Polsons Diostillery vs The Assistant Commissioner (Assessment)

Dr. A.K. Jayasankaran Nambiar, J

The Writ Appeal is preferred against the judgment dated 23.01.2024 of a learned Single Judge in W.P.(C).No.1291 of 2021 whereby, the learned Single Judge found that there was no necessity for interfering with Ext.P17 order passed by the respondent quantifying the amounts that had to be paid by the appellant towards arrears of tax, penalty and interest under the Amnesty Scheme introduced by the Kerala Finance Act, 2020 in relation to outstanding dues under the Kerala General Sales Tax Act [hereinafter referred to as the “KGST Act”].

The Review Petition was filed pursuant to a permission granted by the Supreme Court in Civil Appeal No.8500 of 2010 that was in turn preferred against the judgment and order dated 21.12.2009 by this Court in W.P.(C).No.12901 of 2009. Inasmuch as the fate of the Review Petition would have had a bearing on the decision taken by us in the Writ Appeal, we posted all the aforementioned cases together for hearing and now dispose all of them by this common judgment.

For the sake of convenience, the reference to the parties is as they appear in the Writ Appeal. The brief facts necessary for disposal of these cases are as follows:

The appellant is an assessee on the rolls of the Assistant Commissioner (Assessment), Special Circle, Thrissur. During the period between 1998-99 and 2015-16, it was operating a distillery manufacturing Indian Made Foreign Liquor on the strength of the licences obtained by it from various statutory authorities. The appellant had also been paying the turnover tax in respect of the total conceded sales turnover of Indian Made Foreign Liquor that was supplied by it to the Kerala State Beverages Corporation. On account of a dispute having been raised with regard to inclusion of the excise duty component in the total turnover for the purposes of levy of turnover tax, the appellant did not pay tax on the said excise duty component along with its returns for the relevant assessment years from 1998-99 to 2004-05. The said issue regarding inclusion of the excise duty component in the total turnover for the purposes of turnover tax under the KGST Act came to be settled by the decision of a Constitution Bench of the Supreme Court only on 06.05.2005 by the judgment reported in State of Kerala v. Maharashtra Distilleries Ltd. and another - [(2005) 141 STC 358]. The Court held that excise duty paid will form part of the total turnover for the purposes of levy of turnover tax.

The Assessing Authority completed the assessments for the aforesaid assessment years and raised a demand of tax and interest on the appellant vide Ext.P2 series of orders. The appellant preferred appeals before the First Appellate Authority against the said orders, and when recovery proceedings were launched for realisation of the disputed tax amounts for the assessment years 1998-99 to 2001-02, the appellant preferred W.P.(C).No.27673 of 2006 before this Court. A learned Single Judge of this Court dismissed the said writ petition on 20.10.2006. The Writ Appeal that was thereafter preferred was disposed by a Division Bench, directing the First Appellate Authority to dispose the appeals pending before it expeditiously and by staying the recovery proceedings in the meanwhile subject to payment of 50% of the disputed tax, exclusive of interest within three weeks. The appellant accordingly deposited an amount of Rs.69,09,515/- before the Assessing Authority towards 50% of the disputed tax exclusive of interest for the assessment years 1998-99 to 2001-02.

The First Appellate Authority thereafter rejected the appeals preferred by the appellant and therefore the appellant preferred Second Appeals before the Sales Tax Appellate Tribunal. Appeals were also preferred for the assessment years 2003-04 and 2004-05. While so, by the Finance Act, 2009, an Amnesty Scheme was introduced by the State Government to enable the assessees in arrears of tax to clear their dues subject to relaxation in the matter of payment of interest and penalty and reserving the right to challenge the impugned demands. The appellant therefore submitted Ext.P4 application before the Assessing Authority for settlement of the outstanding tax dues under the Amnesty Scheme. The Assessing Authority appropriated the payments already effected by the appellant till then towards the interest due on the tax arrears and then raised a demand for the tax dues for the purposes of settlement under the Amnesty Scheme. The appellant was therefore intimated that the outstanding tax demand against it for the assessment years mentioned above was in an amount of Rs.5,22,76,093/- and 25% of the said amount [Rs.1,30,69,024] had to be paid for settlement under the Amnesty Scheme. It is significant to notice that thereafter although the Assessing Authority modified the original demand from Rs.5,22,76,093/- to Rs.4,46,86,793/-, the appellant was of the view that it was not open to the Assessing Authority to adjust the amounts that had already been paid by the appellant towards tax uptill then, towards interest accrued on the tax demand for the purposes of the Amnesty Scheme. On the Assessing Authority not accepting the request of the appellant to revise the computation under the Amnesty Scheme, the appellant moved this Court through W.P.(C).No.12901 of 2009, in which, an interim order was passed by the learned Single Judge to accept the amount of Rs.2,47,98,006/- in four installments towards settlement of the tax arrears payable by the appellant under the Amnesty Scheme for the assessment years 1998-99 to 2004-05. It is not in dispute that the appellant paid the aforesaid amount in compliance with the directions in the interim order passed by this Court. Thereafter the said writ petition was disposed along with S.T. Revisions that were pending before this Court on other issues by a common judgment dated 21.12.2009. The S.T. Revisions as well as the writ petition were dismissed by the said common judgment. While dismissing W.P. (C).No.12901 of 2009, the Division Bench of this Court found that as per Section 55C of the KGST Act, there was an express provision that enabled the Department to adjust payment of arrears of tax made by an assessee towards the interest first and the balance amount, if any, towards the tax dues. In a sense therefore, the computation of the tax amounts outstanding for the purposes of the Amnesty Scheme, as stated by the Department, was found to be correct by the Division Bench.

