Full Judgment Text
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REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).2820/2007
M/S. NRC LIMITED APPELLANT(S)
VERSUS
UNION OF INDIA & ORS. RESPONDENT(S)
J U D G M E N T
A.K.SIKRI, J.
The appellant herein had imported Caprolactum for use in
manufacture of Nylon Tyre Cord sometime in May, 1986. The appellant
filed the Bill of Entry declaring the value of goods on which the
import duty was payable. The Customs Authorities, however, took the
view that in addition to normal duty, additional duty under the
Customs Tariffs Act, 1975 @ of 15% ad valorem on CIF price and
also on the basic and auxiliary custom duty and landing charges on
goods imported by the appellant was also payable. The appellant, on
the other hand, took the position that the additional duty was
payable only on CIF value of goods.
The decision of the Customs Authority was challenged by the
appellant by filing writ petition No. 1174 of 1986 in the High
Court of Bombay seeking order restraining Customs Department from
Signature Not Verified
Digitally signed by
ASHWANI KUMAR
Date: 2015.10.29
17:57:46 IST
Reason:
levying and/or recovering the additional duty on basic and
auxiliary custom duty and landing charges. In this writ petition,
interim order dated 02.05.1986 was passed by the Bombay High Court
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restraining the respondent from recovering and/or levying
additional duty under the Customs Tariff Act, 1975 and the import
of Caprolactum in future was permitted to be cleared on payment of
additional duty on CIF price of goods only. A condition was,
however, put directing the appellant to furnish a bank guarantee
of nationalized bank in favour of the respondent for 100% of the
differential duty. Such a guarantee was furnished by the appellant
to comply with the condition contained in the interim order passed
by the High Court. On that basis, between May, 1986 to July, 1991,
the appellant imported several consignments and furnished bank
guarantees from time to time and the amount of these bank
guarantees in all came to Rs. 6,34,87,079/-. The respondents also
determined, quantified and endorsed on Bill of Entry the additional
duty @ of 15% on aggregate value of CIF price, basic and auxiliary
custom duty and landing charges. However, since the matter was
pending in the High Court, separate endorsements were also made on
the Bills of Entry specifying the differential duty and the goods
were allowed to be clared on receiving the bank guarantee for
differential duty. Ultimately, the writ petition was dismissed by
the Bombay High Court on 28.06.1994. Insofar as the stay order
which was operating during the pendency of the writ petition is
concerned, it was extended for a period of ten weeks.
On 28.07.1994, respondent no. 3 issued demand notice in
respect of Bill of Entry No. 1175/164 dated 28.05.1986 calling upon
the appellant herein to pay a sum of Rs. 5,08,300/- along with
interest @ of 12% i.e. Rs. 5,03,008/-. A copy of this notice was
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sent to the Bank of Baroda which has furnished bank guarantee for
encashing the bank guarantee for the aforesaid amount. The period
of ten weeks which was granted by the High Court has also expired
in August, 1994 and because of this reason the respondents wrote
another communication dated 12.08.1994 to the bank for encashment
of the said bank guarantee to recover the outstanding differential
duty. In the meantime, order of Bombay High Court was challenged by
the appellant by filing special leave petition in this Court. In
the said special leave petition interim order dated 14.11.1994 was
passed by this Court permitting the respondent to encash the bank
guarantees to the extent of half the duty due, i.e. up to Rs. 3.25
crores. It was also directed that the remaining bank guarantees
would be kept alive till the disposal of the said matter in this
Court. In this special leave petition leave was granted by this
Court. While the said appeal was still pending the Government came
out with Kar Vivadh Samadhan Scheme (KVSS) which was introduced by
st
Finance Bill, 1998 and came into effect from 1 March, 1998. Under
this Scheme the Government invited the tax payers to settle tax
arrears by availing substantial discount and immunity from
prosecution. As per Section 88(f) of the Finance Act, 1988, an
amount of 50% of the tax dues was payable by the declarant for
availing the benefit of the Scheme. The appellant herein with a
view to take the benefit of this KVSS, filed its declaration
thereunder on 29.12.1998. In this declaration it was stated that
the total demand of differential duty was in the sum of Rs.
6,34,87,079/-. As against this the Government had already realized
Rs. 3,25,40,000/- by invoking the bank guarantees as directed by
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this Court vide order dated 14.11.1994. It was thus stated that the
balance amount of arrears which was payable by the appellant was
Rs.3,09,47,079/- and the appellant was ready to pay 50% thereof in
terms of the KVSS i.e. Rs. 1,54,73,540/-.
This application of the appellant was, however, rejected by
the respondents on 01.03.1999 on the ground that it was not covered
by the KVSS and the case of the appellant fell under the exclusion
clause of Section 95(ii)(b) of KVSS inasmuch as there was neither
any show cause notice nor a demand notice issued prior to
31.03.1998. This order of rejection was challenged by the
appellant by filing writ petition No. 2528 of 1999 in the Bombay
High Court. Insofar as the appeal which was filed by the appellant
challenging the earlier decision of the Bombay High Court dated
28.06.1994 is concerned (Civil Appeal No. 5974/1994) the appellant
withdrew the same on 29.09.1999.
The writ petition of the appellant filed in the Bombay High
Court was disposed of by the High Court on 03.03.2000 whereby the
matter was remanded back to the Designated Authority directing it
to decide the application of the appellant de novo after
considering the two questions viz.:
i) Whether the endorsement on the bills of entries could be
considered to be demand notice under KVSS? and
ii) Whether the notice dated 28th July, 1994 was the demand
notice within the meaning of Section 95(ii)(b) of KVSS?
