2009 (4) TMI 94 - HC - Customs

Kar Vivad Samadhan Scheme (KVSS) - Declaration made under KVSS to be accepted or not - As on the date of the show cause notice the amount from the deposit had not been adjusted. Therefore as on the date of the show cause notice neither was the duty ascertained nor was the amount adjusted. In the absence of the amount of deposit having been adjusted the question whether the deposit was voluntary or not is immaterial. Under Section 87(m)(ii) (5) of the Scheme the application could have been rejected. Though the amount of duty was specified in the notice the amount specified had remained unpaid on the date of making a declaration under Section 88 as the show cause notice itself set out as to why the deposit should not be adjusted - Respondent is directed to consider the petitioners declaration dated 28.12.1998 and pass appropriate orders according to law expeditiously.

Summary

Issues:
1. Recovery of Customs duty under proviso to Section 28(1) of the Customs Act, 1962 read with notification No. 204/92.
2. Adjustment of recovered Customs duty from the amount voluntarily deposited by the petitioners.

Analysis:

Issue 1: Recovery of Customs duty
The petitioner, a merchant exporter, was accused of evading customs duty under the DEEC Scheme. The petitioner's director was arrested, and their accounts were frozen. The court directed the petitioners to give a bank guarantee and lifted the account seizure. The petitioners were coerced into depositing large amounts against alleged duty evasion. A show cause notice was issued demanding Rs.21,13,482 as duty. The petitioners argued that the deposits made were under coercion and not voluntary. The respondents claimed the amounts were paid voluntarily during the investigation.

Issue 2: Adjustment of recovered Customs duty
The petitioners applied under the Kar Vivad Samadhan Scheme, declaring liability for only 50% of the tax arrears. The application was rejected by the 2nd respondent, stating no tax arrears existed as the duty demanded in the show cause notice had been paid. The petitioners contended that the deposits made were not actual duty payments as no assessment or demand had been made. They argued that the deposits were coerced and should not be considered as voluntary payments. The respondents maintained that the amounts were paid voluntarily and the rejection of the application under the Scheme was justified.

The Court analyzed the relevant provisions of the Scheme and determined that the amount paid by the petitioners before the issuance of the show cause notice could not be considered as the amount unpaid for determining tax arrears. The Court found that the rejection of the petitioners' application under the Scheme was incorrect as the duty specified in the show cause notice remained unpaid at the time of the declaration. The Court held that the respondent acted without jurisdiction in rejecting the application and directed them to reconsider the petitioners' declaration and refrain from proceeding with the show cause notice. The Court ruled in favor of the petitioners, emphasizing the importance of proper assessment and adjustment of duty amounts before considering them as paid under the Scheme.