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2000 DIGILAW 146 (KER)

Onkar v. Union of India

2000-03-07

A.R.LAKSHMANAN, S.SANKARASUBBAN

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Judgment :- S. Sankarasubban, J. All these Original Petitions were referred to Division Bench by K.S. Radhakrishnan (J), since according to the learned Single Judge, the question raised by the petitioner in these matters is of considerable importance which will have far reaching consequences. Petitioners in these Original Petitions seek a declaration that Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998 is ultra vires of Art.14 of the Constitution of India. In the alternative they pray for a declaration that they are also covered by the above mentioned order notwithstanding that show cause notices have been adjudicated upon in relation to them. 2. Since the facts are the same, we shall refer to the facts in O.P.No. 13806 of 1999. The petitioner in that Original Petition is the Vice Chairman and Managing Director of Apollo Tyres Ltd. Apollo Tyres Ltd. is a company incorporated under the Companies Act, 1956. Respondent No.1 is the Union of India, Respondent No. 2 is the Designate Authority under the Kar Vivad Samadhan Scheme, 1998 and Respondent No. 3 is the Commissioner of Central Excise. Government of India announced the Kar Vivad Samadhan Scheme (hereinafter referred to as "the scheme"). The Scheme is contained in S.86 to S.98 of the Finance (No. 2) Act, 1998. The object of the Scheme as stated when the Finance Bill 1998 was introduced is as follows: "Litigation has been the bane of both direct and indirect taxes. A lot of energy of the Revenue Department is being frittered in pursuing larger number of litigation's pending at different levels for long periods of time. Considerable revenue also gets locked up in such disputes. Declogging the system will not only incentivise honest tax payers, enable Government to realise its reasonable dues much earlier but coupled with administrative measures, would also make the system more user-friendly. I therefore, purpose to introduce a new scheme called Samadhan". 3. The Scheme applies to indirect taxes also. As per S.87(a)(ii) of the Scheme amount of duties, cesses, interest, fine or penalty determined as due or payable under the enactment as on 31st day of March 1998 but remaining unpaid as on the date of making a declaration under S.88 would fall within the scheme. S.89 of the Scheme deals with particulars to be furnished in the declaration. S.90 deals with time and manner of payment of tax arrear. S.89 of the Scheme deals with particulars to be furnished in the declaration. S.90 deals with time and manner of payment of tax arrear. S.91 of the Scheme deals with immunity from prosecution and imposition of penalty. S.96 of the Scheme deals with the power of the Central Government to issue directions and S.97 of the Scheme deals with power to remove difficulties in regard to the Scheme. The facts regarding the case is as follows: The 2nd respondent issued a show cause notice dated 30th July, 1996 to the petitioner, the Company and other Directors as to why penalty should not be levied under R.173 Q and R.209A of the Central Excise Rules, 1944. Petitioner as well as the Company replied to the show cause notice on 17th November, 1997. By a common order dated 8.5.1998 Respondent No. 3 inter-alia imposed a penalty of Rs. 2 lakhs on the petitioner as well as other parties to the case. Aggrieved by the order, petitioner filed an appeal together with an application for dispensing with pre-deposit and stay before the Customs Excise and Gold (Control) Appellate Tribunal, Chennai on 22nd July 1998. The said appeal and stay application has been numbered as E/1812/98 and E/Stay/1292/98 respectively. The Company also preferred an appeal as E/1774/98 and stay application E/Stay/1250/98 before the Tribunal. The Tribunal by its common order dated 10th August 1998 in all the connected appeals and stay applications directed that a sum of Rs. 50 lakhs be deposited by the company and on such deposit being made balance duty and penalties imposed on the company and officers including the petitioner stand waived and recovery thereof stayed. 4. The Kar Vivad Samadhan Scheme came into force on 1st day of September, 1998. S.88 of the Scheme states that, subject to the provisions of this Scheme, where any person makes, on or after the 1 st day of September, 1998 but on or before the 31st day of December, 1998, a declaration to the designated authority in accordance with the provisions of S.89 in respect of tax arrear payable under the indirect tax enactment it can be settled at the rate of 50% of the amount of such fine, penalty or interest, due or payable as on the date of the making of the declaration under S.88. S.92 of the Scheme says that no appellate authority shall proceed to decide any issue relating to the disputed chargeable expenditure, disputed chargeable interest, disputed income, etc., specified in the declaration and in respect of which an order had been made under S.90 by the designated authority or the payment of the sum determined under that Section. S.87 with regard to tax arrear states as follows: The Scheme will apply to amount of duties, cesses, interest, fine or penalty 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 S.88. 