Against the Division Bench judgment rejecting the contentions of the appellant in W.P.(C).No.12901 of 2009, the appellant preferred Civil Appeal No.8500 of 2010 before the Supreme Court, in which, an interim order of stay of recovery of amounts from the appellant was also directed. The Civil Appeal was finally heard on 28.11.2013 and disposed with the observation that if the appellant had a case that the issues projected in W.P.(C).No.12901 of 2009 had not been correctly considered by the Division Bench, then it was for the appellant to approach this Court through a Review Petition. Acting on the liberty granted by the Supreme Court, the appellant therefore preferred R.P.No.174 of 2014 impugning the judgment in W.P.(C).No.12901 of 2009.

When the Review Petition aforesaid was pending before this Court, recovery proceedings were pursued against the appellant for recovery of the tax amounts outstanding for the assessment years 1998-99 to 2004-05. The appellant therefore moved this Court through W.P.(C).No.16278 of 2014, which came up for admission before a Division Bench which admitted the Writ Petition and also passed an interim order dated 20.10.2014 staying the recovery of disputed amounts pending disposal of the writ petition for a limited period. The said interim stay against recovery was thereafter extended to enure till the final disposal of the writ petition by Ext.P9 order dated 20.08.2015.

It is relevant to note that in the meanwhile, Amnesty Schemes were introduced through various Finance Acts in the KGST Act, and eventually Finance Act, 2020 amended Section 23B of the KGST Act to provide for a revised Amnesty Scheme. For the purposes of the present Writ Appeal, we need only notice that the Amnesty Scheme, 2020 enabled assessees to settle outstanding demands relating to the periods up to and including 31.03.2005 as well, by providing for a complete waiver of penalty amount and interests on tax and on penalty if the assessees paid 50% of the principal amount of the tax in arrears on or before 31.03.2021 or 40% of the principal amount of tax in arrears within 30 days of the date of intimation from the Assessing Authority. The Amnesty Scheme also mandated that notwithstanding Section 55C of the KGST Act, if an assessee opted to settle his arrears under the Amnesty Scheme, he could take a set off of all payments/remittances made by him after the service of the demand notice towards the tax effected. It was further provided that assessees who had opted to settle their arrears under the Amnesty Scheme for the previous years but had failed to make payments could also opt to settle their cases under the Scheme, and the amounts, if any, paid earlier, would be given credit as tax before reckoning the arrears to be settled under Section 23B (6) of the KGST Act.

The appellant therefore put in an application before the Assessing Authority for settlement of the tax arrears for the period from 1998-99 to 2004-05, as also for the year 2015-16 where under, tax and interest to the tune of Rs.77,64,344/- [Rs.52,81,867/- tax + Rs.24,82,477/- interest] had also been demanded from the appellant. The Assessing Authority, however, refused to accept the offer of the appellant in its application for Amnesty and took the view that the settlement under the Amnesty Scheme would arise only in respect of assessment years 1999-00 and 2015-16 since the assessments for the other years had already become final through the order earlier passed by the Assessing Authority for the purposes of the Amnesty Scheme 2009. It is impugning the said order [Ext.P15] as also Ext.P17 revised demand that the appellant approached this Court through W.P. (C).No.1291 of 2021, from which the Writ Appeal arises.

The learned Single Judge, who considered the Writ Petition, was of the view that the appellant had settled the tax liability including the interest amount for all the assessment years from 1998-99 and 2004-05 except 1999-00 under the Amnesty Scheme of 2009. He accordingly found that only the tax liability for the assessment years 1999-00 and 2015-16 could be considered under the Amnesty Scheme of 2020. The appellant was accordingly permitted to remit an amount of Rs.89,93,467/- within 30 days from the date of the judgment to avail the benefit of the Amnesty Schemes of 2009 and 2020.

