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provisions of Kar Vivad Samadhan Scheme (for short, the 'Scheme') =The Scheme also provided the procedure to take benefit thereof. It required an assesakesee to m a declaration to the designated authority in respect of tax arrears and pay the amount payable under the Scheme to conclude in proceeding with respect to the recovery of such tax arrears. For the purpose of taxes payable under indirect tax enactments, the rates at which the settlement would be made are specified in Section 88(f) of the 1998 Act. For our purposes, crucial provision is Section 95(ii) which made the scheme inapplicable, in respect of indirect tax enactments, in the following cases: “(a) In a case where prosecution for any offence punishable under any provisions of any indirect tax enactment has been instituted on or before the date of filing of the declaration under Section 88, in respect of any tax arrears of such case under such indirect tax enactment. (b) In a case where show-cause notice or a notice of demand under any indirect tax enactment has not be issued. (c) 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.”=. Admittedly, the appeal of M/s. Amar Steel Industries, was still pending before the Division Bench when the Scheme was promulgated by the Legislature and the declaration was filed by the appellants. The said assessee has subsequently been permitted to avail of the Scheme. Therefore, prima facie it appears that mischief of clause (c) is not attracted. In any case it is not necessary to go into this aspect in detail, for another simple reason it needs to be remarked that the Revenue had not rejected the declarations filed by the appellants on this ground. It is the Division Bench of the High Court, in the impugned judgment, which has held against the appellants on this account. It is also very pertinent to point out that in the counter affidavit filed by the Revenue in the instant appeal, the Revenue appears to have given up this contention as the impugned order of the High Court is not defended on this ground at all. The aforesaid discussion leads us to conclude that the impugned judgment of the High Court is erroneous and warrants to be set aside. We, accordingly, allow these appeals, set aside the impugned order and hold that the appellants shall be entitled to the benefit of Kar Vivad Samadhan Scheme. No costs.

                                                                  REPORTABLE

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 7570 OF 2004


|M/S. SWASTIKA ENTERPRISES & ANR.           |.....APPELLANT(S)            |
|VERSUS                                     |                             |
|COMMISSIONER OF CUSTOMS & ORS.             |.....RESPONDENT(S)           |


                                   W I T H
                        CIVIL APPEAL NO. 7571 OF 2004


                               J U D G M E N T


A.K. SIKRI, J.
                 The question of law which arises in these  two  appeals  is
identical which concerns the interpretation that is to be  accorded  to  the
provisions of Kar Vivad Samadhan Scheme (for short, the 'Scheme')  that  was
introduced under Chapter IV of the Finance (No.2) Act of  1998  (hereinafter
referred to as the '1998 Act') and is contained in Sections 86 to 98 of  the
said Act.  In particular, it is Section  95(ii)(b)  of  the  1998  Act  that
becomes the focus of the issue and the meaning that is  to  be  assigned  to
the said clause would be the determinative of the outcome  of  the  dispute.
It has arisen under the following circumstances (facts are taken from  Civil
Appeal No. 7570 of 2004 for the sake of convenience):

The appellants carry on the business, inter alia,  of  importing  old  ships
for the purpose of ship breaking and disposing of the scrap. In  1993,  they
imported a vessel called M.V. Pablo Metz and for clearance of  these  goods,
filed the Bill  of  Entry  under  Section  46  of  the  Customs  Act,  1962.
Although the appellants contended that the said  import  was  exempted  from
levy of 'additional customs duty'  under  an  exemption  Notification  dated
February 28, 1993, the Customs authorities, after  hearing  the  appellants,
felt it otherwise.  An endorsement  on  the  Bill  of  Entry  was  made  for
payment of additional customs duty of ?52,20,000 in addition  to  the  basic
customs duty.  The said endorsement was made  under  Section  47  read  with
Section 153 of the Customs Act and required the appellants to  make  payment
of  the  amount  assessed  within  7  days,  failing  which   interest   was
chargeable.

This levy was challenged by the appellants  by  means  of  a  writ  petition
before the High Court of Calcutta, which was disposed of by the  High  Court
with a direction to the appellants to submit a bank  guarantee  for  50%  of
the disputed amount and a personal bond for the balance 50%.

