2015 (11) TMI 821 - SC - Customs

Benefit of KVSS - tax arrears - Levy of additional duty of customs - whether the case of the appellant is covered by KVSS and more particularly by Section 87(m)(ii)(b) of the KVSS or it is excluded by the provisions of Section 95(ii)(b) of the said Scheme - Held that - in those cases where show cause notice had been issued or where the notice of demand for payment of indirect tax had been issued, it was permissible for the declarant to claim the benefit of the Scheme. In the absence of such show cause notice or demand for payment, the benefit of the scheme was not available as per clear stipulation in Section 95(ii)(b). - on the basis of interim arrangements not only for payment of differential duty as on that date was made, the appellant also cleared subsequently imported goods in future as well on the said basis. The Customs Authority, acting on the order, not only asserted the additional duty @ 15% on aggregate value of CIF price but even this additional duty on basic and auxiliary custom duty and landing charges was assessed. It is a different matter that for the sake of convenience and in order to comply with the interim directions of the High Court, insofar as the additional duty on basic and auxiliary custom duty and landing charges is concerned, the same was not actually recovered but was secured by means of bank guarantee. In any case, there were clear endorsements in respect of demand of this additional duty made on the Bills of Entries by the Assessing Officer. This, according to us, would clearly constitute a demand which was issued. - case of the appellant was covered by Section 87(m)(ii)(b) and did not get excluded by virtue of Section 95(ii)(b) and, therefore, the appellant was entitled to the benefit of the KVSS. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of additional duty under Customs Tariff Act, 1975.
2. Application of Kar Vivadh Samadhan Scheme (KVSS) to the case.
3. Determination of tax arrears and eligibility for KVSS benefits.

Issue 1: Interpretation of additional duty under Customs Tariff Act, 1975:
The appellant imported Caprolactum for manufacturing Nylon Tyre Cord and declared the value of goods for import duty. Customs Authorities demanded additional duty on CIF price, basic and auxiliary custom duty, and landing charges. The appellant contended that additional duty was only payable on CIF value. The Bombay High Court passed interim orders allowing clearance of goods on payment of additional duty on CIF price with a bank guarantee. The High Court later dismissed the writ petition, and the demand notice for outstanding duty was issued. The Supreme Court held that the endorsements on Bills of Entry constituted a demand notice, making the appellant eligible for KVSS benefits.

Issue 2: Application of Kar Vivadh Samadhan Scheme (KVSS) to the case:
The appellant sought to avail the KVSS introduced by the Government for settling tax arrears with discounts and immunity from prosecution. The appellant filed a declaration under KVSS, stating the demand of differential duty. The Government had already realized a portion of the duty through bank guarantees. The appellant's application under KVSS was rejected by the authorities, citing exclusion clauses. The Supreme Court held that the appellant's case was covered by KVSS, and the rejection was incorrect, allowing the appellant to benefit from the Scheme.

Issue 3: Determination of tax arrears and eligibility for KVSS benefits:
The Designated Authority rejected the appellant's application under KVSS, stating no tax arrears as per the Scheme's provisions. The High Court dismissed the appellant's writ petition challenging this rejection. The Supreme Court analyzed the definitions of tax arrears under KVSS and exclusion clauses. It held that the appellant's case fell under the Scheme's purview and was not excluded, entitling the appellant to KVSS benefits. The Court directed the return of the excess amount deposited by the appellant within two months without interest.

In conclusion, the Supreme Court ruled in favor of the appellant, allowing them to benefit from the Kar Vivadh Samadhan Scheme and receive a refund of the excess amount deposited towards tax arrears.