Holding

Section 91 immunity is limited to tax arrears covered by the declarant’s own declaration, but the Scheme’s Order, read as a whole, extends the benefit of the main declarant’s settlement to other persons while appeals are pending, and amounts paid under Section 88 are non‑refundable under Section 93.

Summary

The Central Excise Commissioners issued show‑cause notices to Apollo Tyres Ltd. and its directors/officers for alleged duty evasion and imposed penalties. Both the company and the officers appealed before the Customs, Excise and Gold (Control) Appellate Tribunal, and while the appeals were pending, the Kar Vivad Samadhan Scheme (Removal of Difficulties) was introduced, allowing declarations under Sections 88‑93 and granting immunity under Section 91 for tax arrears covered by the declaration. The officers filed separate declarations and paid the assessed amounts, the Kerala High Court granted them refunds on the ground that the appeals were pending, whereas the Gujarat High Court denied refunds. The Supreme Court held that Section 91 immunity applies only to tax arrears covered in the declarant’s own declaration, so the company’s settlement did not immunise the officers, but the Scheme’s Order must be read as a whole to give the benefit of the main declarant’s settlement to co‑notified persons while appeals are pending. Consequently, the officers are not entitled to a refund under Section 93, but the Kerala High Court’s refund order stands as the amounts need not be returned. The Court dismissed the Kerala appeals and allowed the Gujarat appeals, setting aside the Gujarat High Court judgment.

Issues considered

The scope of immunity under Section 91 of the Kar Vivad Samadhan Scheme with respect to officers when the company has settled its tax arrears
Whether the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order applies to cases where show‑cause notices have been adjudicated but appeals are pending
Whether officers are entitled to a refund of amounts paid under protest under Section 93 of the Scheme

Legislation cited

Subjects

excise dutypenaltytax arrearsKar Vivad Samadhan SchemeSection 91 immunityrefundinterpretation of statutespending adjudicationdeclaration under Section 88

Judgment

UNION OF iNDIA AND ORS. A
V.

ONKAR S. KANWAR AND ORS.

SEPTEMBER 27, 2002

[SYED SHAH MOHAMMED QUADRl AND S.N. VARIAVA, JJ.] B

TAX/TAXATION:

Kar Vivad Samadhan Scheme/Kar Vivad Samadhan Scheme (Removal
of Difficulties) Order-Ss. 91and93/0rder 2-Levy of excise duty and penalty C
on Company and its officers-Pursuant to Scheme declarations and payment
made by the Company and its officers-Payment by officers under protest-
Claim of refund on the basis of benefit of the Order-Held, officers do not get
immunity u/s 91 as declaration by Company does not cover tax arrears of
officers-But they were entitled to benefit of the Order as adjudication D
proceedings were pending in appeal-However, uls 93 they are not entitled to
refand even if paid under protest-Since the refands were made by High
Court's orders, they need not repay the amounts to Revenue.

Interpretation ofStatutes-An interpretation which leads to discrimination
must be avoided-If two views are possible then the one which is in favour of E
the assessee must be adopted.

Certain Officers of a Company and ~he Company were issued show
cause notices by Central Excise authority as to why excise duty and penalty
be not levied on them, and consequently adjudicated show-cause notices
and called upon the company to pay excise duty and also imposed penalty. F
The Officers were also directed to pay a sum as personal penalty.

During pendency of the appeals before Customs Excise and Gold
(Control) Appellate Tribunal, Kar Vivad Samadhan Scheme was
announced. Thereafter Kar Vivad Samadhan Scheme (Removal of
difficulties) Order was passed. Customs and Central Excise Authority by G
its clarificatory note clarified that the Order would not apply to cases
where show cause notices had been adjudicated but only 'where such
notices were pending. Tax arrears were settled under the Schemes. The
Company and the Officers filed separate declarations and paid the
675 H
676 SUPREME COURT REPORTS [2002] SUPP. 2 S.C.R.

