By TIOL News Service

HYDERABAD, JULY 09, 2015: THE bone of contention before the Bench is - Whether in absence of any notice to levy penalty or interest prior to settlement of dispute on claim made by assessee, once arrears of tax are settled, it is open to Revenue to pass further order for collection of interest on sum which has already been paid. NO is the answer.

Facts of the case

The assessee is a registered dealer under the AP GST Act, 1957. It is engaged in the business of sale of electrical, electronic and X-Ray equipment and also executes works contracts. It was assessed for tax under the provisions of CST Act for the years 1993-94, 1995-96 and 1996-97, and against such assessment orders, the assessee had filed appeals before the appellate authority. When the appeals filed by assessee were pending consideration before the Appellate Deputy Commissioner, Act 41 of 2001 titled as AP Sales Tax (Settlement of Disputes) Act, 2001 came into force. In view of the pendency of appeals filed by assessee before the Appellate Deputy Commissioner against the assessment orders passed for the assessment years 1993-94, 1995-96 and 1996-97, assessee had applied for settlement before the Deputy Commissioner, who was the competent authority to settle the disputes under the Act. The competent authority accepted the application of assessee for settlement and permitted assessee to pay 50% of the disputed tax under the above scheme, which was paid by assessee and accordingly, Certificate of Settlement was also issued. Consequent upon such issuance of Certificate of Settlement, appeals filed by assessee were treated as withdrawn by the Tribunal.

Held that,

++ in this case, it is not in dispute that in terms of Act 41 of 2001, the claims of petitioner for the assessment years 1993-94, 1995-96 and 1996-97 were settled and dealer was also issued Settlement Certificate under Form-III. It is true that under the scheme of Central Sales Tax Act and Rules made thereunder, it is always open to the authorities to charge interest on the tax due from the dealers, from the date of filing of their returns. The scheme provides for settlement of disputes not only with regard to taxes due but also with regard to interest and penalty. From a perusal of the provisions under Section 6 of Act 41 of 2001, it is clear that so far as the Tax is concerned, waiver of 50% is provided and with regard to interest and penalties, 90% waiver is permissible over the amounts due as on 31.03.2001. During the relevant time, there were no orders passed by the authorities for charging interest payable by the petitioner. Even if any such orders were passed, it was also open to the petitioner to seek waiver in terms of beneficial clause under Section 6(ii) of Act 41 of 2001. From the Settlement Certificate issued also, it is clear that the dispute with regard to payment of tax is settled, and further, in terms of the provision u/s 12 of the Act, once such certificate is issued, such applicant shall be discharged from his liability to make payment of balance amount of such arrears of tax, penalty or interest in dispute. In the absence of any notices or orders levying penalty or interest prior to settlement of dispute on the claim made by the petitioner, once the arrears of tax itself are settled, it is not open to the respondent to pass any further orders for collection of interest on the amount which is already paid. Once Certificate of Settlement is issued under the scheme of the Act, it discharges the liability of petitioner not only for payment of balance amount of tax but also for payment of penalty and interest;

++ having settled the dispute under the Act, it is not open for the respondents to pass subsequent orders or issue demand notices for payment of interest. Further, it is to be noticed that as against the very assessment orders, matters were carried in appeal by the petitioner and but for the settlement scheme notified under Act 41 of 2001, petitioner would not have applied for settlement of dispute without pursuing the appeals before the appellate forum. The Certificate of Settlement issued u/s 12 is final and conclusive and once such certificate is issued in Form-III, the dealer/applicant shall be discharged from his liability of paying balance amount of arrears of tax, penalty or interest, if any. In the absence of any claim against the petitioner, respondent cannot be allowed to charge interest on the amount already settled under the scheme. Further, when the claim of the petitioner is considered as per the scheme notified under Act 41 of 2001, in the absence of any specific provision for collection of interest on the amount settled, it is not open for the respondent to collect the same from the petitioner. For the aforesaid reasons, this writ petition is allowed and the impugned demand notices dated 28.08.2003, issued by the respondent for the assessment years 1993-94, 1995-96 and 1996-97 are hereby quashed. Pending miscellaneous applications, if any, shall stand closed.

(See 2015-TIOL-1560-HC-AP-VAT)