JUDGMENT P. R. Ramachandra Menon :- The issue involved in this case is, whether the payments effected by the petitioner towards the arrears of tax liability, after the declaration of the proposed "Amnesty Scheme" with effect from April 1, 2010 in the "Budget Speech" 2010, with specific request to have it set off against the principal tax and surcharge, could have been unilaterally appropriated by the departmental authorities against "interest", placing reliance on section 55C of the Kerala General Sales Tax Act, 1963, contending that, as on the date of payment, the scheme had not actually come into force. The petitioner - firm was in arrears of sales tax with regard to the year 1997-98 and the first respondent initiated recovery steps for realization of the dues, coming to a total of Rs. 3,82,015 including interest. In the meanwhile, the proposal for settlement of tax dues was announced in the Kerala budget speech, 2010, letting it known to all concerned that, similar benefit as announced in the 2008 Scheme, would be implemented with effect from April 1, 2010 till June 30, 2010, enabling the defaulters to clear the liability by availing of the benefit of the scheme. True copy of the relevant portion of the Budget Speech as above is produced as exhibit P1. Immediately on coming to know about the declaration made by the Finance Minister in the budget speech, the petitioner volunteered to avail of the benefit of the said scheme, which in fact, was to be applied for and obtained after notification of the scheme with effect from April 1, 2010. A specific request was made before the second respondent, as borne by exhibit P2 dated March 20, 2010 (with reference to the contents of paragraph "205" of the budget speech, whereby the scheme was announced), requesting to keep the revenue recovery proceedings in abeyance till proper application is filed under the scheme and orders are passed by the assessing authority thereon. In token of willingness of the petitioner to pay the arrears under the Amnesty Scheme, a sum of Rs. 75,000 was also caused to be paid, which was requested to be adjusted against the sales tax and surcharge dues. In token of willingness of the petitioner to pay the arrears under the Amnesty Scheme, a sum of Rs. 75,000 was also caused to be paid, which was requested to be adjusted against the sales tax and surcharge dues. In the meanwhile, the scheme was declared and the petitioner filed necessary application for availing of the benefit under the scheme and this was sanctioned as per exhibit P3 dated May 28, 2010, whereby the petitioner was required to satisfy a total sum of Rs. 1,64,291 to settle the liability once and for all. On receipt of exhibit P3, the petitioner submitted a letter dated June 1, 2010, referring to the payment of Rs. 75,000 already made by the petitioner along with exhibit P2 and to have it set off/given credit to, while fixing the liability under the scheme. This was replied by the first respondent vide exhibit P4 dated June 2, 2010, stating that, as on the date of remittance of Rs. 75,000 on March 20, 2010, the Amnesty Scheme was not brought into force and that the application form for availing of the benefit under the scheme, having been filed by the petitioner only on May 9, 2010, the request could not be entertained and that the amount paid was adjusted towards "interest" under section 55C of the KGST Act, which course is subjected to challenge in this writ petition. The respondents have filed a counter-affidavit seeking to justify the stand reflected in exhibit P4. It is stated that the entire dues of the petitioner were calculated as Rs. 3,62,251 including tax, surcharge and interest and it was notified for revenue recovery on January 14, 2010. The "Amnesty Scheme" introduced by section 23B of the KGST Act by the Kerala Finance Act, 2008 was not in force at that time. However, it is conceded that, the Finance Minister had announced the reintroduction of the "Amnesty Scheme" with effect from April 1, 2010 to June 30, 2010 in the Budget Speech and that the Kerala Finance Bill, 2010 also contained the provisions, by which the scheme was brought into force with effect from April 1, 2010. However, it is conceded that, the Finance Minister had announced the reintroduction of the "Amnesty Scheme" with effect from April 1, 2010 to June 30, 2010 in the Budget Speech and that the Kerala Finance Bill, 2010 also contained the provisions, by which the scheme was brought into force with effect from April 1, 2010. Since, filing of application was necessary and the eligibility to get the benefit under the scheme was to be decided, payment effected prior to commencement of the said scheme was not liable to be set off, as sought for by the petitioner and that the same could be credited only against "interest" as provided under section 55C of the KGST Act. It is also contended that, the appropriation against interest is "automatic", on effecting the payments and further that the payment effected by the petitioner was before the second respondent/enforcing authority, while the application for considering the eligibility of the "Amnesty Scheme" was to be made before the first respondent/assessing authority. Two decisions are also brought to the notice of this court in support of the