2000 (1) TMI 66 - HC - Central Excise

Issues Involved:
1. Legality and validity of the letter dated 9th March 1999.
2. Legality and validity of the demand cum show cause notice dated 16th March 1999.
3. Eligibility of the petitioner under the Kar Vivad Samadhan Scheme, 1998 (KVSS).
4. Definition and determination of "tax arrears" under Section 87(m) of the Finance (No. 2) Act, 1998.
5. Interpretation of the term "show cause notice" under Section 87(m)(ii)(b) of the Finance Act.

Detailed Analysis:

1. Legality and validity of the letter dated 9th March 1999:
The petitioner challenged the letter dated 9th March 1999 issued by the Assistant Commissioner (T), Central Excise, Delhi, which returned the petitioner's declaration under the KVSS on the grounds that no show cause notice had been issued for the amount mentioned in the declaration. The court found that the letter dated 26th July 1995 directing the petitioner to clear samples by adopting a higher assessable value was tantamount to a show cause notice. Therefore, the letter dated 9th March 1999 was deemed unjustified.

2. Legality and validity of the demand cum show cause notice dated 16th March 1999:
The petitioner also contested the demand cum show cause notice dated 16th March 1999 issued by the Superintendent, Central Excise Range Panipat, for the recovery of the duty amount of Rs. 19,29,642/-. The court quashed this notice, concluding that the differential duty amount was indeed a "tax arrear" under Section 87(m)(ii)(b) of the Finance Act and should be processed under the KVSS.

3. Eligibility of the petitioner under the Kar Vivad Samadhan Scheme, 1998 (KVSS):
The petitioner sought a direction to the Commissioner of Central Excise to consider the declaration under the KVSS. The court emphasized that the KVSS aims to provide a quick and voluntary settlement of tax arrears outstanding as of 31st March 1998. The court concluded that the petitioner met the requisite conditions under the KVSS, and the declaration should not have been returned.

4. Definition and determination of "tax arrears" under Section 87(m) of the Finance (No. 2) Act, 1998:
The court examined the definition of "tax arrears" under Section 87(m) and determined that the differential duty amount of Rs. 19,29,642/- for the period from 1st September 1995 to 31st January 1998, which was finalized on 17th September 1998, constituted "tax arrears" as it remained unpaid on the date of making the declaration under the KVSS.

5. Interpretation of the term "show cause notice" under Section 87(m)(ii)(b) of the Finance Act:
The court interpreted the term "show cause notice" broadly, ruling that the letter dated 26th July 1995 served as a show cause notice for the period in question. This interpretation facilitated the inclusion of the differential duty amount under the KVSS, as it met the requirement of being the subject matter of a show cause notice issued on or before 31st March 1998.

Conclusion:
The court accepted the petition, quashed the impugned letter dated 9th March 1999 and the demand cum show cause notice dated 16th March 1999, and directed the designated authority to process the declaration submitted by the petitioner on 21st January 1999 in accordance with the law. The rule was made absolute, with no order as to costs.

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