1999 (12) TMI 82 - HC - Central Excise

Issues Involved:

1. Rejection of declarations under the Kar Vivad Samadhan Scheme (KVSS), 1998.
2. Classification of the product "laminated sheets" under the Central Excise Tariff.
3. Applicability of the KVSS to cases with pending show cause notices and appeals.
4. Statutory provisions and interpretation of Sections 87(m)(ii), 88(f), and 95(ii)(c) of the Finance (No. 2) Act, 1998.
5. Powers of the Central Government under Section 96 of the Finance (No. 2) Act, 1998.

Detailed Analysis:

1. Rejection of Declarations under KVSS, 1998:

The petitioners contended that the respondent authority's action in rejecting their declarations for availing the benefit of the KVSS, 1998 resulted in a miscarriage of justice. They argued that their cases met the material requirements of the KVSS provisions. The court noted that the Designated Authority committed a serious error in refusing and rejecting the declarations, which was unjust, improper, and unreasonable. Consequently, the impugned orders of rejection were quashed and set aside.

2. Classification of the Product "Laminated Sheets":

The primary dispute was whether the product "laminated sheets" fell under Chapter 48 (paper) or Chapter 39 (plastics) of the Central Excise Tariff. The Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) had upheld that the product was classifiable under Chapter 48. However, the Supreme Court, in the cases of Collector v. M/s. Bakelite Hylam Ltd. and Collector v. M/s. Wood Polymers Ltd., reversed this decision, holding that the product was classifiable under Chapter 39. The court acknowledged this classification by the Supreme Court and noted that the Assistant Commissioner of Central Excise adjudicated the show cause notices accordingly.

3. Applicability of KVSS to Cases with Pending Show Cause Notices and Appeals:

The court examined whether the KVSS could be availed in cases where show cause notices were issued before 31st March 1998, and adjudication was pending or made after this date. The court referred to Trade Notice No. 108/98, which clarified that the KVSS could be availed in such cases if the adjudication was pending on the date of making the declaration or if an appeal was admitted and pending. The court concluded that the petitioners' cases fell within the parameters of the KVSS, entitling them to claim its benefits.

4. Statutory Provisions and Interpretation of Sections 87(m)(ii), 88(f), and 95(ii)(c):

- Section 87(m)(ii): This section defines "tax arrear" in relation to indirect tax enactments, covering amounts determined as due or payable as of 31st March 1998 but remaining unpaid on the date of making the declaration.
- Section 88(f): This section provides for the settlement of tax payable under indirect tax enactments at the rate of fifty percent of the amount due or payable on the date of making the declaration.
- Section 95(ii)(c): This section specifies that the KVSS does not apply if no appeal, reference, writ petition, or revision application is pending on the date of the declaration.

The court emphasized that the petitioners met the criteria under these sections, making them eligible for the KVSS benefits.

5. Powers of the Central Government under Section 96:

Section 96 empowers the Central Government to issue directions for the proper administration of the KVSS. The court noted that the Central Government's instructions, as clarified in Trade Notice No. 108/98, were binding on the authorities. The court reiterated that any direction or instruction issued by the Central Government in relation to the scheme would be binding on the authorities.

Conclusion:

The court concluded that the petitioners were entitled to the benefits of the KVSS, 1998. The Designated Authority's rejection of their declarations was quashed and set aside. The court directed that the time mentioned in Section 90(1) shall begin to run from the date of receipt of the court's order. The petitions were allowed, with each party bearing its own costs. Any amount paid after filing the declaration would be subject to adjustment under Section 90(1). Rule was made absolute accordingly.

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