TaxTMI 
TaxTMI 
2005 (6) TMI 45
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....No. 2447 of 1990 in the Delhi High Court, inter alia, to restrain the Excise Department from recovering and/or levying additional duty of excise under the said Act, inter alia; on the ground that the said levy was ultra vires Article 366(29A) read with Articles 246 and 274 of the Constitution of India and sought to quash notifications dated 25th November, 1987; 9th December, 1987 and 20th March, 1990 issued by respondent No. 1 under the Central Excise Act, 1944 ("Excise Act" for short) 3. The Delhi High Court while admitting the above writ petition was pleased to grant interim relief whereby the petitioner was permitted to clear processed fabrics on payment of 50% of the disputed duty and restrained the respondents from recovering the balance of the disputed duty on petitioner's furnishing bank guarantee of the balance amount. 4. The petitioner, accordingly, paid 50% of the disputed duty and had furnished bank guarantees for the balance amount of disputed duty amounting to Rs. 35,44,614.55 in terms of the interim order of the Delhi High Court. 5. The petitioner went on regularly submitting monthly returns in RT-12 pending the above writ petition. The Excise Authorities....
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....led writ petition before this Court being Writ Petition No. 4072 of 1992 to challenge the legality and validity of the aforesaid order passed by the learned Additional District Judge, Thane dated 30th April, 1991. This Court was pleased to issue rule in the said writ petition. 12. During pendency of the petition Government introduced a Kar Vivad Samadhan Scheme, 1998 (KVS Scheme for short) in the Finance (No. 2) Bill, 1998 to invite the tax-payers to settle their tax arrears by availing substantial discount in payment of taxes and also to seek immunity from prosecution. Pursuant to this scheme, the tax payers could file declaration for settling the tax arrears between 1st September, 1998 to 31st January, 1999. 13. The petitioner on 24th November 1998 opted to take advantage of the said scheme by filing declaration in terms of the said scheme. The declaration filed by the petitioner was acknowledged by the office of the Commissioner of Central Excise on 26th December, 1998. However, on 24th February, 1999, the Assistant Commissioner (KVSS) Central Excise, Mumbai-II rejected the declaration filed by the petitioner on the ground that show cause notice as required under the said ....
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....ly cleared during pendency of the petition. According to him, it was obligatory on the part of the Excise Department to pass assessment orders in accordance with the final judgment of the Delhi High Court in Writ Petition No. 2447/1990, following the principles laid down by the Apex Court in the case of Ujagar Prints (supra). 19. In the submission of Mr. Shridharan, assuming without admitting that the amounts of differential duties mentioned in RT-12 returns filed by the petitioner though were confirmed with the dismissal of the petition filed in the Delhi High Court; even then it cannot be suggested that in the present case no notice of demand was issued. It is, thus, submitted that provision of Section 95(ii)(b) of the Finance (No. 2) Act, 1998 was wrongly applied in the case of the petitioner. 20. Without prejudice to the aforesaid contention, learned counsel for the petitioner further submitted that having satisfied the condition of sub-clause (ii) of clause (m) of Section 87 of the Finance Act, 1998 inasmuch as with the determination of the amount of the additional duty due under the Act on 31st March, 1998, a liability to pay unpaid duty was standing against the petitio....
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....the judgment of this Court in the case of M/s. Swan Mills Limited v. Union of India, 1989 (44) E.L.T. 601 (Bom.); wherein it was held as under : "If we are right in the view that we have taken above, it is clear that once the assessment orders made under Rule 173-I have become final, there was no need to issue notices under Section 11A. If the authorities, have in spite of this issued notices also under Section 11A for the recovery of the amount due under the said assessment orders, they have indulged in an exercise not warranted by law." Mr. Shridharan also relied upon the judgment of the Karnataka High Court in the case of M/s. Chairman CBEC and Ors. v. Davangere Cotton Mills, 1996 (63) E.C.R. 244 (Kar.); wherein it was held as under: "As this court by an interim order restrained the department from levy and collection of excise duty in respect of yarn manufactured by the mills, it was not possible for the officer to complete the assessment order. The learned single judge, was in error in observing that the department could not have completed assessment in accordance with the provisions of Rule 173-I of the rules after interim order passed by this court came ....
