Kar Vivad Samadhan Scheme covers co-noticees in pending appeals, but payments made under declarations remain non-refundable.

The Kar Vivad Samadhan Scheme was interpreted to extend to directors or officers who were co-noticees in the same matter where the company had settled its own declaration, because pending appeals kept the proceedings alive and a narrow reading would defeat the scheme's object. The interpretation favoured the assessee where two views were possible, and the benefit of the Removal of Difficulties Order was not confined to matters still at the adjudication stage. Amounts paid pursuant to declarations made under the Scheme were held non-refundable, as the statute expressly bars refund of sums paid under section 88, even if payment was made under protest.

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Issues: (i) Whether the benefit of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998 extended to directors or officers against whom show-cause notices had already been adjudicated and whose appeals were pending, when the company had settled its own declaration under the Scheme; (ii) Whether amounts paid by the directors or officers pursuant to their declarations under the Scheme were refundable.

Issue (i): Whether the benefit of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998 extended to directors or officers against whom show-cause notices had already been adjudicated and whose appeals were pending, when the company had settled its own declaration under the Scheme

Analysis: The Scheme treats each declarant separately and settlement is with reference to the tax arrears covered by that declarant's declaration. The Order, read as a whole, was held to give effect to a settlement by the main declarant so as to operate in favour of other persons on whom show-cause notices for the same matter had been issued. The words requiring pending adjudication could not be read narrowly to exclude cases where the proceedings had reached the appellate stage, because pending appeals mean the proceedings are still continuing. Such a restrictive reading would create an unreasonable classification and defeat the object of the Order. Where two views are possible, the view favourable to the assessee was adopted.

Conclusion: The benefit of the Order was available to the directors or officers, and the interpretation adopted by the High Court of Kerala was upheld.

Issue (ii): Whether amounts paid by the directors or officers pursuant to their declarations under the Scheme were refundable

Analysis: The Scheme expressly provides that any amount paid in pursuance of a declaration made under section 88 shall not be refundable under any circumstances. The payments made by the officers were pursuant to their own declarations under the Scheme, and therefore the statutory bar against refund applied, including where payment was stated to have been made under protest.

Conclusion: The amounts paid by the directors or officers were not refundable.

Final Conclusion: The common interpretation issue was decided in favour of the assessees, the Revenue's appeals failed on that question, but the statutory bar on refund was affirmed and the officers were not entitled to refund of the amounts paid under the Scheme.

Ratio Decidendi: A settlement under the Kar Vivad Samadhan Scheme can extend to co-noticees where the same matter is covered and proceedings remain pending in appeal, and amounts paid pursuant to a declaration under the Scheme are not refundable because the statute expressly bars refund.

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