It so happened that in the meantime, one  M/s.  Amar  Steel  Industries  had
succeeded in the writ petition filed by the said assessee on the same  point
as the learned Single Judge of the Calcutta High Court had allowed its  writ
petition  vide  order  dated  April  16,  1993.  However,  the  Revenue  had
preferred appeal against the said judgment, which  was  pending  before  the
Division Bench.  The Division Bench had passed an interim  order  dated  May
17, 1993 staying the operation of the judgment of the Single Judge  and,  at
the same time, had also given certain directions.

When the writ petition of the appellants was taken up for consideration  and
disposed of by the learned Single Judge on  July  20,  1993,  the  aforesaid
events in the case of M/s. Amar Steel Industries were taken  cognizance  of.
Thus, while disposing of the writ petition and directing the  appellants  to
submit bank guarantee of 50% of the disputed amount and a personal bond  for
the balance 50%, the learned Single Judge  observed  that  he  case  of  the
appellants would abide by the result of the appeal of  the  Revenue  in  the
case of M/s. Amar Steel Industries.

During the pendency of the appeal, the Union of India introduced the  Scheme
contained in Sections 86 to 98 of the 1998 Act.   The  Scheme  provides  for
settlement of disputes relating to tax arrears both  for  direct  taxes  and
indirect taxes.  So far as indirect tax is concerned, Section 87(m)(iii)  of
the 1998 Act defines 'tax arrear' in respect of which the Scheme was  to  be
applied.  It reads as follows:
“(a) the amount of duties (including drawback of duty,  credit  of  duty  or
any amount representing duty), cesses, 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 a  declaration  under  section
88; or

(b)  the amount of duties (including drawback of duty,  credit  of  duty  or
any amount representing duty),  cesses,  interest,  fine  or  penalty  which
constitutes the subject matter of a demand notice  or  a  show-cause  notice
issued on or before the 31st day of  March  1998  under  the  enactment  but
remaining unpaid on the date of making a declaration under section  88,  but
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, the tax arrear  shall  not  include  the  duties  on  such
seized  goods  where  such  duties  on  the  seized  gods  have   not   been
quantified.”

The Scheme  also  provided  the  procedure  to  take  benefit  thereof.   It
required an assessee to make a declaration to the  designated  authority  in
respect of tax arrears and pay  the  amount  payable  under  the  Scheme  to
conclude in proceeding with respect to the recovery  of  such  tax  arrears.
For the purpose of taxes payable under indirect tax  enactments,  the  rates
at which the settlement would be made are specified in Section 88(f) of  the
1998 Act.  For our purposes, crucial provision is Section 95(ii) which  made
the scheme inapplicable, in respect  of  indirect  tax  enactments,  in  the
following cases:
“(a)  In a case where prosecution  for  any  offence  punishable  under  any
provisions of any indirect tax enactment has been instituted  on  or  before
the date of filing of the declaration under Section 88, in  respect  of  any
tax arrears of such case under such indirect tax enactment.

(b)  In a case where show-cause notice or  a  notice  of  demand  under  any
indirect tax enactment has not be issued.

(c)  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 appellants opted  to  avail  of  the  Scheme  and  filed  a  declaration
accordingly.  However, the  designated  authority  passed  the  order  dated
February 13, 1999 thereon whereby he rejected the declaration on the  ground
that in the appellants' case, no show-cause notice/demand  notice  had  been
issued and, therefore, by virtue of Section 95(ii)(b), the  Scheme  did  not
apply.

The appellants challenged the  order  dated  February  13,  1999  by  filing
another writ petition before the High Court.   The  appellants  also  prayed
for quashing of Section 95(ii)(b) of the 1998 Act if  it  was  construed  as
requiring a notice of payment to be issued  in  any  particular  form.   The
learned Single Judge allowed the writ petition by his judgment  dated  April
19, 1999 holding that the said endorsement on the Bill of Entry  constituted
sufficient notice of demand to attract the Scheme.

