2006 (10) TMI 147 - SC - Income Tax

Whether the Kar Vivad Samadhan Scheme, 1998, is applicable in relation to a public servant? When does a prosecution start? Whether the offences enumerated under section 95 (iii) are excluded from immunity in terms of section 91 of the Act? Held that - In the instant case, resorting to any device or camouflage has not been alleged. It is also not a case that the provisions of the Indian Penal Code or the Prevention of Corruption Act cannot be said to have any application, although linked with an offence under section 136 of the Customs Act. The High Court has not held that the offences alleged against the respondents are so inextricably connected that they cannot be separated so much so that in the event it be held that private parties cannot be proceeded with at all, the case against public servants, would invariably fail. In this case also public interest is involved as interpretation of the provisions of the Act was in question. Yet again there cannot be any equality in illegality. We, therefore, are of the opinion that the impugned judgment cannot be sustained. It is set aside accordingly. The High Court, however, did not go into the merits of the matter. It proceeded on the basis that the continuation of the prosecution as against the respondents was unsustainable in law. Although prosecution as against the respondents herein may be held to be maintainable, in our opinion, they are entitled to contend that even if the materials brought on record are given face value and taken to be correct in their entirety, no case has been made out as against them. The appeal is allowed, the impugned judgment is set aside with the aforementioned observations.

Issues Involved:
1. Applicability of the Kar Vivad Samadhan Scheme, 1998, to public servants.
2. Interpretation of the term "prosecution" under the Scheme.
3. Exclusion of certain offences from immunity under Section 95(iii) of the Act.
4. Doctrine of parity and its application to the respondents.
5. Maintainability of the appeal despite non-filing of appeals in connected matters.

Issue-wise Detailed Analysis:

1. Applicability of the Kar Vivad Samadhan Scheme, 1998, to Public Servants:
The Scheme, framed under the Finance (No. 2) Act, 1998, provides a mechanism for settling tax arrears. The definition of "person" under Section 87(k) includes individuals and entities involved in tax proceedings. However, the court concluded that public servants do not fall within the purview of the Scheme as they are enjoined with a duty to enforce tax enactments and cannot file a declaration for tax arrears. The Scheme is designed to settle tax liabilities and does not extend to public servants who are implicated in criminal misconduct under other statutes.

2. Interpretation of the Term "Prosecution" under the Scheme:
The term "prosecution" includes the initiation or commencement of a criminal proceeding, which may encompass an inquiry or investigation. The court emphasized that prosecution is not synonymous with the filing of a charge-sheet or taking cognizance by a court. The prosecution in this context began with the lodging of the FIR on March 2, 1995, and the subsequent investigation by the CBI. The court held that the term must be given its ordinary meaning, and once prosecution is initiated under the specified statutes, the Scheme's benefits cannot be extended.

3. Exclusion of Certain Offences from Immunity under Section 95(iii):
Section 95(iii) explicitly excludes persons from the Scheme if they are prosecuted for offences under Chapter IX or XVII of the IPC, the Prevention of Corruption Act, and other specified statutes. The court noted that the offences under these chapters are considered serious, and the legislative intent was to exclude such offences from the Scheme's immunity provisions. The court held that even if a person commits multiple offences under different statutes, immunity granted under one statute does not extend to other statutes, particularly those enumerated in Section 95(iii).

4. Doctrine of Parity and Its Application to the Respondents:
The respondents argued that they should receive the same benefit as other accused who were granted immunity under the Scheme. The court, however, distinguished between private parties and public servants, stating that the doctrine of parity does not apply in this case. The High Court's judgment was based on the incorrect assumption that public servants could benefit from the Scheme. The court emphasized that the offences committed by public servants under the Prevention of Corruption Act are distinct and not covered by the Scheme.

5. Maintainability of the Appeal Despite Non-filing of Appeals in Connected Matters:
The court addressed the issue of whether the appeal is maintainable despite the non-filing of appeals in connected matters. Citing previous judgments, the court held that non-filing of an appeal in similar cases does not preclude consideration of the matter on its own merits, especially when public interest and interpretation of law are involved. The court reiterated that there cannot be equality in illegality and proceeded to set aside the High Court's judgment.

Conclusion:
The Supreme Court set aside the High Court's judgment, holding that the Kar Vivad Samadhan Scheme, 1998, does not apply to public servants. The court clarified that the term "prosecution" includes the initiation of criminal proceedings and that offences under the Prevention of Corruption Act are excluded from the Scheme's immunity provisions. The appeal was allowed, and the case was remanded for further consideration on its merits.

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