Gujarat High Court
Star Pistons Pvt. Ltd. And Anr. vs Union Of India And Ors. on 23 March, 2000
Equivalent citations: 2000(70)ECC387, (2000)3GLR2184
Author: D.H. Waghela
Bench: D.H. Waghela
JUDGMENT R.K. Abichandani, J.
1. The petitioners have challenged the order dated 16.1.1999 at Annexure-C to the petition of the respondent No. 2 rejecting the declaration in Form-18 dated 20.11.1998 filed by the petitioners under the Kar Vivad Samadhan Scheme, 1998 on the ground that there was no dispute in the case pending and no appeal was filed by the petitioners against the final order of the CEGAT.
2. According to the petitioners, it satisfied all the conditions of getting the benefit under the said Scheme contained in Chapter IV of the Finance (No. 2) Act, 1998.
3. Two show cause notices were issued to the petitioners on 8.1.1988 and 4.5.1988 by which recovery proceedings as contemplated under Section 11-A of the Central Excise Act, 1944 were commenced. It appears that the petitioners had given a reply to the show cause notices on 23.6.1988 denying that they were manufacturing Pistons of Internal Combustion Engines classifiable as goods covered by Sub-Heading 8409.00 as the parts suitable for use solely or principally with the engines of Heading 84.07 or 84.08 and contending that the pistons were the parts of motor vehicles classifiable under Chapter 84 and not Chapter 87 as stated in the notice.
4. The petitioner-unit was clearing the goods and availing of exemption. As per the first show cause notice, the duty leviable was to the tune of Rs. 81,429.77 on the goods cleared for the period between 22.9.1987 and 30.11.1987, while, as per the second show cause notice, which related to the period between 1.12.1987 and 31.3.1988, the recovery, was for a sum of Rs. 68,560.03. In the second show cause notice, at the end, it was stated that no action will be taken pursuant to the show cause notice till the appeal was finally decided by the Tribunal (CEGAT). It was stated that the show cause notice was issued pursuant to the appeal filed by the Collector of Central Excise, Ahmedabad against the order of Collector (Appeals), Bombay, before the Tribunal. It will be seen from the reply to the show cause notice that the only contention raised by the petitioner was regarding classification of the goods and the petitioners had insisted that, merely because an appeal was filed before the Tribunal, that did not affect the order of the Collector which was in their favour on the question of classification. No other dispute was raised in their reply, a copy of which is placed on record. The Tribunal, by its order dated 26.3.1987 (sic) (Annexure-B to the petition), decided the dispute regarding classification in favour of the Department holding that Pistons for Motor Vehicle Engines were classifiable under Heading 84.09. That appeal No. E/1881 of 1987 (B1) had arisen out of the Order-in-Appeal dated 26.3.1987 which was passed by the Collector in the petitioners' case.
5. The learned counsel appearing for the petitioners argued that the order of rejection of the declaration made by the petitioners under the Scheme was based on the ground that the classification dispute stood finally decided by the CEGAT and therefore there was no dispute pending in the case. It was argued that the two show cause notices were still pending and the matter was to be adjudicated upon as per the provisions of Section 11-A of the said Act even after the decision of the CEGAT and therefore it could not be said that no dispute was pending. Even after the dispute regarding classification was decided by the Tribunal, the matter regarding determination of the amount would still be pending in view of the show cause notices not having been proceeded with further. The learned counsel further argued that under the provisions of Section 87(m) of the Finance (No. 2) Act, 1998, the expression "tax arrear", in relation to indirect tax enactment, means not only the amount of duties etc. determined as due or payable as on 31st March, 1998 and remaining unpaid on the date of declaration, but also the amount of duties etc. which constituted the subject-matter of a demand notice or a show cause notice issued on or before 31st March, 1998 and remaining unpaid on the date of the declaration. It was argued that, in view of this specific inclusion of the amount of duties covered by a demand notice or a show cause notice issued prior to 31st March, 1998 which were not paid on the date of declaration within the meaning of the expression "tax arrear", it was clear that in all cases where show cause notices were pending, even if no adjudication was made, the benefit of the Scheme was available in respect of the tax arrear. The learned counsel argued that the provisions of Section 95(ii)(c) of the said Act did not come in way of the petitioners because show cause notices were already