The Revenue filed intra-court appeal before the Division  Bench  questioning
the validity of the judgment of the learned Single Judge.  In  this  appeal,
the Revenue has succeeded as the Division Bench has reversed  the  order  of
the Single Judge by means of its judgment dated August  28,  2003  resulting
in dismissal of the writ petition of the appellants and affirming the  order
of the designated authority rejecting  the  declaration  of  the  appellants
holding that the appellants were not entitled to take  the  benefit  of  the
Scheme under Section 95(ii) of the 1998 Act.  The Division Bench has gone  a
step further in rendering the impugned  judgment  as  according  to  it  the
declaration filed by the appellants was not  only  hit  by  clause  (b)  but
clause (c) of Section 95(ii) as well.  It has held that neither  clause  (b)
or (c) of Section 95(ii) of the 1998 Act is attracted inasmuch as there  was
no show-cause notice or  notice  of  demand  issued  in  the  instant  case.
Further, no appeal or reference or  writ  petition  of  the  respondent  was
admitted or pending before any authority mentioned in clause (c) above.
            This is how the matter has landed up in this Court.

From the facts noted above, it is clear  that  on  the  import  of  the  old
vessel, the appellants had filed Bill of  Entry  under  Section  46  of  the
Customs Act.  The appellants claimed exemption from  payment  of  additional
custom duty.  This stand of the appellants was not accepted  resulting  into
an endorsement by the  Revenue  asking  the  appellants  to  pay  additional
customs duty of ?52,20,000. According to the  appellants,  this  amounts  to
notice of demand within the meaning of clause (b) of Section 95(ii).  It  is
also the case of the appellants that though technically  the  writ  petition
filed by the appellants challenging the aforesaid  additional  customs  duty
was disposed of by the High Court on July 20, 1993, the order of  Court  was
categorical, namely, the result of the appellants' case was  made  dependant
upon the outcome of the appeal which was preferred by  the  Revenue  in  the
case of M/s. Amar Steel Industries and in that sense the  matter  was  still
pending.

On the aforesaid  facts,  we  have  to  examine  whether  the  case  of  the
appellants is covered by clause (b) and/or clause (c) of Section  95(ii)  of
the 1998 Act, thereby making them ineligible to utilise the benefit  of  the
Scheme.

Insofar as clause (b) of Section 95(ii) is concerned, it is the case of  the
appellants that endorsement on the Bill of Entry to pay  additional  customs
duty amounted to raising demand for payment of duty.   On  the  other  hand,
the Revenue argues that the demand stands crystallized only when there is  a
show-cause notice issued under Section 28  of  the  Customs  Act  and  after
following the procedure the adjudicating authority passes an  order  on  the
said show-cause notice holding that customs duty or additional customs  duty
is payable and on that basis notice of demand  is  issued.   It  was,  thus,
argued that since no such steps were taken in the instant  case,  it  cannot
be said that any show-cause  notice  was  issued  (which  was  the  admitted
position)  or  notice  of  demand  was  given.   It  was  also  argued  that
endorsement on Bill of Entry will be regarded, at the  most,  a  provisional
assessment.

Having regard to the facts of this case,  it  is  difficult  to  accept  the
contention of the Revenue predicated on the provisions of Section 28 of  the
Customs Act.  Section 28 deals with recovery of dues  not  levied  or  short
levied or erroneously refunded or where any interest payable  has  not  been
paid, part paid or erroneously refunded.  In such  circumstances,  within  a
period of one year from the relevant date, appropriate officer is  competent
to serve a notice on the person chargeable with the duty or  interest  which
has not been so levied or which has been short levied or short  paid  or  to
whom the refund is has erroneously been made, requiring  him  to  show-cause
why he should not pay the amount specified in the  notice.   Therefore,  the
contingency of issuing show-cause notice under this  provision  would  arise
where the duty has not been paid either  on  the  ground  that  it  was  not
levied at all  or  was  short  levied.   Another  reason  for  invoking  the
provision would be  where  duty  has  been  erroneously  refunded.   Such  a
situation did not arise in the instant case.  Moreover, we have  to  examine
the mater in the light of the provision of this Scheme.   In  this  context,
we would like to refer to the judgment of this Court in Union  of  India  v.
Nitdip Textiles Processors[1] wherein it is held that  under  the  following
circumstances the amount payable shall be treated as 'tax arrears':
(i)   where tax arrears are quantified but not paid as on 31.03.1998, and
(ii)   where  a  demand  or  show-cause  notice  has  been   issued   before
31.03.1998.

