2005 (3) TMI 136 - HC - Central Excise

Summary

Issues Involved:
1. Validity of the orders passed by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT).
2. Applicability of the Kar Vivad Samadhan Scheme (KVSS) to co-noticees.
3. Whether penalties on co-noticees should be waived when the main noticee has settled under KVSS.

Detailed Analysis:

Issue 1: Validity of the orders passed by CEGAT
The petitioner sought the quashing of the orders dated 24-12-1999 and 11-11-2000 passed by CEGAT. The initial adjudicating authority had imposed various penalties and duties on M/s. India Casting Company and associated entities and individuals. The Tribunal, in its order dated 24-12-1999, upheld the penalties on M/s. Wilson Diesel (P) Ltd. and M/s. Generators & Alternators India, while setting aside penalties on individual partners due to lack of evidence showing their conscious knowledge of the goods being liable for confiscation. The Tribunal dismissed the rectification applications on 3rd November 2000, stating that the issue regarding the KVSS was not raised during the arguments and thus could not be considered post facto.

Issue 2: Applicability of the Kar Vivad Samadhan Scheme (KVSS) to co-noticees
The petitioners argued that under the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998, penalties on co-noticees should also be waived if the main noticee has settled under the scheme. The Court referred to Section 97(1) of the Scheme and the Trade Notice dated 9-12-1998, which clarified that no civil proceedings for imposition of fine or penalty shall be proceeded with against co-noticees if the main noticee has settled under the scheme.

Issue 3: Whether penalties on co-noticees should be waived when the main noticee has settled under KVSS
The Court noted that the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998, and its interpretation by the Kerala High Court in the case of Sri Tom K. Thomas and the Supreme Court in Union of India v. Onkar S. Kanwar, supported the view that settlements by the main declarant should be deemed full and final for co-noticees as well. The Supreme Court emphasized that the scheme's objective was to resolve disputes and reduce litigation, and thus, the benefits should extend to co-noticees even if the show-cause notice was pending adjudication.

Conclusion:
The Court found that the Tribunal had erred in not considering the statutory provision of the Kar Vivad Samadhan (Removal of Difficulties) Order, 1998, merely because it was not argued during the original proceedings. The Court held that non-consideration of such an order was a patent mistake that should have been rectified. Consequently, the writ petitions were allowed, and the Tribunal's orders were set aside. It was held that the petitioners, being co-noticees, were not liable for penalties since the matter had been settled under the Kar Vivad Samadhan Scheme.