issued and were pending for determination by the concerned authority under Section 11-A of the said Act. He contended that Sub-clause (c) of Clause (ii) of Section 95 of the said Act, which provided that the provisions of the Scheme shall not apply in a case where no appeal, reference or writ was pending, was attracted only to cases where the amount of duty was determined while Sub-clause (b) of Clause (ii) of Section 95, which provided that the Scheme will not apply in cases where show cause notice or a notice of demand under any indirect tax enactment has not been issued, would be applicable to cases where there was no determination of the amount of duties. He submitted that it should be inferred from the wordings of Sub-Clause (b) of Clause (ii) of Section 95 that in all cases where show cause notices were issued, the Scheme applied without anything more. He submitted that this construction was warranted by the very definition of the expression "tax arrear" in Clause (m) (ii) of Section 87 of the said Act. It was then argued that the Department had itself construed the provisions so as to treat the cases where show cause notices were pending as eligible for the benefits under the Scheme. A reference was made to the Board's letter dated 3.8.1998, more particularly to its paragraph 4 which discusses the salient features of the Scheme, in support of this contention. Attention was drawn to paragraph 4.1 of that letter in which it was stated : "The dispute and the case may be still at the stage of show cause notice or demand notice when party comes forward and makes a declaration for claiming the benefit of the Scheme, or the duties, fine, penalties or interest after the issue of show cause/demand notice may have been determined, but the assessee is disputing the same in appellate forums/courts etc. and the amounts due have not been paid up." The learned counsel referred to paragraph 4.2 of that letter in which it was stated : "In either of the two aforesaid category of cases, to be covered by the Scheme, the original show cause/demand notice involved in the case should have been issued on or before 31.3.1998, whether or not by that date the duties due and payable have been determined or not and any fine/penalty imposed by the adjudicating authority". In the same letter in paragraph 4.3 it was stated that, it is pertinent to note that when a party comes forward for taking the benefits of the Samadhan Scheme and makes suitable declaration as provided thereunder, there must be a dispute pending between the party and the Department [Section 95(ii)(c) of the Finance Act]. In other words, if in any case where there is no show cause notice pending nor the party is in dispute at the appellate/revision stage nor is there any admitted petition in the court of law where party is contesting the stand of the Department, but certain arrears of revenue due in the case, are pending payment, the benefits of the Scheme will not be available in such a case. The learned counsel then referred to the Trade Notice dated 2.11.1998 which was based on this letter. At serial No. 5 of the Table of the clarification, as against the query, "Can the KVS Scheme be availed of in a case where a show cause notice/demand notice has been issued prior to 31.3.1998 and adjudication is pending on the date of making a declaration ?", the clarification issued was : "Yes, the scheme can be availed of in such cases", and for the same query in respect of the adjudication made after 1.3.1998, the clarification was : "Only, where party is in dispute i.e. it has filed an appeal against the order and the appeal is admitted and pending on the date of declaration, the benefit under the Scheme can be claimed". The learned counsel finally referred to the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998 which has been issued under Section 97(1) of the said Act by the Central Government and stated on the basis of Clause 2 of the Order that, in all cases where a show cause notice was issued and was pending adjudication on the date of declaration, the benefit of the Scheme could be availed of.
6. In support of his contentions, the learned counsel relied upon the decisions of the Supreme Court in Indian Metals & Ferro Alloys Ltd. Vs. Collector of Central Excise reported in 1991 (51) ELT 165, and, in Collector of Central Excise Vs. Parle Exports (P) Ltd. reported in 1988 (38) ELT 741, in which the Supreme Court held that a contemporaneous exposition by the administrative authorities was a very useful and relevant guide to the interpretation of the expressions used in a statutory instrument and that it was a well-settled principle of interpretation that courts, in construing a statute or notification, will give much weight to the interpretation put upon it, at the time of enactment or issue and since, by those who have to construe, execute and apply the enactments.