Before us, it is the submission of the learned senior counsel Sri.K.I.Mayankutty Mather, duly assisted by Adv.Smt.Parvathy Adithya that the learned Single Judge erred in assuming that the assessments in respect of all the assessment years from 1998-99 to 2004-05, except 1999-00 had been completed and finalised by the earlier proceedings. It is, in particular, pointed out, with reference to the litigation that went up to the Supreme Court and continues to be pending through R.P.No.174 of 2014 that while the respondent State was prevented from effecting any recoveries of outstanding tax demands for the said years, the payments made by the appellant towards tax in those assessment years were all subject to the result of the litigation aforementioned. Through a computation sheet produced before us, it is shown that the appellant had made the following payments towards the KGST liability for the assessment years 1998-99 to 2004-05, namely,-

Payments made by the Assessee towards KGST liability

Date

Particulars

Amount (in Rs.)

25.07.2006

784647/25.7.06 (Ext.P3(a))

6909515

11.08.2008

As per High Court order

225000

14.07.2009

DD No 679176

6199502

07.08.2009

Cheque No 008767

6199502

08.09.2009

Cheque No 009998

6199502

09.10.2009

Cheque No 012175

6199502

Total

31932523

As against the above payments, the Amnesty amount for the period from 1998-99 to 2004-05 computed in accordance with the Amnesty Scheme, 2020 would be in an amount of Rs.1,67,26,574/- and the amnesty amount for the assessment year 2015-16 would be in an amount of Rs.78,17,162/-. It is argued therefore that as against the total of Rs.2,45,43,736/- that would be due to the State by way of Amnesty amount under the Amnesty Scheme, 2020 for the assessment years 1998-99 to 2004-05 and 2015-16, the appellant has already paid Rs.3,19,32,523/-. It is the case of the learned senior counsel therefore that the matter can be settled by accepting the payments already effected by the appellant as above towards the Amnesty amount of Rs.2,45,43,736/-. The learned senior counsel further submits that the appellant is even ready to forgo the claim for refund of the differential amount of Rs.73,88,787/- [3,19,32,523 - 2,45,43,736] in the interest of settlement. The learned senior counsel however submits that the appellant would be entitled to a refund of an amount of Rs.7,98,253/-that was paid during the pendency of W.P.(C).No.1291 of 2021 and as a condition for the grant of stay of recovery during the pendency of the Writ Petition. It is further pointed out by the learned senior counsel that inasmuch as the Review Petition has not been withdrawn by the appellant and continues to be pending before this Court and the recovery of balance amounts from the appellant had been stayed all along by orders of this Court and the Supreme Court, the finding of the learned Single Judge that the assessments during the period from 1998-99 to 2004-05 except 1999-00 had become final cannot be legally sustained.

Per contra, it is the submission of Sri.V.K. Shamsudheen, the learned Senior Government Pleader that the appellant cannot re-agitate the issue of applicability of Section 55C of the KGST Act in relation to payments effected by it in the past. It is his submission that since the Division Bench of this Court had already found that the provisions of Section 55C of the KGST Act would apply to the payments effected by the petitioner till then, the mere fact that the Supreme Court had permitted the appellant to prefer a Review Petition to decide the prayers in W.P.(C).No.12901 of 2009 separately, cannot be seen as a permission granted to the appellant to rake up the concluded issue at this belated stage. It is his further submission that, at any rate, during the pendency of this litigation, the Department had already adjusted the amount paid by the appellant, towards its tax and interest dues for the various assessment years in question by applying the provisions of Section 55C of the KGST Act and assessment orders [Ext.P11 series] had been passed which were not impugned by the appellant in W.P.(C).No.1291 of 2021 although they were produced in the said writ petition. It is his contention that when one goes by Ext.P11 series of assessment orders, which the appellant does not separately impugn, the demand made by the respondents has to be seen as valid and reflecting the correct dues position of the appellant under the Amnesty Scheme, 2020.

On a consideration of the rival submissions, we are of the view that inasmuch as the Supreme Court had, while disposing the Civil Appeal preferred by the appellant against the earlier judgment of a Division Bench of this Court in W.P.(C).No.12901 of 2009 relegated the appellant to prefer a Review Petition before this Court so as to agitate the issue as to whether the payments towards tax made by the appellant under the Amnesty Scheme of 2009 could be adjusted towards interest first in accordance with the provisions of Section 55C of the KGST Act, the said issue will remain live for consideration by us if we decide to allow the Review Petition and reinstate the Writ Petition. Taking note of the Writ Appeal that is now before us, in which the appellant seeks the benefit of the Amnesty Scheme, 2020, for settlement of his tax arrears for the assessment year 2015-16, as also for the assessment years 1998-99 to 2004-05, which are also envisaged for settlement under the Amnesty Scheme, 2020, we are of the view that in the interests of settlement, and towards giving a quietus to the long pending litigation, we must allow the Review Petition and restore W.P.(C).No.12901 of 2009 on file so as to consider the claim of the appellant for the benefit of the Amnesty Scheme holistically in the light of both the Schemes, namely, the Amnesty Scheme, 2009 and Amnesty Scheme, 2020. We do so. The Review Petition is therefore allowed and W.P.(C).No.12901 of 2009 reinstated before this Court by recalling the common judgment dated 21.12.2009 inasmuch as it relates to W.P.(C).No.12901 of 2009. The contentions of the petitioner and respondents in relation to W.P.(C).No.12901 of 2009 were already considered at the time of hearing the connected Writ Appeal and Review Petition. Consequently, this judgment shall now be seen as disposing W.A.No.204 of 2024, R.P.No.174 of 2014 and W.P. (C).No.12901 of 2009.