Thus, it becomes abundantly clear that the 'tax arrear' had, in  any  event,
been quantified and had not been paid as on March 31, 1998.  Moreover,  when
the Bill of Entry was filed by the appellants, after examining  the  matter,
endorsement  was  made  thereupon  that  additional  duty  in  the  sum   of
?52,20,000 is payable.  The appellants contested the same.  The question  is
whether it amounts to notice of demand.  In this behalf, we have to keep  in
mind that the 1998 Act does not contain any specific  provision  prescribing
the manner in which customs duty would be assessed or  demanded  in  respect
of  goods  imported  under  a  Bill  of  Entry  for  home  consumption.   An
endorsement on the Bill of Entry and return thereof to the  importer  asking
the importer to pay the amount therein would amount  to  issuing  a  demand.
On our specific query to the learned counsel for the  Revenue  that  if  the
importer does not deposit the amount within the specified time on  receiving
the endorsement on the Bill  of  Entry,  whether  interest  thereupon  shall
start accruing, the learned counsel for the Revenue was candid in  answering
the said question in the affirmative.  In fact, that is the  legal  position
contained in Section 46(1) read with  Section  47(2)  of  the  Customs  Act.
Under Section 46(1) (as it then stood), there was an obligation on the  part
of the importer to present a Bill of Entry in such cases.  Section 47(2)  of
the Customs Act provides that in case there is a failure to pay  the  import
duty within a specified period from the date  on  which  Bill  of  Entry  is
returned to the importer, it  would  attract  interest  until  the  date  of
demand.  At the relevant time, the demand was required to be made  within  7
days.  Otherwise, interest was payable, which was to be  fixed  between  20%
and 30% per annum.  It may be mentioned that fundamentals of this  provision
still remain intact although rate of interest and the  period  within  which
the demand is to be paid has been amended from time  to  time  {as  per  the
amended provision which prevails  now,  the  only  difference  is  that  the
demand is to be  met  within  2  days,  excluding  holidays,  failing  which
interest payable is at a rate between 10% and 36% per annum}.   Section  153
of the 1998 Act also becomes  relevant  as  it  clarifies  that  any  order,
decision, summons or notice under the Act may be served by tendering  it  to
the person or to whom it is intended or to his agent.  In the instant  case,
after the endorsement on Bill of Entry, it was admittedly  served  upon  the
appellants in the manner specified under Section 153.

In Renuka Datla (Dr.) v. Commissioner  of  Income  Tax,  Karnataka[2],  this
Court widely  interpreted  the  term  'total  tax  determined  and  payable'
appearing in Section 87(f) of the Scheme holding that no particular  process
of determination is contemplated.  It has to  be  held  that  on  principle,
same meaning is to be accorded to the term 'determined as  due  or  payable'
in Section 87(m)(ii)(a) of the Scheme.

There is another manner of  looking  into  the  matter.   Immediately  after
receiving the Bill of Entry with  the  endorsement  to  pay  the  amount  of
?52,20,000, the appellants  filed  the  writ  petition  in  the  High  Court
disputing the same with the contention that it was not  payable.  Obviously,
it was a demand raised by way of endorsement  on  the  Bill  of  Entry  that
prompted the appellants to challenge the same by filing the  writ  petition.
The Revenue never took the plea that the case was  premature  in  the  sense
that no demand had been crystallized in the absence of show-cause notice  or
adjudication order and, therefore, such a writ petition was  not  competent.
Thus, both the parties understood that endorsement  on  Bill  of  Entry  and
service thereof upon the appellants was a notice of demand.

Even, with reference to the  provisions  of  the  Scheme,  this  endorsement
shall have to be treated as notice of demand.  We  have  already  reproduced
the provisions  of  Section  87(m)  of  the  1998  Act  which  defines  'tax
arrears'.  It, inter alia, includes the amount of dues remaining  unpaid  as
on the date of making a declaration  under  Section  88  of  the  1998  Act.
Indubitably, there was an amount of duty payable, which had remained  unpaid
on the date of making declaration by the appellants under  Section  88.   It
would be absurd  to  hold  that  though  there  is  a  tax  arrear,  as  the
appellants were liable to pay the tax/duty demanded, and  still  the  Scheme
is inapplicable.

