In Sadhana Textile Mills Private Ltd and Anr v. Union of India v. Ors, the division bench of the Bombay High Court held that the demand confirmed by the Apex Court can be settled through ‘Kar Vivad Scheme’.
The assessee, made a declaration under the “Kar vivad Scheme”. On scrutiny of the declaration, the Revenue found that the application cannot be accepted since the Supreme Court, on appeal, sustained the demand. Accordingly, the declaration was rejected and the assessee approached the High Court for relief.
Before the High Court, the Revenue submitted that the assessee cannot settle the matter since the same has been disposed by the Supreme Court in favor of the Revenue. In the absence of appeal pending against the demand, the assessee is not eligible for availing the benefit of the scheme.
The assessee, to substantiate their arguments, paced reliance on the decisions in Swastika Enterprises and Ors. Vs. Commissioner of Customs and Ors and NRC Ltd. Vs. Union of India. Accepting their contention, the bench said, in both these decisions, the Court has held that requirement of availing of the Scheme and provided by Section 95 of the Finance Act, 1998 cannot be said to be not fulfilled.
The divsion bench comprisin of Justice S.C Dharmadhikari and Justice B.P Colabawalla observed that, “The Scheme will not apply only in respect of tax arrears under any indirect tax enactment. It will apply in a case where show cause notice or notice of demand under any indirect tax enactment has been issued. Once a show cause notice has been issued and there is a dispute raised, then, the matter could not be said to be not within the Scheme because of a date stipulated by the Revenue for the Scheme to come into effect. In other words, the Hon’ble Supreme Court had, in both Judgments, held that there was a clear demand notice, which was issued. Mr. Kamdar, relying upon these two Judgments but which the petitioners do not admit to be covering the dispute, would submit that the petitioners have become liable to pay to the Department a total sum of Rs.98,86,101.79.Out of this amount, the Department has already encashed the BankGuarantees furnished by the petitioners from time to time in the sum of Rs.44,18,233.81.”
“The Department’s case is that balance excise duty of Rs.54,67,867.98 is payable. The petitioners have disputed this position. They have said that in law they are not liable to pay any duty whatsoever and the claim in that regard of the Department is time barred. Thus, the petitioners’ stand is that a mere demand notice is not a show cause notice and itcannot be treated as a show cause notice. That is how initially itwas pointed out that the position remains the same and they are not bound and liable to merely comply with the demand notice of the Department. Moreover, the petitioners have filed an appeal against the order of the Assistant Commissioner of Central Excise, dated 9111998. The petitioners have thus disputed the demand and the appeal is pending”, the bench also added.
Since the matter is squarely covered by the above decision, the bench held that the declaration of the assessee must be proceeded in accordance with law.
Read the full text of the Judgment below.