M/S. NRC LIMITEDversusUNION OF INDIA & ORS.

                      [2016] 12 S.C.R. 982


A                      M/S. NRC LIMITED
                              v.
                    UNION OF INDIA & ORS.
                  Civil Appeal No. 2820 of 2007
B
                      OCTOBER 08, 2015
       [A.K. SIKRI AND ROHINTON FALi NARIMAN,JJ.]
        Kar Vivad Samadhan Scheme (KVSS) (As introduced
c by Pinance Bill, 1998) - ss.87(m)(ii)(b) and 95(ii)(b) -
   Applicability of - On the assessee in question - Assessee
   declared value of goods on which import duty was payable,
   by filing Bill of Entry - Customs authorities, by making
   endorsement on the Bill of Entry, demanded additional duty
o under Customs Tariffs Act ad valorem on CIF price and also
 · on the basic and auxiliary custom duty and landing charges
   on goods imported by the assessee - During pendency of
   the case, which was initiated by the assessee challenging
   levy of additional duty on basic and auxiliary custom duty
E and landing charges, KVSS introduced -Assessee applied
   under the scheme to settle fax arrears and withdrew the
   pending case - Benefit of the Scheme denied by the
   authorities, on the ground that his case was nqt covered u/
   s.87(m)(ii)(b) and the scheme was not applicable to the
F assessee as he was covered u/s.95(ii)(b). - Writ petition
   challenging the order, dismissed by High Court - On appeal,
   held: Declarant is entitled to claim benefit of the scheme
   where show cause notice and notice of demand had been
G issued - In the present case, the endorsement on the Bill of
    Entries would constitute demand - Therefore, the assessee
   in question was entitled to benefit of the Scheme - Customs
    TariffsAct, 1975.

        Allowing the appeal, the Court
H
                               982
          MIS. NRC LIMITED v. UNION OF INDIA                  983


    HELD: 1. A plain reading of ss.87(m)(ii)(b) and 95(ii)(b) A
of Kar Vivad Samadhan Scheme (KVSS) 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 8
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). [Para 8] [989-E]

    2. The Customs Authority had not only asserted the C
additional duty @ 15% on aggregate value of CIF price
but even the additional duty on basic and auxiliary
custom duty and landing charges was assessed. There
were clear endorsements in respect of demand of this
                                                           0
additional duty made on the Bills of Entries by the
Assessing OfJicer. This, would clearly constitute a
"demand" which was issued. The case of the appellant
was covered by Section 87(m)(ii)(b) and did not get
excluded by virtue ofSection 95(ii)(b) and, therefore, the E
appellant was entitled to the benefit of the KVSS. [Paras
9 and 10] [989-G-H; 990-B-C; 991-E]

     Swastika Enterprises vs. Commissioner of
     Customs, Ko/kata 2015 (322) ELT 423 (SC) -               F
     relied on.

                  Case Law Reference

  2015 (322) ELT 423 (SC)         relied on     Para 9
                                                              G
    CIVILAPPELLATE JURISDICTION: CivilAppeal No. 2820
of2015.

     From the Judgment and Order dated 31.03.2006 of the
Division Bench of the High Court of Judicature at Bombay in   H
Writ Petition No. 2135 of 2001.
984         SUPREME COURT REPORTS                    [2015] 12 S.C.R.


A          Shyam Divan, Sr. Adv., U. A. Rana, Mrinal Elkar
      Mazumdar, V. Mohan, M/s Gagrat & Co., Advs., With him, for
      the Appellants.

      A. K. Panda, Sr. Adv., Arijit Prasad, R. S. Jena, B. Krishna
B Prasad,Advs., with him, for the Respondents.

          The Judgment of the Court was delivered by

           p..K.SIKRI, ·J. 1. The appellant herein had imported
c     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
0     Tariffs Act, 1975@of 15% advaloremon CIF price and ~lso
      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.
 E
         2. 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 levying and/or recovering the additional duty
 F 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 restraining the respondent from
    recovering and/or levying additional duty under the Customs
    Tariff Act, 1975 and the import of Caprolactum in future was
 G 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
 H with the condition contained in the interim order passed by
           M/S. NRC LIMITED v. UNION OF INDIA                         985
                      [A.K.SIKRI, J.]

the High Court. On that basis, between May, 1986 to July, 1991, A
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 B
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 c
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 week.                        o
      3. 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          E
this notice was 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                  F
communication dated 12.08.1994 to the bank for encashm.ent
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       G
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      H
986       SUPREME COURT REPORTS                   [2015] 12 S.C.R.


