2008 (8) TMI 791 - HC - Central Excise

Whether the Designated Authority under the Kar Vivad Samadhan Scheme, 1998, as contained in the Finance Act, 1998, can include contingent sales tax liability to the State Government, in computing tax arrears in relation to an indirect tax enactment, as defined in Section 87(j) of the Finance Act, 1998? Held that - The Kar Vivad Samadhan Scheme does not cover any sales tax dues payable to the State Government. If the certificate which included contingent tax liability were to be treated as sacrosanct and left untouched, the assessee might contest claims towards sales tax by reference to the certificate and thereby avoid sales tax liabilities not covered by the Kar Vivad Samadhan Scheme. This cannot be permitted. The writ petition thus succeeds. The impugned order is set aside and quashed.The designated authority is directed to amend the certificate by excluding the amount which represents contingent sales tax liability in respect of the goods in question. Such amendment shall be carried out within six weeks from the date of communication of this order.The petitioner shall be entitled to refund of 50% of the sales tax amount. The refundable amount may, however, be treated as advance tax and adjusted against future dues of the petitioner to the Excise Authorities.

Summary

Issues Involved:
1. Inclusion of contingent sales tax liability in computing tax arrears under the Kar Vivad Samadhan Scheme, 1998.
2. Determination of assessable value for excise duty purposes.
3. Finality and conclusiveness of certificates issued under Section 90(1) of the Finance Act, 1998.
4. Refund of excess payment made under the Kar Vivad Samadhan Scheme.

Issue-wise Detailed Analysis:

1. Inclusion of Contingent Sales Tax Liability:
The primary issue was whether the Designated Authority under the Kar Vivad Samadhan Scheme, 1998, could include contingent sales tax liability to the State Government in computing tax arrears under an indirect tax enactment as defined in Section 87(j) of the Finance Act, 1998. The court ruled that the Scheme did not cover any sales tax enactments and thus contingent sales tax liability could not be included in the tax arrears computation. The petitioner had declared tax arrears of Rs. 18,64,40,549/- and the settlement amount was shown at 50% of this amount. However, the Commissioner of Central Excise added a contingent sales tax liability of Rs. 1,46,15,000/-, which was not permissible under the Scheme.

2. Determination of Assessable Value:
A dispute arose regarding the mode of assessment of the assessable value of goods manufactured by the petitioner. The Central Excise authorities contended that the assessable value should be based on the price at which Philips India Ltd. sold the goods to its customers, rather than the price at which the petitioner sold the goods to Philips India Ltd. This contention was upheld by Khastagir, J., and the petitioner was required to furnish a bank guarantee for the disputed duty.

3. Finality and Conclusiveness of Certificates:
The court examined the finality and conclusiveness of certificates issued under Section 90(1) of the Finance Act, 1998. Section 90(3) states that every order determining the sum payable under the Scheme shall be conclusive and not subject to reopening in any other proceeding. However, the court clarified that this does not preclude the amendment of an erroneous order in the same proceedings or judicial review of a patently wrongful claim. The designated authority had no jurisdiction to enforce payment of or settle any sales tax dues, and the inclusion of contingent sales tax liability was without jurisdiction.

4. Refund of Excess Payment:
The petitioner protested against the inclusion of contingent sales tax liability but made the payment to avoid losing the benefit of the Scheme. The court ruled that the petitioner was entitled to a refund of the excess payment made. The impugned order was set aside, and the designated authority was directed to amend the certificate by excluding the amount representing contingent sales tax liability. The refundable amount could be treated as advance tax and adjusted against future dues of the petitioner to the Excise Authorities.

Conclusion:
The court concluded that the inclusion of contingent sales tax liability in the tax arrears computation under the Kar Vivad Samadhan Scheme was not permissible. The designated authority was directed to amend the certificate accordingly, and the petitioner was entitled to a refund of the excess amount paid. The judgment emphasized the importance of adhering to the provisions of the Scheme and ensuring that the settlement of disputes was conducted in accordance with the law.