When we consider W.P.(C).No.12901 of 2009, which deals with the claim for settlement of the tax demands for 1998-99 to 2004-05 under the Amnesty Scheme, 2009 and the claim of the appellant for settlement of the same dues along with the dues for assessment year 2015-16 under the Amnesty Scheme, 2020 in W.A.No.204 of 2024, we are of the view that inasmuch as the Amnesty Scheme, 2020 envisages a settlement of even those dues that are pending for the assessment years 1998-99 to 2004-05, the appellant must get the benefit of the method of computation of Amnesty amount for the purposes of settlement as envisaged under the Amnesty Scheme, 2020. As the Scheme contains provisions which are beneficial to an assessee, the pendency of the Review Petition, together with the fact that interim orders were passed by this Court and the Supreme Court staying recovery proceedings against the appellant, should be seen as the backdrop against which the payments of various amounts were effected by the appellant during the pendency of the litigation referred above. Accordingly, the said payments have necessarily to be seen as provisional and subject to the final outcome of the litigation. When we reckon the payments already made by the appellant and compare it with the settlement amount arrived at through a computation as envisaged under the Amnesty Scheme, 2020, we find that as against a liability of Rs.2,45,43,736/-, the appellant has paid an amount of Rs.3,19,32,523/-. We are of the view that the said amount paid by the appellant can be treated as in full and final settlement of the dues for the assessment years 1998-99 to 2004-05 and 2015-16 so as to put a quietus to the litigation between the parties. We are conscious of the fact that in this process, the appellant would have effectively paid an amount of Rs.73,88,787/- in excess to the Department. However, the learned senior counsel for the appellant graciously submits that he waives the claim for a refund of the said amount in the spirit of settlement.

Before parting with these cases, we might only refer to the contention of the learned Government Pleader on behalf of the respondents that Ext.P11 series of assessment orders that were produced in W.P.(C).No.1291 of 2021 but not impugned therein virtually binds the appellant and prevents it from assailing the demands made by the Department for differential dues under the Amnesty Scheme, 2020. While it may be a fact that the respondents, based on their understanding that the amounts due to them under the earlier Amnesty Scheme of 2009, after adjustment of amounts paid by the appellant towards interest in terms of Section 55C of the KGST Act, was as shown in Ext.P11 series of assessment orders, it has to be borne in mind that in the earlier round of litigation through W.P.(C).No.12901 of 2009, the appellant was essentially challenging a computation made under the Amnesty Scheme of 2009 wherein he had opted for settlement of the dues for the assessment years 1998-99 to 2004-05. Ext.P11 series of orders was passed even while the litigation challenging the computation under the earlier Amnesty Scheme was pending before the Supreme Court and thereafter before this Court in R.P.No.204 of 2024. Ext.P11 series of assessment orders can therefore be taken only as provisional and subject to the resolution of the disputes between the parties as agitated in W.A.No.204 of 2024, R.P.No.174 of 2014 and W.P.(C).No.12901 of 2009. Thus, in effect, what we have done through this judgment is to compute the Amnesty benefit available to the appellant in terms of the Amnesty Scheme, 2020 by treating all the payments made by it in the past as provisional and towards the payments required under the said Scheme. At this distance of time, and with a view to giving a quietus to the litigation, we believe that this would be the most prudent way of resolving the issue.

Thus, we dispose these cases by (i) setting aside the impugned judgments of the learned Single Judges, (ii) quashing the impugned orders and demand notices in the Writ Petitions and (iii) declaring that the liability of the appellant towards turnover tax interest and penalty for the assessment years 1998-99 to 2004-05 and 2015-16 shall be seen as finally settled in terms of the Amnesty Scheme, 2020 through the payment of Rs.3,19,32,523/- referred to above. We also make it clear that the appellant shall be entitled to a return/refund of the amount of Rs.7,98,253/- paid pursuant to the interim order passed in W.P.(C).No.1291 of 2021. The said amount shall be paid to the appellant within a month from the date of receipt of a copy of this judgment.