A 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 Finance
   Bill, 1998 and came into effect from 1st March, 1998. Under
   this Scheme the Government invited the tax payers to settle
8
   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
c; with a view to take the benefit of this KVSS, filed its declaration
   thereunder en 29.12.1998. In this r:leclaration 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
0 as directed by 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/-.
 E
        4. 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
 F 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 earli.er
 G 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.

       5. The writ petition of the appellant filed in the Bombay
 H High Court was disposed of by the High Court on 03.03.2000
              M/S. NRC LIMITED v. UNION OF INDIA                   987
                         [A.K.SIKRI, J.]

whereby the matter was remanded back to the Designated A
Authority directing it to decide the application of the appellant
de nova 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             B

     ii) Whether the notice dated 28th July, 1994 was the de-
     mand notice within the meaning of Section 95(ii)(b) of
     KVSS?
                                                                   c
     6. On remand the Designated Authority passed an order
dated 1'41h June, 2001 and rejected the application of the
appellant once again giving the reason that there were no tax
arrears as contemplated by Section ~7(m)(ii)(b) of the KVSS
and also that the case of the appellant was covered by Section D
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 Court vide impugned judgment E
dated 31 51 March, 2006.

     7. From the aforesaid it is clearthatthe 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 F
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:                                                  G
     )()()()()()(

     )()()()()()(


     (m) "tax arrear" means,-
                                                                   H
     (i) in relation to direct tax enactment, the amount of tax,
988   SUPREME COURT REPORTS                     [2015] 12 S.C.R.


A     penalty or interest determined on or before the 31st 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;
 B
      (ii) in relation to indirect tax enactment,-

      (a) The amount of duties (including drawback of duty,
      credit of duty or any amount representing duty), cesses,
c     interest, fine or penalty determined as due or payable
      under that enactment as on the 31•t day of March, 1998
      but remaining unpaid as on the date of making a decla-
      ration under Section 88; or

 D    (b) The amount oi duties (including drawback of duty,
      credit of duty or any amount representing duty), cesses,
      interest, fine or penalty which constitutes the subject-mat-
      ter of a demand notice or a show-case notice issued on
      or before the 31 51 day of March, 1998 under that enact-
 E    ment but remaining unpaid on the date of making a dec-
      laration under Section 88, but does not include any de-
      mand relating to erroneous refund and where a show-
      cause notice is issued to the declaraot in respect of sei-
      zure of goods and demand of duties, the tax arrear shall
 F    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,.
 G    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,
 H
      such payment shall not be deemed to be the amount
                M/S. NRC LIMITED v. UNION OF INDIA             989
                           [A.K.SIKRI, J.]

     unpaid for the purposes of determining tax arrear under A
     this sub-clause;"

    . Section 95. Scheme not to apply in certain cases.- the
      provisions of this Scheme shall not apply-
                                                               B
     )()()()()()(


     )()()()()()(


     (ii) In respect of tax arrear under any indirect tax
     enactment, -                                              c
     )()()()(


     (b) In a case where show cause notice or a notice of
     demand under any indirect tax enactment has not been 0
     issued;"

     8. 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 E
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).
                                                               F
     9. We have already pointe<;f out above that when the writ
petition No. 1174of1986 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 o
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 H
990         SUPREME COURT REPORTS                   [2015) 12 S.C.R.


A 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,
8     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 issue is no longer res integra
c     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
D
           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
 E         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
 F
           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
 G         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
 H         adjudication order and, therefore, such a writ petition was
              M/S. NRC LIMITED v. UNION OF INDIA                      991
                         [A.K.SIKRI, J.]

        not competent. Thus, both the parties understood that A
        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 · B
        demand. We have already reproduced the provisions of
        Section 87(m) of the 1998Actwhich 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 1998Act. Indubitably, there was an amount of duty C
        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
                                                                      D.
        demanded, and still the Scheme is inapplicable."

      10. 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         E
 impugned judgment of the Bombay High Court and allow this
 appeal holding that the appellant should be given the benefit
 of the said Scheme.

      11. We are informed that in the meantime, the appellant         F
 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           G
 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.

: Kalpana K Tripathy                                Appeal allowed.
                                                                      H