ACME Cleantech Solutions Private Limited Vs Deputy Commissioner (ST) STU-1 (Telangana High Court)
No new tax demand by issuing show cause notices in case demand was settled under State’s One Time Settlement Scheme
Conclusion: Where the respondents had entered into One Time Settlement despite knowledge of objections of Audit Officer letter, it will be presumed that they had considered the objection and did not find worth in it for exercising powers under Section 32 of the VAT Act or otherwise. Therefore, after having entered into One Time Settlement, it was not open for the respondents to issue the impugned show cause notice for demanding tax and penalty.
Held: An Assessment Order was issued by the Assistant Commissioner (CT), Audit, Begumpet Division, Hyderabad to assessee company confirming the demand of Rs.3,25,87,464 for 2015-16, 2016-17 and 2017-18 (up to June 2017) and demanding penalty of 25% on the tax demand, which amounted to Rs.81,46,866. Assessee-company feeling aggrieved by the aforesaid orders preferred appeals before the Appellate Deputy Commissioner challenging the AOs issued demanding Value Added Tax (VAT) and penalty and pre-deposited an amount equivalent to 12.5% of the tax and penalty, which was increased to 50% of the demand of tax and penalty. One Time Settlement (OTS) schemes were launched by the Telangana Government to enable the tax payers to settle the disputed tax amounts under the Telangana Value Added Tax Act (VAT Act) and the Central Sales Tax Act (CST Act). Deputy Commissioner sent an intimation to assessee-company under the OTS scheme for paying the tax demand of Rs.3,25,87,464 and tax balance of Rs.1,22,20,164. This intimation was in relation to the earlier to AOs. Assessee deposited the desired amount vide challan No.6201664297 and consequently, a letter of acceptance issued by Assistant Commissioner, Begumpet Division, Hyderabad acknowledged the receipt of arrears and recorded settlement. Subsequently, a show cause notice (SCN) were issued to assessee proposing raising the demand to Rs. 7,58,43,382. Assessee raised objections stating that after entering into the OTS scheme, a show cause notice could not be issued. Thereafter, a revised show cause notice was issued revising the tax proposed to the tune of Rs.2,46,53,240 in lieu of previous determination of Rs.7,58,43,382. It was held that very purpose of bringing such OTS scheme was to encourage the tax payers to settle their disputes. The entire exercise of determination of tax/penalty amount was in the hands of the respondents and for that purpose, a committee consisting of senior officers was constituted. After having undertaken the entire exercise of determination of amount, a proposal was given by the respondents to assessee which was duly accepted. The most important thing was that between the date of acceptance and actual recording of OTS, the Audit Officer informed the respondents about the alleged short levy of tax/penalty. Despite having full knowledge about it, the respondent entered into OTS. There was no allegation against assessee in the show cause notice that assessee had committed any fraud. Thus, if the respondents had entered into OTS despite knowledge of Audit Officer letter with eyes opened, it will be presumed that they had considered the objection and did not find worth in it for exercising powers under Section 32 of the VAT Act or otherwise. If we permit the respondents to undertake aforesaid exercise of issuance of show cause notices even after entering into settlement, the very purpose of such scheme would vanish in thin air. This practice will certainly discourage the tax payers to enter into settlement. The settlement should draw the curtains for all times to come otherwise the very meaning of OTS would pale into insignificance.