5. On 8th December, 1998 the first respondent issued what is called Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998. This Order is dated 8th December, 1998. It is produced as Ext. P3 in the case. As per Clause 1(2) of the Order, it shall be deemed to come into force on the 1st day of September, 1998. We are concerned with Clause 2 of the above Order. Clause 2 of the Order states that, where a declaration to the designated authority has been made in respect of tax appear in relation to indirect tax enactment for 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 show cause notice issued on or before the 31st day of March, 1998 but remaining unpaid, and pending determination on the date of making a declaration, and where, in respect of the same matter stated in the said declaration, a show cause notice has also been issued to any other person and is pending adjudication on the date of making the declaration, then, no civil proceeding for imposition of fine, penalty or penalty shall be proceeded with against such other person. In the Explanatory Memorandum of Ext. P3, it is stated as follows: Under the Kar Vivad Samadhan Scheme, 1998 attention of the Government has been drawn to the difficulties being encountered in settlement of certain categories of cases of pending show cause notices involving also certain co-noticees against whom penal action is proposed in the same case for the alleged involvement for the irregularities committed by the principal noticee. Having due regard to the aims and objects of the Scheme, the Government have decided to issue an order for removal of difficulties. It has been inter alia clarified that no civil proceedings for imposition of the fine or penalty shall be proceeded with against the co-noticees and in such cases the settlement in favour of the declarant under the scheme shall be deemed to be full and final in respect of other persons also on whom show cause notices were issued on the same matter. 6. According to the petitioners, Ext. P3 order is discriminatory because the said order is not applicable to those cases where show cause notices have been adjudicated and orders have been passed by the Commissioner and the demands have been confirmed and penalties have been levied on Company as well as on the officials of the Company. The show cause notice in the petitioner's case was issued on 30th July, 1996 and was adjudicated along with that of the appeal against adjudication was pending on the date when the Scheme came into force. The company was given the benefit of the Scheme even though adjudication was over and only the appeal was pending. But in the case of the petitioner a different treatment is meted out. The benefit of the scheme is given to those co-noticees with respect to whom the adjudication is not over and the show cause notice is pending for adjudication. Learned counsel for the petitioner, Senior Advocate Sri. Arshad Hidayathulla submitted that this is a case of discrimination because, according to him all the co-noticees belong to the same class and there is no rationale to discriminate among them. Learned counsel further submitted that in any event, since appeals are pending against adjudication proceedings, the words pending adjudication in clause 2 of the Removal of Difficulties Order should be read as to include pending in appeal also. If such an interpretation is made there will be no discrimination. 7. A counter affidavit is filed on behalf of respondents. In the counter affidavit it is stated as follows: Petitioner is not entitled to any of the reliefs prayed for in the Original Petition. Admittedly, the petitioner has availed of the facility offered by the Government of India. If such an interpretation is made there will be no discrimination. 