Dept. To Reconsider The Application Under Karasamadhana Scheme: Karnataka High Court Quashes Recovery From The Banker

The Karnataka High Court has quashed the recovery from the banker and directed the department to reconsider the application under the Karasamadhana Scheme.

The bench of Justice S. Sunil Dutt Yadav has observed that in the event that the application is rejected, it is needless to state that the petitioner cannot be placed in a position worse off, and the petitioner is entitled to the restoration of his appeal, which would be a logical course of action.

The petitioner has challenged the endorsement dated January 5, 2019, by which the respondent rejected the application of the complainant seeking benefits under the Karasamadhana Scheme. The department observed that the Circular of the Commissioner of Commercial Taxes, Bengaluru, at Circular No. 1/2018-19 dated August 13, 2018, provides that "the assessee shall not be eligible for refund of any amount that may become excess as a result of adjustment of penalty or interest paid by him at the time of filing an appeal".

The department passed the re-assessment order under Section 9(2) of the Central Sales Tax Act, 1956, levying tax and interest of Rs. 57,16,022. A demand notice was raised. The petitioner filed an appeal under Section 62 of the Karnataka Value Added Tax Act, 2003 (KVAT Act) before the Joint Commissioner of Commercial Taxes (Appeals) along with an application for stay and has complied with the requirement prescribed under Section 62(4) of the KVAT Act on depositing 30% of the disputed amount.

During the pendency of the appeal, in light of the introduction of the "CST Karasamadhana Scheme 2018" by the order dated August 4, 2018, which provided for waiver of penalty and interest subject to payment of tax, the petitioner had opted for relief under the Scheme.

For the purpose of availing benefit under the scheme, the scheme requires that the appeal be withdrawn, and accordingly, the appeal filed by the petitioner pending before the tribunal was withdrawn to enable the petitioner to avail benefit. The petitioner submitted that he was eligible for refund if benefits were extended under the scheme, and accordingly, he has pursued the application filed under the scheme.

The petitioner stated that the order of rejection by the Authority is only on the ground that the assessee is not eligible for refund of any amount that may become excess as a result of an adjustment of amount or the penalty or interest paid by him at the time of filing the appeal. The amount paid at the time of filing the appeal was only Rs. 17,14,807. The authority has not looked into the provisions of the scheme in a proper manner, and the order requires it to be set aside.

The department submitted that as of the date of the scheme coming into force, i.e., on August 4, 2018, the entirety of the tax, penalty, and interest had been recovered, so the scheme was inapplicable.

The petitioner submitted that the department cannot go beyond the stand already taken as reflected in the order.

The court quashed the endorsement dated January 5, 2019, by which the respondent rejected the application of the complainant seeking benefits under the Karasamadhana Scheme.

Case Title: M/s. GE T & D India Ltd. Versus State Of Karnataka

Case No.: Writ Petition No. 20035 Of 2019 (T-Res)

Citation: 2023 LiveLaw (Kar) 214

Date: 24/05/2023

Counsel For Petitioner: Joseph Prabhakar

Counsel For Respondent: K. Hemakumar

Click Here To Read The Order