2017 (3) TMI 456 - HC - Central Excise

Court quashes decision under Kar Vivad Samadhan Scheme, directs compliance with law and deposit of 50% amount.

The Court allowed the writ petition challenging the Department's decision on the petitioners' eligibility under the Kar Vivad Samadhan Scheme, 1998. It ... Kar Vivad Samadhan Scheme, 1998 - maintainability of declaration under settlement scheme - show cause notice versus demand notice - dispute pending despite prior adjudication - quashing administrative communication - release of interim deposit with accrued interestKar Vivad Samadhan Scheme, 1998 - maintainability of declaration under settlement scheme - show cause notice versus demand notice - Declaration filed under the Kar Vivad Samadhan Scheme, 1998 was maintainable and the impugned letter denying benefit was unsustainable in law. - HELD THAT: - The Court considered the petitioners' declaration under the Scheme and the Department's contention that the disputed arrears were not 'in dispute' as a Supreme Court decision had found in favour of the Revenue. Having regard to precedents relied upon by the petitioners, the Court accepted the legal principle that the Scheme applies where there is a show cause notice or a clear demand and a dispute has been raised, and that a mere date or prior adjudication does not automatically exclude a matter from the Scheme. The Department conceded that its stand in the impugned communication was unsustainable in law and that the matter was covered by the cited Supreme Court decisions. Consequently the Court quashed the impugned letter and directed that the petitioners' declaration be proceeded with and decided in accordance with law. [Paras 6]Impugned letter dated 8.2.1999 quashed; declaration under the Scheme to be proceeded with and decided in accordance with law.Release of interim deposit with accrued interest - quashing administrative communication - Order regarding the interim deposit made pursuant to an earlier interim order and the manner of its release to the Revenue. - HELD THAT: - The Court noted that pursuant to its interim order dated 5.5.1999 the petitioners had deposited fifty per cent of the contested amount, which remains invested in Court. Having allowed the writ and quashed the impugned letter, the Court directed that the Revenue is entitled to collect the deposited sum along with accrued interest and directed the Prothonotary & Senior Master to permit the Revenue to take the sum on production of an authenticated copy of the judgment. [Paras 7]Revenue permitted to collect the interim deposit with accrued interest on production of an authenticated copy of the judgment.Final Conclusion: Writ petition allowed; impugned letter dated 8.2.1999 set aside, the petitioners' declaration under the Kar Vivad Samadhan Scheme, 1998 to be considered and decided in accordance with law, and the interim deposit ordered released to the Revenue with accrued interest; no order as to costs. Issues:1. Eligibility of petitioners to avail Kar Vivad Samadhan Scheme, 1998.2. Dispute regarding tax arrears prior to 1.4.1998.3. Interpretation of show cause notice under indirect tax enactment.4. Applicability of two Judgments of the Hon'ble Supreme Court.5. Legality of impugned letter dated 8.2.1999.6. Decision to quash and set aside the impugned letter.7. Compliance with interim order for depositing 50% of the amount.Eligibility of petitioners to avail Kar Vivad Samadhan Scheme, 1998:The petitioners sought a writ to challenge an order dated 8.2.1999, claiming they were eligible to settle a tax dispute under the Kar Vivad Samadhan Scheme, 1998. The dispute arose as the tax arrears were linked to a Supreme Court judgment. The Department argued that since the Supreme Court ruled in their favor, the arrears were not in dispute and hence not eligible for the Scheme. The petitioners contended that the tax arrears were disputed and maintainable under the Scheme, supported by judgments of the Hon'ble Supreme Court.Dispute regarding tax arrears prior to 1.4.1998:The petitioners disputed the tax arrears claimed by the Department prior to 1.4.1998, arguing that the amount was contested and not final. They highlighted that an appeal was pending against the order and that the Department's position was unsustainable in law. The petitioners maintained that they were not liable to pay the disputed duty, as they believed the claim was time-barred.Interpretation of show cause notice under indirect tax enactment:The Hon'ble Supreme Court judgments emphasized that a show cause notice or demand under an indirect tax enactment was crucial for the Scheme's applicability. The Court clarified that once a dispute was raised through a show cause notice, the matter fell within the Scheme's purview. The petitioners argued that a mere demand notice did not equate to a show cause notice, and they were not obligated to comply solely based on the Department's demand.Applicability of two Judgments of the Hon'ble Supreme Court:The petitioners relied on two judgments of the Hon'ble Supreme Court to support their claim of eligibility under the Scheme. These judgments established that the requirements set by the Finance Act, 1998, for availing the Scheme had been fulfilled. The Court found merit in the petitioners' argument and deemed the Department's stance unsustainable in light of the Supreme Court rulings.Legality of impugned letter dated 8.2.1999:The Court concluded that the Department's position, as stated in the impugned letter dated 8.2.1999, was unsustainable in law based on the factual position and the two Supreme Court judgments. Consequently, the Court allowed the writ petition, quashed the impugned letter, and directed the petitioners' declaration to be processed in accordance with the law.Decision to quash and set aside the impugned letter:In light of the factual position and the legal precedents, the Court decided to quash and set aside the impugned letter dated 8.2.1999. The Court directed that the petitioners' declaration be further processed and decided in accordance with the law, acknowledging the unsustainable nature of the Department's position.Compliance with interim order for depositing 50% of the amount:An interim order was passed requiring the petitioners to deposit 50% of the amount within six weeks. The petitioners complied with this order, and the Court directed the Revenue to collect the deposited amount with accrued interest upon conclusion of the judgment, indicating the fulfillment of the interim order.