7. A counter affidavit is filed on behalf of respondents. In the counter affidavit it is stated as follows: Petitioner is not entitled to any of the reliefs prayed for in the Original Petition. Admittedly, the petitioner has availed of the facility offered by the Government of India. Once a person accepts and submit himself to the scheme and takes a chance before adjudicating authority, he cannot turn around and attack the scheme itself. In paragraph 3 of the counter it is stated that, under the Kar Vivad Samadhan Scheme, cases where show cause notices issued as on 31.3.1998 and which were not adjudicated as on the date of making a declaration during the operation of the Scheme were permitted to avail the benefits under the Scheme in terms of provisions of S.87(m)(ii)(b) of the Finance (No.2) Act, 1998. However, a problem arose before the Government as to whether show cause notices issued to co-noticees proposing penal action will, survive in the event of the Principal noticee avails the benefit under the Scheme. The further question was whether any proceedings that can be initiated against the co-noticees in the absence of the principal noticee participating in a quasi-judicial proceedings shall be violative of principles of natural justice. Taking note of these difficulties, the Government thought it fit to extend the benefits under the Kar Vivad Samadhan Scheme to the co-noticees in the show cause notice, once the principal noticee avails the benefits under the Scheme. However, this facility was not extended to the co-noticees in whose cases the adjudication proceedings were completed and orders confirming demand of payment/ penalty was quantified by the adjudicating authority on the day of filing a declaration under the Kar Vivad Samadhan Scheme. It is further stated that petitioner having submitted to the adjudicating authority had an opportunity to explain his case and got himself exonerated completely. It is also stated that petitioner is not entitled to, legally or normally, challenge the Removal of Difficulties Order as violative of Art.14 of the Constitution of India. 8. Learned counsel for the petitioners cited before us certain decisions to show that there is violation of Art.14 of the Constitution of India. It is also stated that petitioner is not entitled to, legally or normally, challenge the Removal of Difficulties Order as violative of Art.14 of the Constitution of India. 8. Learned counsel for the petitioners cited before us certain decisions to show that there is violation of Art.14 of the Constitution of India. The decisions reported in Vishundas Hundumal v. State of M.P. (AIR 1981 SC 1636), Union of India v. Indian Charge Chrome (1999 (34) RLT 355 (SC)), Devi Match Factory & Ors. v. Superintendent of Central Excise, Sattur ((1983 ELT 99 (Mad.)), Sree Annapaorna v. State of Tamil Nadu (1996 (63) STC 18 (Mad.)) and certain other decisions are relied on by the counsel for the petitioners. 9. As already stated, counsel for the petitioners raised two contentions. According to him, provisions of Clause 2 of Kar Vivad Samadhan Scheme should be declared as discriminatory in so far as it does not give the benefit to co-noticees with regard to whom the adjudication is over. Further contention was that expression "is pending adjudication" appearing in clause 2 of Ext. P3 should be interpreted to take any proceedings where appeals are also pending. 10. The object of the Scheme appears to be to shorten the litigation and settle the dispute between the parties. It is with this end in view, the Scheme has been promulgated. Tax arrears has been defined with regard to indirect enactment as the amount of duties, cesses, interest etc., 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 S.88. Under S.88 of the Scheme, where a person makes a declaration to the designate authority in accordance with the provisions of S.89, then the liability shall be discharged as per the Scheme. It can be seen that so far as the Sections were concerned, no distinction is there made with regard to a principal noticee or a co-noticee. All are entitled to get the benefit of the Scheme whether the matter is pending in appeal or not. The Removal of Difficulties Order was issued because where the principal noticee had settled the matter under the scheme, what should be done with regard to the co-noticee. It is in that context, Ext. P3 was issued. In Ext. All are entitled to get the benefit of the Scheme whether the matter is pending in appeal or not. The Removal of Difficulties Order was issued because where the principal noticee had settled the matter under the scheme, what should be done with regard to the co-noticee. It is in that context, Ext. P3 was issued. In Ext. P3, it is stated that such co-noticees are entitled to the benefit of the Scheme provided the show cause notice is pending adjudication on the date of making of the declaration. In the explanatory note, it is stated that a settlement in favour of the declarant under the Scheme shall be deemed to be full and final in respect of other persons also on whom show cause notices were issued on the same matter. Sri. K.Ramakumar for the respondent, argued that petitioners' cannot compel as to how the Government should extent the benefit of the Scheme. According to Sri. K. Ramakumar it is only in cases where show cause notices are pending adjudication, that the benefit of the Scheme can be given. 