above contentions; the first one by a learned single judge of this court reported in ABY Engineers and Consultants (P) Ltd., Ernakulam v. Assistant Commissioner [2011] 38 VST 539 (Ker); [2009] 2 KLJ 228 and the other one by a Division Bench of this court in Writ Appeal No. (298 of 2010) (Assistant Commissioner (Assessment), Special Circle I, Ernakulam v. Martin and Harris Pvt. Ltd. [2011] 42 VST 496 (Ker)). With regard to the scope and applicability of the above verdicts, it is to be noted that, the rights and liberties of the Department to appropriate the payment is clearly dealt with under section 55C of the KGST Act, which is extracted below : "55C. Appropriation of payment. - (1) Where any tax or any other amount due or demanded under the Act is paid by any dealer or other person, the payments so made shall be appropriated first towards interest accrued on such tax or other amount under sub-section (3) of section 23 on such date of payment and the balance available shall be appropriated towards principal outstanding, notwithstanding any request to the contrary by the dealer or any person making such payments. (2) Notwithstanding anything contained in sub-section (1) where any dealer or other person has paid any amount towards tax or any other amount and such payment has been set off towards the principal amount prior to the coming into effect of this section, no recomputation of such payment shall be made under sub-section (1)." By virtue of sub-section (1) of section 55C, it is open for the Department to appropriate any payment first against "interest", notwithstanding the request made by the party concerned, specifying any contrary intention. By virtue of sub-section (2), some sort of concession is provided, making it clear that, if the payments effected already had been set off towards the principal amount, prior to the coming into force of the above section, no recomputation of the said amount was to be made under sub-section (1). The above provision came into effect from January 1, 2000 and by virtue of the sub-section (2), the intention of the Legislature was very much to put a quietus to the matter in respect of the instances earlier, when the manner of appropriation was rather in fluid state and the amounts satisfied by the persons concerned were actually set off against the "tax", before appropriating the same against "interest". The question considered by the Single Bench in ABY Engineers and Consultants (P) Ltd., Ernakulam v. Assistant Commissioner [2011] 38 VST 539 (Ker); [2009] 2 KLJ 228 was mainly with regard to two aspects, as observed in paragraph 4 of the verdict. The first contention was that, since the payments were made in relation to the years prior to the insertion of section 55C of the KGST Act, the payments ought to have been adjusted against the "tax" and not towards "interest". The said proposition was mooted mainly on two grounds; the first one placing reliance on sections 59 and 60 of the Indian Contract Act and the second one, on the ground that the assessment and the liability in respect of the period prior to introduction of section 55C ought to have been worked out and the payment ought to have been set off towards the "principal", till December 31, 1999 and set off against "interest" could only be in respect of the period after January 1, 2000. After discussing the facts, circumstances and the relevant provisions of law, it was held that the circumstances contemplated under sections 59 and 60 of the Indian Contract Act were entirely different, which pre-supposes existence of several distinct debts and the debtor effects the payment with either express intimation or the circumstances showing that the payment is in discharge of some particular debt. In the light of the law declared by the apex court in Industrial Credit and Development Syndicate v. Smt. Smithaben H. Patel AIR 1999 SC 1036 , holding that it cannot be said that principal and interest due on a single debt or decree passed on such debt carrying subsequent interest are to be treated as several and distinct debts. The above contention was fairly stated as not pressed by the learned counsel, which accordingly stands recorded in paragraph 5 of the said judgment. With regard to the other contentions, it was observed that, all payments were effected "after January 1, 2000" and this being the position, the mandate under sub-section (1) of section 55C has already taken in breath and hence the contentions raised from the part of the petitioner therein did not merit any consideration. Referring to the contents of sub-section (2), it was observed that, by virtue of necessary implication, even prior to section 55C, if any payment was made, it was certainly open to the officer to have it adjusted against "interest" and as such, the petitioner may not have the right to contend that, even prior to section 55C there was legal right to have the amount appropriated against the head, on a mere request to set it off against the tax. Accordingly, interference was declined and the writ petition was dismissed, as borne by the verdict ABY Engineers and Consultants (P) Ltd., Ernakulam v. Assistant Commissioner reported in [2011] 38 VST 539 (Ker); [2009] 2 KLJ 228. This court finds it very difficult to accept the version of