7. The learned counsel also referred to a decision of this Court dated 3.12.1999 in Special Civil Application No. 1502 of 1999 and cognate matters in support of the contention that, even after the CEGAT had decided the question of classification, it cannot be said that there was no dispute, because, the show cause notices were still pending for adjudication. In that decision, admittedly, the question of construing the provisions of Section 95(ii)(c) was not raised. The learned counsel pointed out that in two of the matters of that group, show cause notices had remained unadjudicated. As regards the other matters, the Court had found that after the decision of the Apex Court, the Assistant Collector of Central Excise had adjudicated the show cause notice. The Division Bench considered in detail the propriety of such claim and the benefits which can be derived and observed that such a scheme was 'laudably and widely accepted and received tremendous success'. The court held that it is crystal clear that by virtue of the statutory authority, the Central Government was empowered to issue directions, and, in all the cases in the said group of matters show cause notices had been issued prior to 31.3.1998 and adjudication came to be made in some of the cases and the amount had not been paid and the appeals were pending. The Court finally held, "After having taken into consideration the overall factual scenario coupled with the relevant proposition of law and the submissions raised before us, we are of the clear opinion that the entire group of these petitions fall within the parameters entitling the petitioners to claim the benefits of KVS Scheme." Thus, in the background of the matters involved in that group, it was held that the Scheme was attracted.
8. There is no dispute about the fact that, on the date of the declaration, there was no appeal or reference or writ petition admitted or pending before any appellate authority or High Court or the Supreme Court nor was there any application for revision pending before the Central Government on the date of the declaration which was made by the petitioners under Section 88 of the Act. The said Scheme was expressly made not applicable in certain cases covered by Section 95 of the said Act. The relevant provisions of Section 95 are reproduced hereunder :
"Section 95 Scheme not to apply in certain cases : The provisions of this Scheme shall not apply -
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(ii) in respect of tax arrear under any indirect tax enactment-
(a) in case where prosecution for any offence punishable under provisions of any indirect tax enactment has been instituted on or before the date of filing of the declaration under Section 88, in respect of any tax arrear in respect of such case under such indirect tax enactment;
(b) in a case where show cause notice or a notice of demand under any indirect tax enactment has not been 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."
9. Clause (ii) of Section 95 of the said Act provides for three categories of cases where the Scheme would not apply. Where there is a prosecution institute as contemplated by sub-clause (a) of clause (ii), then, notwithstanding anything else, the Scheme would not apply. Similarly, where there is no show cause notice or a demand notice issued, the Scheme was not applicable and, finally, where there was no litigation of the nature covered under sub-clause (c) of clause (ii) pending, then also, the Scheme was not to apply. It is clear from these provisions that if the case fell in any of sub-clauses (a), (b) or (c) of Clause (ii) of Section 95, the Scheme was not to apply. Each sub-clause stands on its own, and there is no reason to confine sub-clause (c) only to matters where there has been adjudication. It will be seen that under Rule 173-I of the Rules framed under the Central Excise Act, 1944, the proper officer has to make an assessment order pursuant to which a show cause notice is required to be issued under Section 11-A of the said Act. Under Section 35 of the said Act, any person aggrieved by any decision or order passed under the Act by a Central Excise officer may appeal to the appellate authority mentioned therein. The expression "Proper Officer" is defined in Rule 2(xi) so as to mean the officer in whose jurisdiction the land or premises of the producer of any excisable goods, or of any person engaged in any process of production of, or trade in, such goods or containers thereof whether as a grower, curer, wholesale dealer, broker or commission agent or manufacturer, or intended grower, curer, wholesale dealer, broker, commission agent, or manufacturer, are situated. The proper officer under Rule 173-I, after scrutiny, passes an order of assessment as he thinks fit. The expression "Central Excise Officer" as defined in Section 2(b), inter alia, means any officer of the Central Excise Department.
10. Therefore, the proper officer being an officer of the Central Excise Department, the assessment order would be an order passed under the Act by the Central Excise Officer, and therefore be appealable under Section 35 at the instance of the aggrieved person. Even after the show cause notice under Section 11-A and adjudication made by the Central Excise Officer, an appeal can lie under that provision. In other words, there can be a litigation pending even in cases where only an adjudication order is made by the proper officer under Rule 173-I and the show cause notice is issued under Section 11-A of the Act for recovery of the amount so assessed.