A amounts. However, the Officers made the payment under protest.
Writ petitions were filed before High Court claiming refund of the
amo4nts paid on the ground that they were entitled to the benefit of the
Order, as the Company had settled the matter under the Scheme. High
Court of Kerala ordered for refund on the ground that as the appeals were
B pending, the adjudication proceedings had not terminated. H~wever, High
Court of Gujarat dismissed similar writ petitions.

In appeal to this Court, State contended that benefit of the order
was not available to the officers as the same was not available where
C proceedings were pending adjudication, but only where the show cause
notices were pending adjudication.

Officers contended that once the Company settled under the Scheme,
there was immunity in respect of the matter for which show cause notice
was issued as per section 91 of the Scheme, and that since penalty was
D sought to be imposed on them for the same matter for which show cause
notice was issued on the Company and the Company getting immunity,
nothing survived even against them.

Disposing of the appeals, the Court

HELD: I.I. Under the Kar Vivad Samadhan Scheme there is no
E
adjudication on the subject matter of the demand notice or show cause
notice. There is a settlement of the "tax arrears". Even though the same
show cause notice may call upon the Company and its Directors/Officers
to show cause, there is a separate demand for "tax arrears" against the
Directors/Officers. Thus each entity/person would have to file a declaration
F separately. The settlement is in respect of each declaration. Section 91 only
gives immunity in respect of matters covered in the declaration. The
matter covered in the declaration by the Company is the "tax arrears" of
the Company. The declaration by the Company admittedly does not cover
the tax arrears of the Directors/Officers. Thus they get no immunity under
G Section 91 on a settlement by the Company. (683-E-Gf

1.2. If Kar Vivad Samadhan Scheme (Removal of Difficulties) Order
is read as a whole, it is clear that a settlement by the main declarant is to
operate as full and final settlement in respect of all other persons on whom
show cause notice was issued in respect of the same matter. Thus the words
H "pending adjudication" cannot be read to exclude cases where the
U.0.1. v. ONKAR S. KANWAR 677

proceedings are still pending in appeal. Even otherwise the order has to A
be read along with the Kar Vivad Samadhan Scheme. Under the Scheme
a party can file a declaration so long as the proceedings are pending. Thus,
even though the show cause notice may have been adjudicated upon and
an appeal is pending a party could still take the benefit of the Scheme and
,.,,.
file a declaration. The object of the Order is to give benefit of a settlement
by the main party (i.e. the Company in this case) to all other co-notices. B
This being the object a classification, restricting the benefit only to cases
where the show cause notice is pending adjudication, would be
unreasonable. If read in this manner the Order would be discriminatory.
An interpretation which leads to discrimination must be avoided. An
interpretation, as suggested by the Department would also be against the C
object of the Order. Reasoning given by the High Court of Kerala is
correct and is upheld. (684-E-H; 685-AI

1.3. If two views are possible then the one which is in favour of the
assessee must be adopted. On this ground also the interpretation sought
to be given by the Department cannot be accepted. (685-B) D
2. All the officers have paid the amounts in pursuance of the
declaration made by them under Section 88 of the Scheme. Even if they
have paid the amounts under protest they are not entitled to refund. The
Directors/Officers in Kerala would also not have been entitled to refund
by virtue of section 93 of the Scheme. However, section 93 does not seem E
to have been pointed out to the High Court of Kerala. As, pursuant to
the Order of the High Court of Kerala, they have received refund, they
are not required to repay the amount to the Revenue. (685-El

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 6260- p
6265 of 2000.
!
From the Judgment and Order dated 7.3.2000 of the Kerala High Court
in O.P. Nos. 13806, 16406, 16407, 16408, 16409, and 16334, of 1999.

WITH
G
C.A. Nos. 633, 634, 635, 636, 637, 638, 639, 640, 641, and 642/2002

S. Ganesh, Joseph Vellapally, K. Swami, Mrs. Nisha Bagchi, K.C.
Kaushik, B.K, Prasad, M.P. Vinod, P.K. Ram, A.K. Jain, Deepak Prakash,
Bobby Lal and Tarun Gulati, for the appearing parties. H
678 SUP:lEME COUK.T REPORTS [2002] SUPP. 2 S.C.R.