the learned Special Government Pleader that, the issue in the instant case is covered by the decision cited supra in ABY Engineers and Consultants (P) Ltd., Ernakulam v. Assistant Commissioner reported in [2011] 38 VST 539 (Ker); [2009] 2 KLJ 228, as it stands entirely on a different footing and not applicable to the case in hand. The learned counsel for the petitioner however places reliance on the observation made by the learned judge in "paragraph 8" of the above verdict, referring to the scheme and scope under sub-section (2), holding that it has two parts, the first one, payments made by the dealer and the second one, setting off the amounts towards the principal amount, contending that, mere payment was not enough and that the provision further requires actual "appropriation" by an officer towards the principal amount. In the instant case, the learned counsel submits that, even though the payment was effected on March 20, 2010 as borne by exhibit P2, the actual appropriation was made only on passing exhibit P3 order dated May 28, 2010, on which day the scheme was very much in existence. With regard to the judgment rendered by the Division Bench in W.A. 298 of 2010 (Assistant Commissioner (Assistant) v. Martin and Harris Pvt. Ltd. [2011] 42 VST 496 (Ker)), the benefit granted in terms of sub-section (4) of section 23B of the KGST Act was withdrawn, for violating the conditions of the "Amnesty Scheme" as stipulated under sub-clause/sub-section 5. Still, the learned single judge ([2011] 42 VST 492 (Ker)) allowed the claim of the assessee, referring to the pendency of the application for rectification of the assessment, when the application for Amnesty Scheme was filed, observing that, the "time requirement" as specified under the scheme could not have been widened under any circumstances and further that, if the assessee succeeded in furtherance to the appeal, revision or rectification, the benefit could be claimed by way of refund of the tax paid under the "Amnesty Scheme" as provided under sub-section (7) of section 23B. Observing that, the scheme, statutory prescription and the time-frame were to be strictly followed, which could not have been extended by the learned single judge, interference was made, allowing the writ appeal filed by the Department in part, to the above extent. This decision is also not applicable to the case in hand, as the situation pointed out is not with regard to the extension of time-limit. This decision is also not applicable to the case in hand, as the situation pointed out is not with regard to the extension of time-limit. Even if it is assumed for the sake of a moment, that the petitioner has not complied with the demand, as stipulated in exhibit P3 order granting the benefit of the scheme, the fact remains that the scheme itself, which was originally notified with effect from April 1, 2010 till June 30, 2010 has now been extended till September 30, 2010. As such, the said decision is not liable to be considered as a binding precedent to the issue in hand. With regard to the merits involved in the present case, it is an admitted fact that the "budget proposal" was made as to the introduction of the Amnesty Scheme with effect from April 1, 2010 till June 30, 2010 and it was after the said budget speech, the petitioner volunteered to effect the payment of Rs. 75,000 as a token of bona fides to have the liability settled, simultaneously seeking to keep the revenue recovery proceedings in abeyance till the above scheme was notified and the application to be preferred by the petitioner was considered accordingly, as requested in exhibit P2 dated March 20, 2010. Obviously, the declaration of the scheme and the benefit sought to be extended thereunder, enabling the defaulters to opt for the same, to clear the liability, availing of the benefit of waiver of a substantial portion of the liability was with an intent to generate revenue in a better and effective manner, rather as a measure of "give and take" policy. The success of the scheme notified earlier, with regard to the revenue collection, the factual circumstance that the several persons could not make use of the opportunity because of the time-limit and other adverse circumstances as given in exhibit P1 budget speech, etc., weighed much and the "Legislature" thought it fit to renotify the scheme, providing necessary provisions in the Finance Bill, 2010. Declaration of such scheme is purely a matter of "policy" of the Government. Once such a "policy" was declared and proclaimed to be given effect to from April 1, 2010, the first question that comes up for consideration is whether there could have been any further coercive proceedings under the Kerala Revenue Recovery Act from the part of the respondents, particularly the second respondent. Once such a "policy" was declared and proclaimed to be given effect to from April 1, 2010, the first question that comes up for consideration is whether there could have been any further coercive proceedings under the Kerala Revenue Recovery Act from the part of the respondents, particularly the second respondent. The petitioner was very much at liberty to wait till April 1, 2010, filing necessary application to have his matter considered as to the eligibility and to have satisfied