2008 (10) TMI 248 - HC - Customs

Kar Vivad Samadhan Scheme - interest Held that - It must be mentioned here that the amount of ₹ 1,50,00,000/- was paid by the petitioner prior to show cause notice issued in all the cases covered in writ Petitions. As already pointed out a sum of ₹ 50,00,000/- was paid on 2-8-1994 and ₹ 1,00,00,000/- was paid on 3-8-1994 and the show cause notices were issued only after the said payment i.e. 26-10-1994; 7-11-1994; 7-11-1994; 3-7-1995; 6-4-1995; 3-7-1995; 3-7-1995 and 3-7-1995 respectively covered in W.P. Nos. 4456 to 4463 of 1999. In this context, it is also referable that when the request of the petitioner for refund of the above said sum of ₹ 91,62,370/- was made, it was rejected and at the instance of the petitioner, W.P. No. 1575 of 2002 came to be filed and the same was allowed by the learned single Judge by his order dated 12-3-2003 holding that the petitioner was entitled to the benefit of the KVS scheme. Admittedly, the said order was questioned by the Revenue in W.A. No. 2434 of 2003 apprehending that the petitioner may claim interest on the said amount viz., ₹ 50,00,000/- and ₹ 1,00,00,000/- from the dates when they were made i.e. 2-8-1994 and 3-8-1994 respectively. Admittedly, the finding in respect of the applicability of the Scheme to the petitioner was not questioned by the Revenue in the said writ Appeal. The provisions of Section 87(m)(ii)(b) of the Act could be pressed into service only in respect of the amount remaining unpaid pursuant to the demand made by the revenue and what ever the amount paid prior to the show cause notices or demand notices cannot be considered to be one of the amount paid after assessing the indirect tax arrear to be paid by the assessee viz., the writ petitioner, in these circumstances, we are of the considered view that there is no infirmity in the finding of the learned single Judge and consequently allowing the writ petitions.

Summary

Issues:
1. Interpretation of Section 87(m)(ii)(b) of the Finance Act, 1998 regarding the eligibility for the Kar Vivad Samadhan Scheme.
2. Application of the explanation clause in Section 87(m)(ii)(b) to exclude an assessee from the benefit of the Scheme.
3. Consideration of payments made voluntarily or under protest prior to the issuance of demand notices or show cause notices.
4. Adjustment of amounts under the Kar Vivad Samadhan Scheme and rejection of claims by the revenue department.
5. Compliance with the provisions of Section 88(f) of the Finance Act, 1998 for settlement of tax payable under indirect tax enactment.

Analysis:
1. The judgment deals with writ appeals filed by the Union of India against a single judge's order setting aside show cause notices and final adjudication orders issued to a garment manufacturer. The main issue revolves around the interpretation of Section 87(m)(ii)(b) of the Finance Act, 1998, concerning the eligibility criteria for the Kar Vivad Samadhan Scheme.
2. The contention between the parties focuses on the application of the explanation clause in Section 87(m)(ii)(b) to determine whether payments made by the petitioner prior to the issuance of demand notices should disqualify them from availing the Scheme's benefits. The revenue department argues that such payments, even if made voluntarily or under protest, should not entitle the assessee to the Scheme.
3. The court analyzes the timeline of payments made by the petitioner and the subsequent issuance of show cause notices. It delves into whether the payments were made before or after the demand notices, emphasizing that only payments made pursuant to such notices should be considered for exclusion from the Scheme under the provisions of the Act.
4. Further scrutiny is placed on the adjustment of amounts under the Kar Vivad Samadhan Scheme and the rejection of claims by the revenue department. The court notes discrepancies in the treatment of payments and adjustments made by the department, highlighting the need for consistency in applying the Scheme's provisions.
5. Lastly, the judgment evaluates the compliance with Section 88(f) of the Finance Act, 1998, which outlines the settlement of tax payable under indirect tax enactments. The court emphasizes the importance of following due process, including investigations and demand notices, before disqualifying an assessee from availing the Scheme based on payment history.

In conclusion, the High Court dismisses the writ appeals, affirming the single judge's order and finding no grounds for interference. The detailed analysis of the issues surrounding the interpretation of relevant sections of the Finance Act, 1998, provides clarity on the eligibility criteria and procedural requirements for the Kar Vivad Samadhan Scheme in the context of the case at hand.