Mecpro Heavy Engineering Ltd. vs Union Of India And Others
2001 Latest Caselaw 398 Del

ORDER

Arijit Pasayat, C.J.

1. Petitioner questions the legality of the action taken by the respondents No.2 and 3 (Commissioner of Central Excise and Superintendent, MOR-XII, MOD-II) requiring payment of duty payable under the Central Excise & Salt Act, 1944 (in short, Excise Act) and the Central Excise Rules, 1944 (in short, the Rules). Petitioner's stand is that acting on the assurance held out by the respondents 2 and 3, it had made a declaration in terms of Kar Vivad Samadhan Scheme, 1998 (in short, the Scheme)(Chapter-IV OF Finance (No.2) Act, 1998 (in short, the Finance Act).

2. After such declaration there was no scope for any demand as has been done. According to respondents, the scheme has no application to petitioners' case and therefore the demand in order. Background facts necessary for adjudication of the controversy are essential as follows.:-

A show-cause notice dated 18th March, 1996 was issued by the Commissioner Central Excise & Customs, Jaipur (in short, the Commissioner) alleging evasion of duty. Allegation essentially was to the effect that a concern, namely, M/S Ganga Nagar Refinery Pvt Ltd concluded with the petitioner in the manufacture and clearance of goods without paying central excise duty and such action was in contravention of the Rules, more particularly, Rule 9(1), 49, 52A, 53, 173B, 173C and 173F, 173G and 226 with Section 6 of the Act. The Commissioner was also of the view that the petitioner was liable to penalty under Rule 209 of the Rules. The petitioner submitted its show-cause reply. By order dated 5-9-1998, the Commissioner held that petitioner was to pay Rs. 1,24,200/- under Section 11A(2) of the Act read with Rule 9(2) of the Rules. Penalty of Rs. 1,24,200/- was levied under Rule 173Q of the Rules along with interest at the rate of 20% of the central excise duty. There was no challenge to order of adjudication. The Scheme came info force with effect from 1st September, 1998. A declaration was filed by petitioner seeking benefit of the Scheme. In the declaration filed under Section 89 of the Finance Act in Form No. 1B, a statement under verification, inter alia, was made to the following effect by the petitioner:-

"I am not disqualified in any manner from making a declaration under the Scheme with reference to the provision of Section 95 of Finance (No. 2) Act, 1998."

3. Petitioner's stand is that after acceptance of the declaration, the respondents were precluded from taking any action for nullifying the effect of the certificate of intimation under Section 90(1) of the Finance Act read with the Scheme. It is not in dispute that after making the declaration, the petitioner had in fact deposited requisite amount of duty. Respondents were of the view that the petitioner had made a false declaration that it did not have any disqualification in terms of Section 95 of the Finance Act. It is their stand that the conditions requisite for bringing in application of Scheme were not present. Such action is the subject matter of challenge, as indicated above.

4. Learned counsel for the petitioner submitted that the declaration was filed by the petitioner acting on the assurance held out by the authorities and therefore denial of the benefit available under the Scheme is uncalled for the arbitrary. Reference is made to several letters stated to have been issued by the Commissioner asking the petitioner to take advantage of the Scheme. Learned counsel for the respondent, on the other hand, submitted that the Scheme was not applicable to the petitioner, more particularly, in view of Clause 95(i)(c), as no appeal against the order dated 5-9-1998 was filed. It is stated that the petitioner cannot take any advantage of stereotyped letter issued to several persons informing them about promulgation of the Scheme and requesting them to take advantage of the beneficial provisions.

5. In order to appreciate rival contentions, a few provisions need to be noted in the background of the object which led to introduction of the Scheme.

Section 88 provides for settlement of tax payable. Section 89 provides for particulars to be furnished in a declaration under Section 88. The Memorandum to the Finance (No.2) Bill, 1998 (see[1998] 231 ITR (St.) 262), explains the scheme as follows:

The Kar Vivad Samadhan Scheme seeks to provide a quick and voluntary settlement of tax dues outstanding as on 31-3-1998, both various direct tax enactments as well as indirect taxes enactments by offering waiver of the part of the arrear taxes and interest and providing immunity against institution of prosecution and imposition of penalty. The assessed on his part shall seek to withdraw appeals pending before various appellate authorities and courts. The Scheme comes into force on the force on the force on the first day of September, 1998, and ends on the 31st day of December, 1998,it will have the following salient features.