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th
On remand the Designated Authority passed an order dated 14
June, 2001 and rejected the application of the appellant once again
giving the reason that there were no tax arrears as contemplated
by Section 87(m)(ii)(b) of the KVSS and also that the case of the
appellant was covered by Section 95(ii)(b) of the said Scheme and,
therefore, the appellant was not entitled to the benefit under the
Scheme. Against this order, the appellant approached the High
Court again and filed writ petition under Article 226 of the
Constitution. This writ petition has been dismissed by the High
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Court vide impugned judgment dated 31 March, 2006.
From the aforesaid it is clear that the question that is to be
determined by this Court is as to whether the case of the appellant
is covered by KVSS and more particularly by Section 87(m)(ii)(b) of
the KVSS or it is excluded by the provisions of Section 95(ii)(b)
of the said Scheme. The aforesaid clauses of the two Sections are
re-produced as under:
“Section 87:
xxxxxx
xxxxxx
(m)“tax arrear” means,-
(i) in relation to direct tax enactment,
the amount of tax, penalty or interest
st
determined on or before the 31 day of March,
1998 under that enactment in respect of an
assessment year as modified in consequence of
giving effect to an appellate order but
remaining unpaid on the date of declaration;
(ii) in relation to indirect tax enactment,-
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(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
st
that enactment as on the 31 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-case notice
st
issued on or before the 31 day of March, 1998
under that 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 goods have not been quantified.
Explanation.- Where a declarant has already
paid either voluntarily or under protest, any
amount of duties, cesses, interest, fine or
penalty specified in this sub-clause, on or
before the date of making a declaration by him
under Section 88 which includes any deposit
made by him pending any appeal or in pursuance
of a court order in relation to such duties,
cesses, interest, fine or penalty, such
payment shall not be deemed to be the amount
unpaid for the purposes of determining tax
arrear under this sub-clause;”
Section 95. Scheme not to apply in certain
cases.- the provisions of this Scheme shall not
apply-
xxxxxx
xxxxxx
(ii) In respect of tax arrear under any
indirect tax enactment,-
xxxx
(b) In a case where show cause notice or a
notice of demand under any indirect tax
enactment has not been issued;”
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A plain reading of the aforesaid two provisions would indicate
that in those cases where show cause notice had been issued or
where the notice of demand for payment of indirect tax had been
issued, it was permissible for the declarant to claim the benefit
of the Scheme. In the absence of such show cause notice or demand
for payment, the benefit of the scheme was not available as per
clear stipulation in Section 95(ii)(b).
We have already pointed out above that when the writ petition
No. 1174 of 1986 was pending in the Bombay High Court and interim
order dated 14.11.1994 was passed, on the basis of such interim
arrangements not only for payment of differential duty as on that
date was made, the appellant also cleared subsequently imported
goods in future as well on the said basis. The Customs Authority,
acting on the order, not only asserted the additional duty @ 15% on
aggregate value of CIF price but even this additional duty on basic
and auxiliary custom duty and landing charges was assessed. It is a
different matter that for the sake of convenience and in order to
comply with the interim directions of the High Court, insofar as
the additional duty on basic and auxiliary custom duty and landing
charges is concerned, the same was not actually recovered but was
secured by means of bank guarantee. In any case, there were clear
endorsements in respect of demand of this additional duty made on
the Bills of Entries by the Assessing Officer. This, according to
us, would clearly constitute a “demand” which was issued. The
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issue is no longer res integra and has already been decided in
Swastika Enterprises Vs. Commissioner of Customs, Kolkata
[2015(322) ELT 423 (SC)] wherein the said issues were discussed in
the following manner:
“16. 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.
17. There is another manner of looking into
the matter. Immediately after receiving the
Bill of Entry with the endorsement to pay the
amount of Rs.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.
18. 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.”
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We, thus, hold that the case of the appellant was covered by
Section 87(m)(ii)(b) and did not get excluded by virtue of Section
95(ii)(b) and, therefore, the appellant was entitled to the benefit
of the KVSS. We, thus, set aside the impugned judgment of the
Bombay High Court and allow this appeal holding that the appellant
should be given the benefit of the said Scheme.
We are informed that in the meantime, the appellant had
already deposited the entire amount of tax arrears. Once the
benefit of KVSS is extended, the amount of tax arrears payable
under the said Scheme shall be worked out and the balance amount
shall be returned to the appellant within a period of two months
from today. In the peculiar facts of this case, however, we direct
that no interest shall be paid on this amount, in the event, amount
is paid within two months.
......................J.
[A.K. SIKRI]
......................J.
[ROHINTON FALI NARIMAN]
NEW DELHI;
OCTOBER 08, 2015
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ITEM NO.104(2) COURT NO.13 SECTION III
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). 2820/2007
M/S. NRC LIMITED APPELLANT(S)
VERSUS
UNION OF INDIA & ORS. RESPONDENT(S)
Date : 08/10/2015 This appeal was called on for hearing today.
CORAM : HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN
For Appellant(s) Mr. Shyam Divan, Sr. Adv.
Mr. U.A. Rana, Adv.
Ms. Mrinal Elkar Mazumdar, Adv.
Mr. V. Mohan, Adv.
M/s Gagrat & Co.,Adv.
For Respondent(s) Mr. A. K. Panda, Sr. Adv.
Mr. Arijit Prasad, Adv.
Mr. R. S. Jena, Adv.
Mr. B. Krishna Prasad, Adv.
UPON hearing the counsel the Court made the following
O R D E R
The civil appeal is allowed in terms of the signed reportable
judgment.
Interlocutory Application(s) pending, if any, stands disposed
of accordingly.
(Ashwani Thakur) (Renu Diwan)
COURT MASTER COURT MASTER
(Signed reportable judgment is placed on the file)