resorted to in the manner as discussed above.
31. In the light of the above discussion, the order of the learned Single Judge is upheld. Appeals are dismissed and the direction as contemplated in terms of para-52 of the impugned order is to be carried out".
3. The impugned orders Annexures-K and L passed by the concerned authority of the Respondent-
Department therefore cannot be sustained, being contrary to these judgments.
4. The writ petitions are therefore allowed in terms of the aforesaid judgments of this Court and the impugned orders Annexures-K and L both dated 20.07.2017 are set aside and the concerned authority is directed to pass fresh orders in accordance with law laid down in the Date of Order 24-09-2018 W.P.Nos.10549-550/2018 M/s. Kailash Bar & Restaurant Vs. The State of Karnataka & Anr.
8/8aforesaid judgments of this Court within a period of three months from today. No order as to costs.
Sd/-
JUDGE TL