11. Before we try to interpret Ext. P3, we have to find out the meaning of the expression "is pending adjudication". Now, before any action is taken under the Excise laws or under the Direct Tax Laws, notices are issued to the parties by the primary authority. The primary authority then considers the matter and dispose of the same by his order. It is a known fact that most of these Acts provide remedies against the orders passed by the primary authority. Appeals, Second Appeals or Revisions are provided against final orders. It is also a fact which does not require any proof that an appeal is a continuation of the original proceedings. Even though in appeal what the Appellate Authority considers is the correctness or otherwise of the order passed by the Primary Authority, the entire matter is before the Appellate Authority and in that sense we can say that the adjudication has not become final and is pending consideration. It can also be said that what is pending before the Appellate Authority is the adjudication of the show cause notice. 12. A similar question arose before the Hon'ble Supreme Court in the decision reported in Mathew M. Thomas v. Commissioner of Income Tax, 1999 (IJI) ELT 4 (SC). It can also be said that what is pending before the Appellate Authority is the adjudication of the show cause notice. 12. A similar question arose before the Hon'ble Supreme Court in the decision reported in Mathew M. Thomas v. Commissioner of Income Tax, 1999 (IJI) ELT 4 (SC). The facts of the case are as follows: The appellants in that case purchased certain lands with buildings in 1997 for a sum of Rs. 2,45,000/-. The Inspector of Income Tax valued the properties at Rs. 3,24,000/- and the Departmental Valuation Officer valued them at Rs. 7,24,000/-. The Inspecting Assistant Commissioner, Acquisition Range, Ernakulam ordered acquisition of the property on 31.3.1981. The appellants filed an appeal to the Tribunal by order dated 31.10.1981. The appeal was allowed and the proceedings were cancelled. As against the said order, the Revenue filed an appeal under S.269H before the High Court of Kerala. During the pendency of the Appeal Chapter XX-C was introduced in the Income Tax Act. The Central Board of Direct Taxes issued a Circular which reads as follows: "With a view to achieve early finalisation of proceedings, under the existing Chapter XX-A of the Income Tax Act, 1961, the Board has decided that with effect from April, 1986, acquisition proceedings under S.269 C will not be initiated in respect of an immovable property for which the apparent consideration is Rs. 5 lakhs or less and that where acquisition proceedings have been initiated by issue of notice under S.2691), the proceedings will be dropped if the apparent consideration of the immovable property is below Rs. 5 lakhs." When the appeal was taken up by the High Court, the appellants therein contended that the acquisition proceedings has to be dropped as the consideration was only Rs. 2,45,000/-. This was referred to a Full Bench of the High Court for decision. The Full Bench opined that the Circular was not applicable to the case on hand as the acquisition proceedings were over. It is the appeal against that decision which was . considered by the Hon'ble Supreme Court. Srinivasan, J. speaking for the Bench held as follows: It is well settled that the word "proceedings" shall include the proceedings in the appellate stage. It is the appeal against that decision which was . considered by the Hon'ble Supreme Court. Srinivasan, J. speaking for the Bench held as follows: It is well settled that the word "proceedings" shall include the proceedings in the appellate stage. Their Lordships quoted the judgment of the Supreme Court in Garikapati Veeraya v. N. Subiah Choudhry & Ors., AIR 1957 SC 540, that the legal pursuit of a remedy, suit, appeal and second appeal are really but steps in a series of proceedings, all connected by an intrinsic unity and are to be regarded as one legal proceedings. 13. Thus the expression "is pending adjudication" should be interpreted to take in also cases where appeals against adjudication proceedings are also pending. In that case, petitioners will be entitled to the benefit of the Scheme and their claims cannot be rejected because the matter is pending in appeal. 14. Considering the above circumstances, we allow the Original Petitions, declare that co-noticees like the petitioners are also covered by the Order dated 8.12.1998 notwithstanding the fact that the show cause notice has been adjudicated upon in relation to the co-noticee as well as the declarant under S.90(1) of the Finance Act, 1998. The amount deposited by the petitioners (stated to be Rs.1 lakh) will be refunded to the petitioner within a period of two months from today. If it is not refunded within two months then it will carry an interest of 18% from the date of judgment till the date of refund.