2005 (6) TMI 45 - HC - Central Excise

Entitlement to any relief in exercise of(C) writ jurisdiction - Manufacturer of Processed Fabrics - Kar Vivad Samadhan Scheme (KVS Scheme) - Pendency of dispute - Refund - Unjust enrichment - Whether the designated authority, respondent No. 2 herein;(A) was justified in not considering the declaration filed by the petitioner under KVS Scheme in respect of tax arrears determined in RT-12 based on Delhi High Court decision? - declaration filed by the petitioner falls under the exclusion of Section 95(ii)(b) of the Finance (No. 2) Act, 1998. HELD THAT - In the instant case, admittedly, no writ petition was pending on the date when the declaration was made or filed by the petitioner. No demand notice requiring the petitioner to pay disputed tax arrears was pending. What was holding the field, on the date of filing of declaration, was the endorsement on RT-12 assessment; which by no means can be said to be a notice of demand under any indirect tax enactment. That endorsement, though prime facie; at the first sight gives a picture of notice of demand but on deeper scrutiny we find that it was not a notice of demand since no demand was pending against the petitioner on that date. In any event a demand was raised in the light of the concluded decision of the Delhi High Court. The bank guarantees did not remain actionable claim. It culminated in a decree of the Court in the nature of mandamus; wherein encashment of bank guarantees was ordered with further order to pay interest thereon @ 17.5% p.a. It becomes a property of the Revenue. In order to make the record straight and for the purposes of accounting, it was necessary to pass final assessment order based on the concluded decision of the Delhi High Court so as to adjust the amount of bank guarantees against the duty amount. So just to show execution of the order in the nature of writ or decree passed by the Delhi High Court and to report compliance thereof, or in other words, to report compliance of the writ issued by the Delhi High Court, the RT-12 assessments with necessary endorsements thereon were necessary. Those orders were nothing but were in the nature of execution of the order of the Delhi High Court; whereby the dispute between the parties for all time to come; came to be settled; as such no dispute warranting settlement of any dispute under KVS Scheme was pending. No dispute was pending or involved on the factual matrix of this case, as such, in the facts of this case, KVS Scheme or benefits thereof were not available to the petitioner. The submissions made in this behalf by Mrs. Bharucha appearing far the Revenue deserves acceptance in toto. Thus, we confirm that the designated authority was perfectly justified in not considering rather rejecting the declaration filed by the petitioner under the KVS Scheme. In the instant case, the judgment and order of the Delhi High Court passed in Writ Petition has become final and conclusive with the dismissal of the petition followed by dismissal of S.L.P.; wherein the bank guarantees furnished by the assessee/petitioner culminated into enforceable decree in the nature of writ of mandamus, as such, in our view, no dispute with respect to the tax arrears was pending. In the instant case, what was pending was only a formal assessment order to be passed merely on the basis of the returns filed by the petitioner; which was nothing but a formality to be completed to make the record complete. In such event, if any formal demand notice in execution of the final order is issued just to record satisfaction of the amount already recovered, or secured by way of bank guarantees; can such demand notice be said to be a notice of demand raising dispute as contemplated u/s 95(ii)(b) of the KVS Scheme. (In our view, such notice of demand issued by making endorsement on RT-12 assessment may be a notice of demand as ordinarily understood but not as contemplated under the KVS Scheme. Therefore, the impugned order is perfectly legal and valid. The pendency of the writ petition contemplated under Section 95(ii)(c) is a writ petition arising out of an order passed in appeal and/or reference and/or revision passed under the provisions of the indirect tax enactment. The civil suit has been specifically excluded from the purview of the provisions of KVS Scheme. Consequently, it would be reasonable to infer that the writ petition arising from the civil suit has also been excluded and, therefore, no proceedings as contemplated under clause (c) of Section 95(ii)(c) were pending in the instance case on the date of declaration made by the petitioner under the KVS Scheme. It is needless to mention that where a decision is arrived at for a wrong reason, but the same decision must as a matter of law has been arrived at if the right reason had been relied on, the decision will not be quashed. In the instant case the impugned order can be sustained jointly and severally on the basis of both grounds i.e. the exclusion clauses incorporated in clauses (b) and (c) of Section 95(ii). Even otherwise, if no writ petition was pending, then there was no question of any demand being pending for adjudication. Therefore, the view taken by respondent No. 3 can very well be sustained on the basis of either of the above clauses. Issue B accordingly, stands answered. It is clear that the doctrine of 'unjust enrichment' is based on equity and has been accepted and applied in several cases. In our opinion, therefore, irrespective of applicability of Section 11B of the Act, the doctrine can be invoked to deny the benefit to which a person is not otherwise entitled. Section 11B of the Act or similar provision merely gives legislative recognition to this doctrine. That, however, does not mean that in absence of statutory provision, a person can claim or retain undue benefit. Before claiming a relief of refund, it is necessary for the petitioner/appellant to show that he has paid the amount for which relief is sought, he has not passed on the burden on the consumers and if such relief is not granted, he would suffer loss. In the instant case it is not in dispute that the petitioner has recovered the amount of duty from its customers. In view of this undisputed fact, it is an academic debate as to whether or not the show cause notice or demand notice was issued to the petitioner. Irrespective of the applicability of the KVS Scheme no writ jurisdiction can be invoked in favour of the petitioner. The power under Article 226 has to be exercised to effectuate the regime of law and not to abrogate it. While exercising writ jurisdiction this Court cannot ignore that exercise of power under Article 226 will result in enriching the petitioner and allowing him to retain the amount of duty which it had already collected from its customers. In this view of the matter, we decline to issue writ in favour of the petitioner. Thus, this petition deserves to be dismissed. In the result, petition is dismissed with no order as to costs.

