2016 (11) TMI 681 - HC - Customs

Imposition of penalty - 100% EOU - mis-declaration of imported goods - Held that - the tax arrears of the Directors and officers of a company can be proceeded with independently, if they do not join it in making an application. This case, however, it is not tax arrears which are in dispute but the penalty which is wholly dependent upon the findings that led to the tax arrears (which has not been settled by the company) in the part of other three petitioners. Secondly, and more importantly, the Supreme Court clearly stated that object of the removal of difficulties order in respect of the scheme was to give benefit of settlement by the main parties to all other co-noticees - imposition of penalty set aside - appeal allowed.

Summary

Issues:
1. Quashing of penalty order dated 07.01.1999 imposed on three individuals for mis-declaration in importation of goods.
2. Application under Kar Vivad Samadhan Scheme, 1998 by the company and subsequent acceptance of liability.
3. Proceedings against employees for penalties imposed.
4. Interpretation of liability under the scheme for employees of the company.
5. Distinction between tax arrears and penalties imposed.
6. Benefit of settlement under the Kar Vivad Samadhan Scheme for co-noticees.

Issue 1: The judgment involved a petition seeking the quashing of a penalty order dated 07.01.1999 imposed on three individuals for mis-declaration in the importation of goods. The order confiscated goods, imposed customs duty, and penalties on the company and individuals.

Issue 2: The company applied under the Kar Vivad Samadhan Scheme, 1998, and its liability was accepted and settled under Section 19(1) of the Finance Act, 1998. The company paid the determined amount, which was not in dispute.

Issue 3: The employees of the company, who were facing penalties, approached the court seeking relief as they were not the principal noticees. The employees argued that once the company's liability was settled, further liability on employees should not arise.

Issue 4: The court considered the interpretation of liability under the scheme for employees of the company. The respondents argued that unless all noticees made an application under the scheme, the settlement recorded for one noticee would not benefit others.

Issue 5: The judgment distinguished between tax arrears and penalties imposed, emphasizing that penalties were dependent on the findings leading to tax arrears. The court analyzed the Supreme Court's observations regarding the Kar Vivad Samadhan Scheme.

Issue 6: The court examined the benefit of settlement under the Kar Vivad Samadhan Scheme for co-noticees. It referenced the Supreme Court's clarification that the scheme aimed to extend the benefit of settlement by the main party to all co-noticees.

Conclusion: The court directed the respondents not to enforce any demand for penalty against the three individual petitioners who were employees of the company, quashing the penalty order against them. The judgment highlighted the objective of the scheme to provide the benefit of settlement to all co-noticees, emphasizing the need to uphold this principle.