Fiscal settlement scheme cut-off date upheld as a valid classification; post-deadline show-cause notices could not claim amnesty.

The Supreme Court upheld the statutory cut-off in the Kar Vivad Samadhan Scheme, 1998, holding that limiting indirect tax amnesty to dues covered by demand or show-cause notices issued on or before 31 March 1998 was a valid fiscal classification with a rational nexus to settling existing arrears and reducing litigation, and did not violate Article 14. The Court also held that assessees whose show-cause notices were issued after that date could not claim the Scheme's benefit, because the Scheme was a complete code and its express eligibility conditions could not be expanded on equitable grounds. The respondents' claim was therefore rejected.

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Issues: (i) Whether Section 87(m)(ii)(b) of the Finance (No. 2) Act, 1998, which limits the indirect tax amnesty to dues covered by a demand notice or show-cause notice issued on or before 31 March 1998, is violative of Article 14 of the Constitution of India; (ii) Whether assessees against whom show-cause notices were issued after 31 March 1998 could claim the benefit of the Kar Vivad Samadhan Scheme, 1998.

Issue (i): Whether Section 87(m)(ii)(b) of the Finance (No. 2) Act, 1998, which limits the indirect tax amnesty to dues covered by a demand notice or show-cause notice issued on or before 31 March 1998, is violative of Article 14 of the Constitution of India.

Analysis: The Scheme was a statutory settlement code intended to realise arrears and reduce litigation. In fiscal matters, the Legislature enjoys wide latitude in classification, and Article 14 is violated only if the classification is arbitrary, artificial, or without nexus to the object of the law. The cut-off date in Section 87(m)(ii)(b) created two categories of indirect tax arrears: quantified dues unpaid as on 31 March 1998 and cases where notices had already been issued by that date. That distinction was held to be connected with the object of settling existing tax arrears and could not be treated as a hostile or illusory classification merely because some assessees fell outside the line drawn by the statute.

Conclusion: Section 87(m)(ii)(b) is not unconstitutional and does not offend Article 14.

Issue (ii): Whether assessees against whom show-cause notices were issued after 31 March 1998 could claim the benefit of the Kar Vivad Samadhan Scheme, 1998.

Analysis: The Scheme expressly confined indirect tax "tax arrears" to matters already determined as due and payable, or to demand notices or show-cause notices issued on or before 31 March 1998. The Court held that the Scheme being a complete code had to be applied according to its text and conditions, and equitable considerations could not enlarge its scope. Since the respondents' show-cause notice was issued on 6 January 1999, their claims did not satisfy the statutory eligibility requirement, and the High Court could not direct reconsideration on a broader basis.

Conclusion: The respondents were not entitled to the Scheme's benefit.

Final Conclusion: The statutory cut-off date was upheld, the High Court's contrary view was set aside, and the Revenue succeeded in the appeals.

Ratio Decidendi: In fiscal settlement schemes, a legislative cut-off tied to existing arrears or pre-existing notices is valid if it bears a rational nexus to the object of the scheme, and courts cannot extend the benefit beyond the scheme's express eligibility conditions.

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