2017 (3) TMI 456 - HC - Central Excise

Benefit of Kar Vivad Samadhan Scheme, 1998 - Revenue contends that the tax arrears in question are not in dispute as on the date of filing of the declaration - whether the benefit of the Scheme can be extended to the declarant or not? - Held that - The alleged tax arrears have not attained finality inasmuch as the petitioners have disputed the same by filing an appeal before the Commissioner (Appeals). Importantly, the Department admitted that a sum of ₹ 55 lakhs recoverable as tax arrears prior to 1.4.1998 has been disputed. The letter dated 8.2.1999 also disputes this position. Hence, there is an application fully maintainable and covered by the Scheme - petition allowed.

Summary

Issues:
1. Eligibility of petitioners to avail Kar Vivad Samadhan Scheme, 1998.
2. Dispute regarding tax arrears prior to 1.4.1998.
3. Interpretation of show cause notice under indirect tax enactment.
4. Applicability of two Judgments of the Hon'ble Supreme Court.
5. Legality of impugned letter dated 8.2.1999.
6. Decision to quash and set aside the impugned letter.
7. Compliance with interim order for depositing 50% of the amount.

Eligibility of petitioners to avail Kar Vivad Samadhan Scheme, 1998:
The petitioners sought a writ to challenge an order dated 8.2.1999, claiming they were eligible to settle a tax dispute under the Kar Vivad Samadhan Scheme, 1998. The dispute arose as the tax arrears were linked to a Supreme Court judgment. The Department argued that since the Supreme Court ruled in their favor, the arrears were not in dispute and hence not eligible for the Scheme. The petitioners contended that the tax arrears were disputed and maintainable under the Scheme, supported by judgments of the Hon'ble Supreme Court.

Dispute regarding tax arrears prior to 1.4.1998:
The petitioners disputed the tax arrears claimed by the Department prior to 1.4.1998, arguing that the amount was contested and not final. They highlighted that an appeal was pending against the order and that the Department's position was unsustainable in law. The petitioners maintained that they were not liable to pay the disputed duty, as they believed the claim was time-barred.

Interpretation of show cause notice under indirect tax enactment:
The Hon'ble Supreme Court judgments emphasized that a show cause notice or demand under an indirect tax enactment was crucial for the Scheme's applicability. The Court clarified that once a dispute was raised through a show cause notice, the matter fell within the Scheme's purview. The petitioners argued that a mere demand notice did not equate to a show cause notice, and they were not obligated to comply solely based on the Department's demand.

Applicability of two Judgments of the Hon'ble Supreme Court:
The petitioners relied on two judgments of the Hon'ble Supreme Court to support their claim of eligibility under the Scheme. These judgments established that the requirements set by the Finance Act, 1998, for availing the Scheme had been fulfilled. The Court found merit in the petitioners' argument and deemed the Department's stance unsustainable in light of the Supreme Court rulings.

Legality of impugned letter dated 8.2.1999:
The Court concluded that the Department's position, as stated in the impugned letter dated 8.2.1999, was unsustainable in law based on the factual position and the two Supreme Court judgments. Consequently, the Court allowed the writ petition, quashed the impugned letter, and directed the petitioners' declaration to be processed in accordance with the law.

Decision to quash and set aside the impugned letter:
In light of the factual position and the legal precedents, the Court decided to quash and set aside the impugned letter dated 8.2.1999. The Court directed that the petitioners' declaration be further processed and decided in accordance with the law, acknowledging the unsustainable nature of the Department's position.

Compliance with interim order for depositing 50% of the amount:
An interim order was passed requiring the petitioners to deposit 50% of the amount within six weeks. The petitioners complied with this order, and the Court directed the Revenue to collect the deposited amount with accrued interest upon conclusion of the judgment, indicating the fulfillment of the interim order.