A The Judgment of the Court was delivered by

S.N. VARIAV A, J. Civil Appeal Nos. 6260~6265 of 2000 are against
a Judgment dated 7th March, 2000 passed by the High Court of Kerala. All
the other Appeals are against a Judgment dated· 14th November, 2000 passed
by the High Court of Gujarat. In all these Appeals a common question arises.
B Therefore all these Appeals are being disposed of by this common Judgment.

Briefly stated the facts are as follows:

The Respondents in Civil Appeal Nos. 6260-6265 of 2000 and the Appellants
in all the other Appeals are Directors/Officers of M/s Apollo Tyres Limited.
C M/s Appollo Tyres has a factory in Kerala and another in Gujarat. M/s
Appollo Tyres Ltd. were clearing certain tyres on the basis that the tyres were
for use on trailers. It was found that these tyres were then being fitted to
Light Commercial Vehicles. The Commissioners of Central Excise at Kerala
...
and in Gujarat issued show cause notices to the Company as to why excise
D duty and penalty be not levied. In the same Show Cause Notice the Directors/
Officers were also called upon to show cause as to why penalty be not
imposed on them. The Company and its Directors/Officers replied to the
show cause notice. Thereafter the Commissioners of Central Excise in Kerala
and Gujarat adjudicated the show cause notices and called upon the Company
to pay excise and also imposed penalty. The Commissioners of Central Excise
E also required each Director/Officer of the Company to pay a sum of Rs.
2,00,000 as personal penalty.

The Company as well as the Officers filed Appeals before the Customs
Excise and Gold (Control) Appellate Tribunal. While the Appeals were pending
the Kar Vivad Samadhan Scheme was announced. The relevant provisions of
F this Scheme read as follows :
87. In this Scheme, unless the cont.ext otherwise requires. -

xxx xxx xxx

xxx xxx xxx
G
(i) "indirect tax enactment" means the Customs Act, 1962 (52 of
1962) or the Central Excise, 1944 (I of 1944) or the Customs Tariff
Act, 1975 (51 of 1975) or the Central Excise Tariff Act, 1985 (5 of
I 986) or the relevant Act and includes the rules or regulations made
H under such enactment ;
U.0.1. v. ONKAR S. KANWAR [S.N. VARIAVA, J.] 679
xxx xxx xxx A
xxx xxx xxx

;~
(m) "tax arrear" means -
•t
xxx xxx xxx
B
xxx xxx xxx

(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, interest, fine or penalty c
determined as due or payable under that enactment as on the 31"

.. day of March, 1998 but remaining unpaid as on the date of
making a declaration under section 85; or

(b) the amount of duties (including drawback of duty, credit of duty
or any amount representing duty), cesses, interest, fine or penalty D
which constitutes the subject matter of a demand notice or a
show-cause notice issued on or before the 31" day of March,
1998 under that enactment but remaining unpaid on the date of
making a declaration under section 88, but does not include any
demand relating to erroneous refund and where a show cause
notice is issued to the declarant in respect of seizure of goods E
and demand of duties, the tax' arrear shall 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, interest, F
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, such payment shall not be deemed to be the amount
unpaid for the purposes of determining tax arrear under this sub-
G
clause;

xxx xxx xxx

xxx xxx xxx
H
680 SUPREME COURT REPORTS [2002) SUPP. 2 S.C.R.

A 88. Subject to the provisions of this Scheme, where any person makes,
on or after the !st day of September, 1998 but on or before the 31st
day of December, 1998, a declaration to the designated authority in
accordance with the provisions of section 89 in respect of tax arrear,
then, notwithstanding anything contained in any direct tax enactment
or indirect tax enactment or any other provision of any law for the
B time being in force, the amount payable under this Scheme by the
declarant shall be determined at the rates specified hereunder, namely:-
•
xxx xxx xxx

xxx xxx xxx
c (f) where the tax arrear is payable under the indirect tax enactment-
(i) in a case where the tax arrear comprises fine, penalty or
interest but does not include duties (including drawback of
duty, credit of duty or any amount representing duty) or
cesses, at the rate of fifty per cent, of the amount of such
D
fine, penalty or interest, due or interest, due or payable as
on the date of making a declaration under section 88,

