2002 (9) TMI 101 - SUPREME COURT

Benefit of the Kar Vivad Samadhan Scheme - Whether the directors/officers are entitled to a refund?

Held that:- A reading of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order shows that where a declaration had been made in respect of a tax arrear and where in respect of the same matter a show-cause notice had also been issued to any other person, then the settlement in favour of the declarant has to be deemed to be full and final in respect of other persons on whom show-cause notices had been issued. It is settled law that when an appeal is pending there is no finality to the proceedings. The proceedings are then deemed to be continuing. Undoubtedly, at one place the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order seems to state that the show-cause notice should be pending adjudication. However, the same order also talks of the show-cause notice being in respect of the same matter on which the show-cause notice has been issued to the main declarant. Then the order provides that a settlement in favour of the declarant will be deemed to be full and final in respect of other persons also. This order has to be read as a whole.

Thus, even though the show-cause notice may have been adjudicated upon and an appeal is pending a party could still take the benefit of the Kar Vivad Samadhan Scheme and file a declaration. The object of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order is to give benefit of a settlement by the main party (i.e., the company in this case) to all other co-noticees.

Admittedly, in this case, all the officers have paid the amounts in pursuance of the declaration made by them under section 88. Even if they have paid the amounts under protest they are not entitled to refund. The directors/officers in Kerala would also not have been entitled to refund by virtue of section 93. However, section 93 does not seem to have been pointed out to the High Court of Kerala. As, pursuant to the order of the High Court of Kerala, they have received refund we do not direct that they should repay the amounts to the Revenue.