Kar Vivad Samadhan Scheme: pre-notice deposits did not defeat unpaid tax arrears, and rejection of the declaration was without jurisdiction.

Amounts deposited before issuance of the show cause notice were treated as part of the unpaid demand for purposes of the Kar Vivad Samadhan Scheme because Section 87(m)(ii)(b), read with its Explanation, covers duty, interest, fine or penalty forming the subject matter of a notice issued on or before 31 March 1998 and remaining unpaid on the declaration date. The notice itself proposed adjustment of the quantified duty demand against the deposits, so the sums had not been adjusted when the declaration was made. Whether the deposits were voluntary or coerced was therefore immaterial. The declaration was held maintainable and the rejection order without jurisdiction.

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Issues: Whether amounts deposited before issuance of the show cause notice could be treated as unpaid tax arrears for purposes of the Kar Vivad Samadhan Scheme, and whether the rejection of the declaration was without jurisdiction.

Analysis: The relevant provision was Section 87(m)(ii)(b), read with its Explanation, which covers duties, cesses, interest, fine or penalty forming the subject matter of a demand notice or show cause notice issued on or before 31 March 1998 and remaining unpaid on the date of declaration. The show cause notice specifically proposed adjustment of the quantified duty demand against the amounts deposited, showing that the deposited sums had not been adjusted as on the date of declaration. Since the duty demanded in the notice remained unpaid on that date, the question whether the deposits were voluntary or under coercion was immaterial for determining tax arrears under the Scheme.

Conclusion: The declaration was maintainable and the rejection order was without jurisdiction. The issue was decided in favour of the petitioner.

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