Settlement benefit under the Kar Vivad Scheme cannot be extended to co-noticees in appeal; classification upheld under Article 14.

Paragraph 2 of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998 was interpreted as limited to co-noticees whose proceedings were still at the demand notice or show-cause notice stage, and it did not extend settlement benefits to co-noticees whose penalty had already been adjudicated and was in appeal. The court also held that this distinction was not discriminatory under Article 14 because co-noticees at the notice stage and those in appellate proceedings constituted different classes with a rational nexus to the Scheme's object of speedy revenue recovery and reduced litigation. The challenge to the scope and validity of paragraph 2 therefore failed.

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Issues: (i) Whether paragraph 2 of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998 could be construed to extend the benefit of settlement to co-noticees whose penalty proceedings had already reached the appellate stage; (ii) Whether limiting that benefit to co-noticees facing only show-cause notice stage proceedings was discriminatory and violative of Article 14 of the Constitution of India.

Issue (i): Whether paragraph 2 of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998 could be construed to extend the benefit of settlement to co-noticees whose penalty proceedings had already reached the appellate stage.

Analysis: The Scheme treated the main noticee and co-noticees as separate persons, each entitled to make a separate declaration. The statutory definition of tax arrears under the Scheme distinguished between arrears already determined and arrears forming the subject-matter of a demand notice or show-cause notice. Paragraph 2 of the Order was issued to remove difficulties only in respect of co-noticees whose proceedings were still pending at the demand notice or show-cause notice stage. The language of the Order did not justify extending its operation to cases where penalty had already been adjudicated and the co-noticee was in appeal. The doctrine of reading down could not be used to add words or enlarge the scope of a subordinate legislative order beyond the parent Scheme.

Conclusion: The paragraph could not be read to include appellate proceedings, and the contention was rejected.

Issue (ii): Whether limiting that benefit to co-noticees facing only show-cause notice stage proceedings was discriminatory and violative of Article 14 of the Constitution of India.

Analysis: Co-noticees at the show-cause notice stage formed a distinct class from co-noticees against whom penalty had already been quantified and who had entered the appellate stage. The classification had a rational basis linked to the object of the Scheme, namely speedy recovery of revenue and reduction of litigation. The differential treatment was therefore not arbitrary or unreasonable.

Conclusion: The classification was valid and there was no violation of Article 14.

Final Conclusion: The challenge to the interpretation and validity of paragraph 2 failed, and the petitions were dismissed.

Ratio Decidendi: A removal-of-difficulties order under a fiscal settlement scheme cannot be construed by reading down so as to expand its plain scope, and a classification between pending show-cause notice proceedings and adjudicated appellate proceedings is valid when it bears a rational nexus to the scheme's object.

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