the liability without effecting any "pre-deposit" as done by him in the instant case. As put it clear in exhibit P2, it was only as a "token of willingness/bona fides" to avail of the benefit of the scheme announced vide exhibit P1, that the petitioner effected payment of Rs. 75,000 specifically seeking the same to be given credit to, in respect of the amount payable under the scheme and not otherwise. To put it more clear, the benefit contemplated and sought to be given by the Government by virtue of the Amnesty Scheme as a matter of policy, specifying the manner of appropriation, rather stands on a different/higher pedestal, notwithstanding the manner of appropriation as provided under section 55C. The stand of the respondents as given in the opening line of paragraph 4 which reads as "the contention that the petitioner had paid the said amount in pursuance to exhibit P1 proposal cannot be countenanced since by the proposal itself it was abundantly clear that the same will be effective only from April 1, 2010" appears to be rather strange. This gives a message that the petitioner ought to have waited without contributing anything to the revenue, even as a measure of bona fides, till the notification of the scheme on April 1, 2010 or could have satisfied the liability availing of the benefit on the eve of the closure of the scheme, i.e., June 30, 2010. This gives a message that the petitioner ought to have waited without contributing anything to the revenue, even as a measure of bona fides, till the notification of the scheme on April 1, 2010 or could have satisfied the liability availing of the benefit on the eve of the closure of the scheme, i.e., June 30, 2010. If the version of the respondents is to be accepted, it will lead to a very anomalous situation as follows : Take the case of a person who, on coming to know about exhibit P1 budget speech and the scheme proposed and announced to be effective from April 1, 2010, voluntarily comes forward expressing that he is intending to avail of the benefit of the scheme and effects a portion of the liability seeking to have it set off against the actual amount payable in terms of the scheme. There may be another case, where a person remaining silent without effecting any payments, files an application after declaration of the scheme and on getting sanction satisfies the liability on the last date of the scheme, whereby he could generate funds in the course of his business retaining the entire amount at his hands. Though the former, like the petitioner herein, on announcing the scheme effected payment of a portion of the liability proving the bona fides, thus helping/contributing to the revenue and helps to stabilize the economy of the State, the latter chose to be a defaulter till the last date of the scheme and effected the payment only on eve of the closure of the scheme. If the stand of the respondents is to be accepted, it may have to be said that the person who effects a portion of the liability after announcement of the scheme is being penalized for having effected such payment. This court does not think that such an anomalous situation is contemplated, intended or sought to be implemented by State/Legislature. If the stand of the respondents is to be accepted, it may have to be said that the person who effects a portion of the liability after announcement of the scheme is being penalized for having effected such payment. This court does not think that such an anomalous situation is contemplated, intended or sought to be implemented by State/Legislature. More so since, once the scheme is announced and specified to be commenced from the first day of the relevant financial year, for a specified period, it may not be proper for the State/Department to augment the revenue collection by resorting to coercive steps before the defaulters get an opportunity to apply for and obtain the benefit of the scheme, which otherwise can only defeat or frustrate the scheme itself and in turn, the "policy" of the Government. In the above circumstances, this court finds that the course pursued by the respondents; issuing exhibit P4 rejecting exhibit P2 preferred by the petitioner seeking the amount deposited as a token of willingness to clear the liability availing of the benefit of the scheme proposed in exhibit P1 and consciously appropriating the said amount against "interest" portion under the cover of section 55C, is not correct or sustainable. Accordingly, exhibit P4 is set aside. The respondents are directed to pass fresh orders quantifying the liability of the petitioner, in the application preferred for extending the benefit under the "Amnesty Scheme", giving credit to a sum of Rs. 75,000 paid by him vide exhibit P2, as payment towards a portion of the liability under the scheme, and effect appropriation, in tune with the terms of the scheme. This shall be finalized and the position shall be let known to the petitioner, as expeditiously as possible, at any rate, within one month, from the date of receipt of a copy of this judgment. It will be open for the petitioner to clear the liability to be re-fixed as above on or before the date of expiry of the scheme, which is now stated as extended till September 30, 2010. The writ petition is allowed. No cost.