Summary

Issues Involved:
1. Whether the designated authority was justified in not considering the declaration filed by the petitioner under the KVS Scheme.
2. Whether the designated authority was justified in holding that the declaration filed by the petitioner falls under the exclusion of Section 95(ii)(b) of the Finance (No. 2) Act, 1998.
3. Whether the petitioner is entitled to any relief in the exercise of writ jurisdiction of this Court.

Detailed Analysis:

Issue 1: Justification for Not Considering the Declaration under KVS Scheme
The petitioner filed a writ petition in the Delhi High Court challenging the levy of additional duty of excise and seeking to quash certain notifications. The Delhi High Court dismissed the petition and directed the recovery of the disputed amount secured by bank guarantees. The petitioner then filed a declaration under the Kar Vivad Samadhan Scheme (KVS Scheme) to settle the tax arrears. The designated authority rejected the declaration, stating that no show cause notice or demand notice was issued to the petitioner, a requirement under the KVS Scheme.

The court found that the RT-12 assessments, which the petitioner claimed as notices of demand, were merely endorsements implementing the Delhi High Court's final order. These endorsements did not constitute a demand notice under the KVS Scheme. The court concluded that no tax arrears were pending against the petitioner as the disputed amounts were secured by bank guarantees and the assessments were based on values declared by the petitioner. Thus, the designated authority was justified in rejecting the declaration.

Issue 2: Exclusion under Section 95(ii)(b) of the Finance (No. 2) Act, 1998
Section 95(ii)(b) of the Finance Act excludes cases where no show cause notice or demand notice has been issued. The court examined the nature of the demand notice envisaged under the KVS Scheme and concluded that it must relate to a disputed amount pending before a competent authority. Since the RT-12 assessments were final and based on the petitioner's own declarations, they did not constitute a disputed demand. The court emphasized that the KVS Scheme aims to resolve pending disputes, not to reopen settled matters. Consequently, the court upheld the designated authority's decision that the petitioner's case fell under the exclusion clause of Section 95(ii)(b).

Issue 3: Entitlement to Relief in Exercise of Writ Jurisdiction
The court considered whether to exercise its writ jurisdiction to grant relief to the petitioner. It noted that the petitioner had already recovered the disputed duty from its customers, and allowing the petition would result in unjust enrichment. The court referenced the doctrine of unjust enrichment, which prevents a party from retaining undue benefits. The court also highlighted that the petitioner had engaged in extensive litigation, causing significant revenue loss to the government. Given these factors, the court declined to exercise its writ jurisdiction in favor of the petitioner and dismissed the petition.

Conclusion
The court dismissed the petition, holding that the designated authority was justified in rejecting the declaration under the KVS Scheme because no valid notice of demand was issued, and the petitioner was not entitled to relief under the writ jurisdiction due to the principles of unjust enrichment. The petition was dismissed with no order as to costs.