11. The said Scheme was specifically framed in the background of the litigation which had been the bane of both direct and indirect taxes. It was being noticed that a lot of energy of the Revenue Department was being frittered away in pursuing large number of litigations pending at different levels for long periods of time and considerable revenue also got locked up in such disputes. When the Scheme itself was prepared in this background and sub-clause (c) of Section 95(ii) specifically provided that the Scheme was not to apply in a case where no appeal or reference or writ petition was admitted and pending before any appellate authority or High Court or the Supreme Court, or no application for revision was pending before the Central Government on the date of the declaration made under Section 88, by no stretch of imagination can the benefit of the Scheme be given in a case where only a show cause notice was issued and there was no dispute of the nature covered in sub-clause (c) of clause (ii) of Section 95, existing. In our opinion, sub-clause (c) of clause (ii) of Section 95 is an independent ground which excluded the application of the Scheme when no litigation of the nature referred to therein was pending on the date of the declaration. This specific statutory provision excluding the application of the Scheme to cases where there was no litigation pending cannot be diluted by just referring to the definition clause which gives the meaning of 'tax arrears'. Section 87(m) of the said Act only defines the term 'tax arrears' and this definition, as can be seen from the opening part of the provision of Section 87, would apply unless the context otherwise requires. Section 95 specifically excludes the applicability of the Scheme in respect of tax arrears which fall in any of the categories of cases enumerated therein and this mandate cannot be set at naught by referring to the definition clause out of the relevant context. The intention of the Legislature being clear, we are not prepared to dilute the effect of sub-clause (c) of clause (ii) of Section 95 which expressly excludes the cases of tax arrear where no litigation of the nature covered therein was pending on the date of the declaration, from the benefit of the Scheme. The very nature of the Scheme was to bring about a speedy settlement to realise the Government's reasonable dues which were locked up in the cases where litigations were pending. The Scheme was not intended to be a bonanza In all cases where show cause notices were issued, for, that would have had the effect of freezing the provisions of law and making the normal levy and collection of tax under the law redundant for the period covered under the Scheme. It our opinion, all the sub-clauses (a), (b) and (c) of clause (ii) of Section 95 of the Act are independent of each other and if the case was covered by any of these three sub-clauses, the Scheme did not apply. The Board's letter relied upon by the petitioner cannot and does not carve out any exception to the applicability of sub-clause (c) of clause (ii) of Section 95 nor can the trade notice be read in a manner that would fly in the face of the specific statutory provision.
12. Reference to clause 2 of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998 is wholly misconceived. Merely because the expression 'show cause notice' is used therein, one cannot infer that the requirement of pendency of litigation for attracting the Scheme as contemplated by Section 95(ii)(c) has been done away with. No such reading is warranted of Clause 2. Moreover, this Order was issued by the Central Government under Section 97(1) and can certainly not override the specific statutory provision of Section 95(ii)(c) enacted by the Parliament. It is not possible to read the Board's letter or the trade notice or the said Order in a manner that would take away the efficacy of the provisions of Section 95(ii)(c) and give the benefit of the Scheme in a situation where it is specifically stated that it would not apply. The decision of the Division Bench Special Civil Application No. 1502 of 1999 rendered on 3.12.1999 was not in context of the interpretation of the provisions of Section 95(ii)(c), and it proceeded on the footing that appeals were pending. The issue which has arisen before us that even in a case where only a show cause notice was pending and there was no litigation pending the Scheme applied was not specifically argued or adjudicated upon in that decision, as fairly submitted by the learned counsel for the petitioner.
13. The Department has rejected the petitioner's declaration on the ground that there was no dispute pending and that the dispute regarding classification was finally decided by the Tribunal before the declaration was made. From the reply to the show cause notices, which is placed on record, it is clear that the only defence that was raised by the petitioners was that the classification was made by the Collector (Appeals) in favour of the petitioners and mere pendency of the appeal before the CEGAT did not amount to stay of that order. Even the show cause notice made a reference to the fact that the dispute regarding classification was pending before the Tribunal. Therefore, after the Tribunal decided the question of classification in favour of the Department, the respondent-authorities were fully justified in rejecting the declaration on the ground that there was no dispute pending on the date of the declaration because beyond the question of classification, there was in fact no other dispute raised in the reply which was filed by the petitioners against the show cause notices. Both, in cases where a dispute was already decided and not pending on the date of declaration as well as where a dispute of the nature covered by sub-clause (c) of clause (ii) of Section 95 was not raised at all, the Scheme would not apply as provided in Section 95. In this view of the matter, the petition fails and is rejected. Rule is discharged with no order as to costs.