Supreme Court: Bill of Entry Endorsement = Notice of Demand under Tax Scheme.

The Supreme Court held that the endorsement on the Bill of Entry constituted a notice of demand under Section 95(ii)(b) of the Kar Vivad Samadhan Scheme, making the appellants eligible for the Scheme. The Court emphasized the Scheme's objective of expeditiously recovering tax arrears. The High Court's judgment was set aside, and the appellants were granted the benefit of the Scheme. The appeals were allowed with no costs.

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Issues Involved:
1. Interpretation of Section 95(ii)(b) of the Kar Vivad Samadhan Scheme under the Finance (No.2) Act of 1998.
2. Whether the endorsement on the Bill of Entry constitutes a notice of demand.
3. Applicability of Section 95(ii)(c) regarding pending appeals or writ petitions.

Issue-wise Detailed Analysis:

1. Interpretation of Section 95(ii)(b) of the Kar Vivad Samadhan Scheme:
The primary issue concerns the interpretation of Section 95(ii)(b) of the 1998 Act, which determines the applicability of the Kar Vivad Samadhan Scheme (the 'Scheme'). The appellants argued that the endorsement on their Bill of Entry should be considered a notice of demand, thus making them eligible for the Scheme. Conversely, the Revenue contended that a formal show-cause notice under Section 28 of the Customs Act was necessary for the demand to be recognized under the Scheme.

2. Whether the Endorsement on the Bill of Entry Constitutes a Notice of Demand:
The appellants imported a vessel and contested the additional customs duty levied by the Customs authorities. The High Court initially directed them to submit a bank guarantee and a personal bond. The Revenue's endorsement on the Bill of Entry required the appellants to pay additional customs duty. The appellants claimed this endorsement amounted to a notice of demand under Section 95(ii)(b). The Supreme Court found that the endorsement on the Bill of Entry and its subsequent service on the appellants did constitute a notice of demand, as it required payment within a specified period, failing which interest would accrue. This interpretation aligns with the broader purpose of the Scheme, which aimed to expedite the recovery of tax arrears.

3. Applicability of Section 95(ii)(c) Regarding Pending Appeals or Writ Petitions:
The High Court had linked the outcome of the appellants' case to the pending appeal in a similar case (M/s. Amar Steel Industries). The Division Bench of the High Court ruled that neither clause (b) nor clause (c) of Section 95(ii) was applicable, as no formal show-cause notice or demand notice had been issued, and no appeal or writ petition was pending. However, the Supreme Court noted that the High Court's earlier order made the appellants' case contingent on the outcome of the pending appeal, thus implying that the matter was still effectively pending. Furthermore, the Revenue did not reject the appellants' declarations on this ground, and the Division Bench's interpretation was not defended by the Revenue in the Supreme Court.

Conclusion:
The Supreme Court concluded that the endorsement on the Bill of Entry constituted a notice of demand, making the appellants eligible for the Scheme. The broader purpose of the Scheme was to recover tax arrears expeditiously, and the appellants' case fell within this objective. The impugned judgment of the High Court was set aside, and the appellants were granted the benefit of the Kar Vivad Samadhan Scheme. The appeals were allowed with no costs.

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