2003 (3) TMI 117 - SC - Central Excise

Whether the respondents are entitled to the benefit of Kar Vivad Samadhan Scheme 1998 (in short KVSS )? Held that - As held by the High Court the letter dated 26-7-1995 tantamounted to a show cause notice or was in the nature of a show cause notice then there would have been no requirement or need to issue further show cause notices. Pending adjudication under those show cause notices the respondents decided to comply with the direction given in the letter of 26-7-1995 and provisionally paid and/or gave bonds/executed bank guarantees. However for the period 1-9-1995 to 31-1-1998 no show cause notice had been issued till 16th March 1999. Thus it is clear that the High Court fell in error in holding that the letter dated 26-7-1995 tantamounts to a show cause notice or was in the nature of a show cause notice . In favour of assessee.

Summary

Issues:
1. Entitlement to benefit under Kar Vivad Samadhan Scheme, 1998.
2. Interpretation of provisions of the Scheme.
3. Validity of show cause notices and their impact on Scheme applicability.

Entitlement to benefit under Kar Vivad Samadhan Scheme, 1998:
The case involved a dispute regarding whether the respondents were entitled to the benefit of the Kar Vivad Samadhan Scheme, 1998 (KVSS). The respondents had applied under the Scheme for two show cause notices issued prior to March 31, 1998, and were granted the benefit. However, for a subsequent period, a show cause notice was issued after the relevant date, leading to a rejection of their declaration under the Scheme. The High Court, considering the Scheme as beneficial, directed acceptance of the declaration, stating that a liberal interpretation should be applied. The Supreme Court emphasized that full compliance with the Scheme's provisions is necessary to avail its benefits. The Court analyzed the Scheme's definition of "tax arrear" and highlighted the conditions for its applicability.

Interpretation of provisions of the Scheme:
The Supreme Court delved into the provisions of the KVSS, particularly focusing on the definition of "tax arrear" under Section 87(m) and the exclusion criteria outlined in Section 95. The Court emphasized that the Scheme's benefits are contingent upon the fulfillment of specific requirements, including the determination of dues or issuance of demand notices before March 31, 1998. The Court clarified that the absence of a demand or show cause notice could preclude the application of the Scheme, as highlighted in Section 95.

Validity of show cause notices and their impact on Scheme applicability:
The Court scrutinized the show cause notices issued in the case, emphasizing the necessity of a formal show cause notice under the relevant legal provisions. It was observed that the letter initiating the dispute did not meet the criteria of a show cause notice under Section 11A. The Court rejected the argument that previous adjudications could validate the later period's inclusion under the Scheme, emphasizing the chronological and legal distinctions between the periods in question. Ultimately, the Supreme Court set aside the High Court's judgment, ruling in favor of dismissing the writ petition and denying the benefit of the Scheme to the respondents for the subsequent period in question.