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....he petitioner is liable to be quashed and set aside. Per Contra : 23. Mrs. S.V. Bharucha, learned counsel appearing for the respondents-Revenue submits that the endorsement made on RT-12 returns at the time of assessment cannot be considered as notice of demand. In her submission, Section 95(ii)(b) of KVS Scheme contemplates that the provisions of KVS Scheme does not apply to thy tax arrears under any indirect tax enactment in a case where show cause notice or notice of demand under any indirect tax enactment has not been issued. She submits that in the case on hand no such show cause notice or notice of demand was ever issued or served under Section 11A of the Excise Act. She relied upon the judgment of the Apex Court in the case of M/s. Metal Forgings v. Union of India, 2002 (146) E.L.T. 241 (S.C.); wherein the requirement of show cause notice was held to be mandatory for raising any demand. 24. Mrs. Bharucha further submits that the petitioner itself had filed RT-12 returns. The duty liability was quantified by the petitioner itself in terms of interim order dated 18th September, 1990 passed by the Delhi High Court in Writ Petition No. 2447 of 1990. Based on such self a....
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....nding. 27. Mrs. Bharucha further submits that as a matter of fact, the petitioner has recovered or collected the differential amount of duty amounting to Rs. 35,44,614.55 from its customers. In her submission, the object of KVS Scheme is not to enrich the assessee but to see that he is relieved of his duty liability, may be partially. At the same time, another object is to bring an end to the long pending revenue disputes or litigations. 28. Mrs. Bharucha, alternatively, submits that assuming RT-12 assessments were made, but none of those assessments were challenged by the petitioner contending that they were contrary to law laid dawn by the Apex Court in the case of Ujagar Prints (supra). Consequently, in her submission, those orders of assessment; though made subsequent to the filing of the suit; would operate as res judicata between the parties since the orders passed thereon were made prior to the decision of the suit in view of Explanation-I to Section 11 of the Code of Civil Procedure, 1908. 29. Mrs. Bharucha, on the above canvas, submits that the recovery which was secured by way of bank guarantees against the petitioner was a demand judicially adjudicated as valid ....
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....dmitted was pending before any appellate authority or the High Court or the Supreme Court. No dispute warranting resolution thereof under KVS Scheme was pending between the parties since entire issue was concluded by the order of the Delhi High Court dated 9th July, 1991. 32. Mrs. Bharucha relied upon the judgment of the Apex Court in the case of Union of India v. Charak Pharmaceuticals (India) Ltd., 2003 (154) E.L.T. 354 to contend that the demand pursuant to assessment an RT-12 returns neither constituted show cause notice nor demand notice. She placed reliance on another judgment in the case of M/s. Lajya Dyeing and Bleaching Works v. Union of India, 2003 (155) E.L.T. 213; wherein the Apex Court ruled that Section 95 of the Excise Act makes it clear that in case where no appeal or reference or writ petition is admitted and pending before any appellate authority or High Court or the Supreme Court and where no application or revision is made before the Central Government, the KVS Scheme does not apply and the parties are not entitled to the benefits of said Scheme. 33. Mrs. Bharucha also tried to justify the impugned action of the Revenue on the basis of sub-clause (c) of Se....
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....heme called Samadhan." The Memorandum to Finance (No. 2) Bill, 1998 thus explains the scheme : Kar Vivad Samadhan Scheme seeks to provide a quick and voluntary settlement of tax dues outstanding as on 31-3-1998, both in various direct tax enactments as well as indirect taxes enactments by offering waiver of a part of the arrear taxes and interest and providing immunity against institution of prosecution and imposition of penalty. The assessee on his part shall seek to withdraw appeals pending before various appellate authorities and Courts. The Scheme comes into force on the first day of September, 1998 and ends on 31st day of December, 1998. It will have following salient features. Section 86 specifies that the Scheme may be called "Kar Vivad Samadhan Scheme, 1998". It shall come into force on the first day of September, 1998. Section 87 defines few terms unless the context otherwise requires. The relevant ones are: "(e) "Disputed income", in relation to an assessment year, means the whole or so much of the total income as is relatable to the disputed tax; (f) "disputed tax" means the total tax determined and payable, in respect of an assessment year und....