The scheme is applicable to tax arrears outstanding as on 31-3-98 under various direct tax enactments and indirect tax enactments. The amount payable by the applicants termed as declarants shall be determined as under:

(a) Indirect taxes:

Under indirect taxes the amount payable shall be 50% of the tax arrear and including interesting payable, fine or penalty levied.

A person desiring to avail of the Scheme is required to file a declaration in the prescribed form before the designated authority notified for this purpose. The designated authority shall pass an order within sixty days of the declaration determining the amount payable in accordance with the provisions of the Scheme and grant a certificate indicating the particulars of tax arrears and the sum payable and intimate the same to the declarants. The declarants will pay the sum payable as determined by designated authority within thirty days of the passing of such order. The order passed by the designated authority shall be conclusive and shall not be reopened in any other proceedings or under any law for the time being in force. Where the declarants has filed an appeal or reference before any authority, tribunal or court, notwithstanding anything contained in any other provision of law for the time being in force, such appeal, reference or reply shall be deemed to have been withdrawn. Where writ petitions have been filed before the High Court or the Supreme Court the declarants shall move an application for withdrawing such petitions and furnish the proof of the same along with the intimation. Any amount paid in pursuance of declaration made under the Scheme shall not be refundable under any circumstances.

The designated authority shall, subject to the conditions provided in the Scheme, grant immunity form prosecution or penalty under the relevant Acts in respect of matters covered in the declaration.

The Scheme shall not be applicable in respect of tax arrears in the following cases:

(a) In respect of direct taxes-

(i) in a case where prosecution for concealment has been launched under any direct tax enactment;

(ii) in a case where the Settlement Commission has passed the order on disputed income;

(iii) in a case where no appeal or reference is pending before any appellate authority or court or revision application before the Commissioner.

(b) In respect of indirect tax enactments-

(i) in a case where prosecution has been launched under any indirect enactment;

(ii) in a case where show-cause notice or notice of demand under Customs Act or the Central Excise Act has not been issued.

(C) In respect of a person against whom prosecution for any offence punishable under Chapter IX and Chapter XVII of the Indian Penal Code, the Narcotics Drugs and Psychotropic Substances Act, 1985, the Terrorist and Disruptive Activities (Prevention) Act, 1987, or the Prevention of Corruption Act, 1988, has been instituted.

(d) In respect of a person against whom an order of detention has been made under the conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

(e) In respect of a person notified under sub-section (2) of section 3 of the Special Court (Trial of Offences Relating to Transaction in Securities) Act, 1992."

6. The expression "disputed tax" is defined in Section 87(f). Learned counsel for the petitioner urged that it is the disputed tax aspect which is relevant and merely because an appeal has not been preferred against the order confirming the show-cause notice, that cannot be a ground to deny the benefits to the petitioner.

7. The bar to the applicability of the Scheme, as contained in Section 95(i)i

(c), has great relevance so far as the present controversy is concerned. The said provision reads as under:-

95. The provisions of this Scheme shall not apply-

(i) in respect of tax arrear under any direct tax enactment-

(a) xxx xxx xxx

(b) xxx xxx xxx

(c) to 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 on the date of filing of declaration or no application for revision is pending before the Commissioner on the date of filing declaration."

Obviously, therefore, the provisions of Section 95(1)(c) do not operate when there is no appeal or challenge to the order of original authority. On a bare reading of the provisions contained in Section 95(1)(c), it is clear that unless requisite conditions as clearly spelt out in the provisions are complied, the Scheme shall not apply. Once it is held that the Scheme does not apply to a particular case, the scope and ambit of expression 'disputed tax', as appearing in the Scheme, has actually no relevance. The object of the Scheme has been spelt out by this Court in All India Federation Of Tax Practitioners vs. Union of India, (1999)236 ITR 1. The scheme seeks to provide a quick and voluntary settlement of tax dues outstanding as on 31-3-1998, both under the 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. Once the conditions requisite for making the Scheme applicable are partially and or fully absent, the Scheme does not become operative. If the Scheme is not operative, other questions as regards definition of various expressions, like 'disputed tax' and/or effect there of become inconsequential. Reliance was placed on a decision of Madras High Court in Rajam Pictures Circuity v. CIT by the petitioner. On a reading of the judgment it is clear that the said decision has no relevance to the facts of the present case and the dispute involved in that case was on conceptually different character. In view of the admitted position that there was no challenge to the order dated 59-1998 before appellate forum, the Scheme had no application.That being the position, the authorities were within their jurisdiction in ignoring the declaration filed under Section 88 and issuing the impugned notices of demand. Writ petition is without merit and the same is dismissed.