It would also be interesting to note that the Division  Bench  of  the  High
Court in the impugned judgment has itself recorded that 'duty was  assessed'
on the Bill of Entry.  This is so stated  by  the  Revenue  in  the  counter
affidavit filed in the instant proceedings as well.  Therefore,  endorsement
on the Bill of Entry is treated even by  the  High  Court  as  well  as  the
Department as the assessment.

is necIt essary to keep in mind the purpose and  the  objective  with  which
the Scheme was introduced.  It pertained to the 'tax arrears' which was  due
and not paid as on March 31, 1998 and in order to recover such  tax  arrears
expeditiously  without  undergoing  any  legal  hassles,  the   Scheme   was
promulgated. Therefore, when it is found in the  broader  sense  that  there
were tax arrears and the appellants were called upon to pay  the  said  tax,
mischief contained in Section 95(ii)(b) would not be attracted.

We now advert to the second limb of  the  matter,  viz.,  whether  the  case
would come within the embargo set out in clause (c).  From the  facts  noted
above, it is clear that when the High Court had disposed of the  first  writ
petition of the appellants on July 20,  1993,  it  was  explicit  in  making
categorical remarks that the fate of the appellants'  case  would  abide  by
the result of the appeal filed by the Revenue in a similar case  of  another
assessee,  namely,  M/s.  Amar  Steel  Industries.   Thus,  the  appellants'
challenge to the substantive levy of the additional  duty  was  disposed  of
subject to the result of the Revenue's appeal  in  the  case  of  M/s.  Amar
Steel Industries.  Admittedly, the appeal of  M/s.  Amar  Steel  Industries,
was still pending before the Division Bench when the Scheme was  promulgated
by the Legislature and the declaration was filed  by  the  appellants.   The
said assessee has subsequently  been  permitted  to  avail  of  the  Scheme.
Therefore, prima facie it  appears  that  mischief  of  clause  (c)  is  not
attracted.  In any case it is not  necessary  to  go  into  this  aspect  in
detail, for another simple reason it needs to be remarked that  the  Revenue
had not rejected the declarations filed by the appellants  on  this  ground.
It is the Division Bench of the High Court, in the impugned judgment,  which
has held against the appellants on this account.  It is also very  pertinent
to point out that in the counter affidavit  filed  by  the  Revenue  in  the
instant appeal, the Revenue appears to have given up this contention as  the
impugned order of the High Court is not defended on this ground at all.

The aforesaid discussion leads us to conclude that the impugned judgment  of
the High Court is erroneous and warrants to be set aside.  We,  accordingly,
allow these appeals,  set  aside  the  impugned  order  and  hold  that  the
appellants shall be entitled to the benefit of Kar Vivad Samadhan Scheme.
            No costs.

                             .............................................J.
                                                                (A.K. SIKRI)



                             .............................................J.
                                                     (ROHINTON FALI NARIMAN)

NEW DELHI;
AUGUST 04, 2015.
ITEM NO.1A              COURT NO.12               SECTION III
(for jt.)
               S U P R E M E  C O U R T  O F  I N D I A
                       RECORD OF PROCEEDINGS

Civil Appeal  No(s).  7570/2004

M/S. SWASTIKA ENTERPRISES & ANR.                 Appellant(s)

                                VERSUS

COMMNR. OF CUSTOMS, KOLKATA & ORS.              Respondent(s)
WITH
C.A. No. 7571/2004

Date : 04/08/2015 These appeals were called on for judgment
today.

For Appellant(s)
                     Ms. Ruby Singh Ahuja,Adv.

                        Mr. Ashok Kumar Juneja,Adv.
                        Mr. Chand Qureshi,Adv.
                     Mr. R. N. Keshwani,Adv.

For Respondent(s)       Mr. Sanjai Kumar Pathak,Adv.for
                     Mr. B. Krishna Prasad,Adv.


            Hon'ble Mr. Justice A.K.Sikri pronounced the  judgment  of  this
Court comprising of His Lordship  and  Hon'ble  Mr.  Justice  Rohinton  Fali
Nariman.

            The appeals are allowed in terms of the signed judgment.

            No costs.



|   (SUMAN WADHWA)                 |         (SUMAN JAIN)              |
|AR-cum-PS                         |COURT MASTER                       |


      Signed Reportable judgment is placed on the file.


                           -----------------------
[1]   (2012) 1 SCC 226
[2]   (2003) 2 SCC 19

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