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....e and the manner in which the payment of tax arrears is to be made. 39. Section 91 provides that the designated authority shall, subject to the conditions provided in Section 90, grant immunity from instituting any proceedings for prosecution for any offence under any direct tax enactment or indirect tax enactment or from the imposition of penalty under any of such enactments, in respect of matters covered in the declaration under Section 86. 40. The provisions of Section 94 make explicitly clear that any benefit, concession or immunity to the declarant shall be available only for the year in which the declaration has been made. Further, Section 95 specifies certain circumstances, cases, situations in which the benefit of the Scheme shall not be available. Relevant part of section 95 reads as under : 95. Scheme not to apply in certain cases. - The provisions of this Scheme shall not apply (i) x x x x (ii) in respect of tax arrear under any indirect tax enactment, - (a) in a case where prosecution for any offence punishable under(a) any provisions of any indirect tax enactment has been instituted on or before the date of filing of t....
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....ed the petitioner to deposit 50% amount of the disputed duty in cash. For the balance 50% amount of disputed duty the petitioner was asked to furnish bank guarantee. Accordingly, bank guarantees in the sum of Rs. 35,44,614.55 were furnished by the petitioner. 43. The Delhi High Court, after hearing the parties, vide its order dated 9th July, 1991 was pleased to dismiss the petition on merits and had directed recovery of Rs. 35,44,614.55 by encashing the bank guarantees with interest thereon at the rate of 17.5% per annum. The S.L.P. preferred against the said order came to be dismissed by the Apex Court. Thus, the order of the Delhi High Court achieved finality having affirmed by the Apex Court. Thus, the order of the Delhi High Court became final and conclusive. 44. Pending the decision of writ petition before the Delhi High Court, the RT-12 returns though filed by the petitioner were not assessed. However, with the dismissal of the writ petition they were finally assessed since the goods were already released under interim order on the basis of provisional assessment. Thus, the RT-12 assessment was nothing but it represented concluded determination of tax in the light of th....
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....he net wealth as is related to the disputed tax. Thus, all the three clauses referred to hereinabove contemplate pendency of the dispute. 49. With the above, if one turns to clause (k) of the said Section, which contains definition of "person", the said clause contemplates various constituents set out therein including the person against whom proceedings have been initiated and are pending under any direct or indirect tax enactment. It is, thus, clear that pendency of the proceeding under the provisions of direct or indirect tax enactment is a must. 50. Clause (m)(ii)(a) of Section 87 defines "tax arrears", in relation to indirect tax enactment, means the amount of duty, cess, interest, fine or penalty determined as due or payable under that enactment as on the 31st day of March, 1998 but remaining unpaid as on the date of making declaration under Section 88. However, it does not include any demand relating to erroneous refund and where a show cause notice is issued to the declarant in respect of seizure of goods and demand of duties, and does not include the duties on such seized goods where such duties on the seized goods have not been quantified. Explanation to clause (m),....
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....it was not a notice of demand since no demand was pending against the petitioner on that date. In any event a demand was raised in the light of the concluded decision of the Delhi High Court. The bank guarantees did not remain actionable claim. It culminated in a decree of the Court in the nature of mandamus; wherein encashment of bank guarantees was ordered with further order to pay interest thereon @ 17.5% p.a. It becomes a property of the Revenue. 54. In order to make the record straight and for the purposes of accounting, it was necessary to pass final assessment order based on the concluded decision of the Delhi High Court so as to adjust the amount of bank guarantees against the duty amount. So just to show execution of the order in the nature of writ or decree passed by the Delhi High Court and to report compliance thereof, or in other words, to report compliance of the writ issued by the Delhi High Court, the RT-12 assessments with necessary endorsements thereon were necessary. Those orders were nothing but were in the nature of execution of the order of the Delhi High Court; whereby the dispute between the parties for all time to come; came to be settled; as such no dis....
