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M/s. Swastika Enterprises & Another Versus Commissioner Of Customs & Others

Exemption under Kar Vivad Samadhan Scheme – notice of demand - tax arrears - Levy of additional customs duty – ship breaking and disposing of the scrap – Whether appellants was covered by Section 95(ii)(b) and/or (c) of Act,1998, making them ineligible to utilise benefit of Scheme – Held that:- Section 28 deals with recovery of dues not levied or short levied or erroneously refunded or where any interest payable was not paid, part paid or erroneously refunded – Thus, contingency of issuing show- .....

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were called upon to pay said tax, mischief contained in Section 95(ii)(b) would not be attracted – Impugned judgment of High Court was erroneous and warrants to be set aside – Appellants shall be entitled to benefit of Kar Vivad Samadhan Scheme – Decided in favour of Appellant. - Civil Appeal No. 7570 of 2004, Civil Appeal No. 7571 of 2004 - Dated:- 4-8-2015 - A. K. Sikri And Rohinton Fali Nariman,JJ. For the Appellant : Ms. Ruby Singh Ahuja, Adv. Mr. Ashok Kumar Juneja, Adv. Mr. Chand Qureshi, .....

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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): 2) The appellants carry on the business, inter alia, of importing old ships for the purpose of ship breaking and disposing of the scrap. In 19 .....

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ition 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. 3) 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 b .....

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he judgment of the Single Judge and, at the same time, had also given certain directions. 5) 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 Sing .....

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f 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 penal .....

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ve not been quantified." 7) 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, cruci .....

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tment 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." 8) 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 declar .....

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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. 10) 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 peti .....

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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. 11) 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 clai .....

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he 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. 12) 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 bene .....

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at 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. 14) Having regard to the facts of this case, it is difficult to accept the contention of th .....

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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 exam .....

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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 .....

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t 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 Bil .....

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ifference 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 .....

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r. 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 abs .....

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ount 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. 19) It would also be interesting to note that the Division Bench of the High Court in the i .....

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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. 21) 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 .....

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