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..... In order to unlock the considerable revenue locked in the litigations at various levels a new scheme was introduced by way of "Samadhan" i.e. for settlement of dispute. The idea was to settle the disputes. Therefore, the notice of demand contemplated under the KVS Scheme is in respect of a demand which is in dispute either before original authority or the appellate authority or revisional authority under the indirect tax enactment or the High Court or the Supreme Court. 58. We get the above indication from clause (c) of sub-section (ii) of Section 95 of the Finance Act; which, specifically, provides that in a case where no appeal or reference or writ petition is admitted and pending before any appellate authority or High Court or the Supreme Court or no application for revision is pending before the Central Government on the date of declaration made under Section 88, the KVS Scheme shall not apply. Meaning thereby, for applicability of the Scheme a dispute between the parties must be pending in any of the forums referred to in the said section. In order to understand the concept of pendency of litigation let us consider what types of litigations are contemplated under the said....
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....of the Act. A purposive approach for interpreting the Act is necessary." 63. In the instant case, the judgment and order of the Delhi High Court passed in Writ Petition No. 2447 of 1990 has become final and conclusive with the dismissal of the petition followed by dismissal of S.L.P.; wherein the bank guarantees furnished by the assessee/petitioner culminated into enforceable decree in the nature of writ of mandamus, as such, in our view, no dispute with respect to the tax arrears was pending. In the instant case, what was pending was only a formal assessment order to be passed merely on the basis of the returns filed by the petitioner; which was nothing but a formality to be completed to make the record complete. In such event, if any formal demand notice in execution of the final order is issued just to record satisfaction of the amount already recovered, or secured by way of bank guarantees; can such demand notice be said to be a notice of demand raising dispute as contemplated under Section 95(ii)(b) of the KVS Scheme. (In our view, such notice of demand issued by making endorsement on RT-12 assessment may be a notice of demand as ordinarily understood but not as contemplate....
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....refers to the ground contemplated under Section 95(ii)(c), even if not applicable, will not make the order invalid on that ground as has been held by the Apex Court in the case of J.K. Steel Ltd. v. Union of India, 1978 (2) E.L.T. (J 355) (S.C.) = (1969) 2 SCR 481 = AIR 1970 SC 1173; wherein it was observed as under: "If the exercise of a power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of the power in question. This is a well settled proposition of law. In this connection reference may usefully be made to the decisions of this Court in P. Balakotaiah v. The Union of India, (1958) SCR 1052 = (AIR 1958 SC 232); and Afzal Ullah v. State of U.P. (1964) 4 SCR 9 91 - (AIR 1964 SC 264)." It is needless to mention that where a decision is arrived at for a wrong reason, but the same decision must as a matter of law has been arrived at if the right reason had been relied on, the decision will not be quashed. In the instant case the impugned order can be sustained jointly and severally on the basis of both grounds i.e. the exclusion clauses incorporated in clauses (b) and ....
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.... that the respondents should be allowed to encash the bank guarantees forthwith they should also be entitled to interest on these amounts at the rate of 17.1/2% per annum from the date the duty became payable but was stayed under the orders of this Court." (Emphasis supplied) 68. If we were to allow this petition and set aside the order passed by respondent No. 3 the result would be that the declaration furnished by the petitioner would be restored. In that event, unlawful and illegal declaration will get validated. If that be so, this Court is not expected to exercise writ jurisdiction in such case. It can safely be said that there has been no failure of justice in the present case. We would be justified in rejecting this writ petition considering absence of equity in favour of the petitioner. 69. One more judgment which concludes the issue at hand is the judgment of the Apex Court in the case of Sahakari Khand Udyog Mandal Ltd. (supra) [2005 (181) E.L.T. 328 (S.C.)]; wherein the Apex Court, after taking survey of various judgments delivered by it, invoked doctrine of unjust enrichment to deny the benefit of exemption and refund of duty in the following words: 48....