(ii) in any other case, at the rate of fifty per cent, of the amount
of duties (including drawback of duty, credit of duty or any
E amount representing duty) or cess due or payable on the
date of making a declaration under section 88.

xxx xxx xxx
xxx xxx xxx

91. The designated authority shall, subject to the conditions provided
F in section 90, grant immunity from instituting any proceeding for
prosecution for any offence under any direct tax enactment or indirect
tax enactment, or from the imposition of penalty under any of such
enactments, in respect of matters covered in the declaration under
section 88."
G On 8th December, 1998 the Government passed the Kar Vivad Samadhan
Scheme (Removal of Difficulties) Order. This Order reads as follows:

"I. (1) This order may be called the Kar Vivad Samadhan Scheme
(Removal of Difficulties) Order, 1998.
H (2) lt shall be deemed to have come into force on the l st day of
U.0.1. v. ONKAR S. KANWAR [S.N. VARIAVA, J.] 681
September, 1998. A
2. Where a declaration to the designated authority has been made
in respect of tax arrear in relation to indirect tax enactment for
the amount of duties (including drawback of duty, credit of duty
or any amount representing duty), cesses, interest, fine or penalty
which constitutes the subject matter of a demand notice or a B
show cause notice issued on or before the 31st day of March,
1998 but remaining unpaid and pending determination ?n the
date of making a declaration and, where, in respect of the same
matter stated in the said declaration, a show cause notice has also
been issued to any other person and is pending adjudication on
the date of making the declaration, then, no civil proceeding for C
imposing of fine or penalty shall be proceeded with against such
other person and in such cases the settlement in favour of the
declarant under sub-section (I) of section 90 shall be deemed to
be full and final in respect of such other person also on whom
a show cause notice was issued on the same matter covered D
under the declaration."

The Commissioner of Customs and Central Excise issued a clarificatory
note dated 16th December, 1998 wherein it was clarified that the Kar Vivad
Samadhan Scheme ,(Removal of Difficulties) Order only applied to cases
where the show cause notices had been issued on or before 3 I st March, 1998 E
and where such notices were pending adjudication. It was clarified that the
said Order would not apply to cases where the show cause notices had been
adjudicated by the competent authority and fines/penalties had already been
imposed on the date of making the declaration.

The company as well as all its Directors/Officers filed separate F
declarations before the Designated Authority. The Commissioner determined
the settlement amounts and the Company and the Directors/Officers paid the
amounts. It is claimed that the Directors/Officers paid under protest.

. All the Directors/Officers then filed Writ Petitions. The Officers who G
were posted in the Kerala factory filed Writ Petitions in the High Court of
Kerala. The Officers who were posted in the Gujarat factory filed Writ Petitions
in the High Court of Gujarat. All the Petitioners claimed a refund of the
amounts paid by them. It was claimed that as the Company had settled under
the Kar Vivad Samadhan Scheme they were entitled to the benefit of the Kar
Vivad Samadhan Scheme (Removal of Difficulties) Order. It was claimed H
682 SUPREME COURT REPORTS [2002] SUPP. 2 S.C.R.

A that as they had paid the amounts under protest they were, therefore, entitled
to refund of the amounts paid by them.

The High Court of Kerala, by the impugned Order dated 7_th March,
2000, allowed the Writ Petition and directed refund of the amounts. Pursuant
to the Order dated 7th March, 2000 the Officers in Kerala got a refund. The
B High Court of Gujarat dismissed the Writ Petition. Therefore, in their case,
no refund has taken place. The Judgment of the High Court of Kerala is
assailed by the Union of India. The Judgment of the High Court of Gujarat
is assailed by the Directors/Officers working in Gujarat to whom relief has
been refused.
c Mr. Ganesh pointed out that the admitted facts are (a) that show cause
notices had been issued not only to the Company but also to the various
Directors/Officers of the Company, (b) that the show cause notices had been
adjudicated upon and on the Company excise duty as well as penalty had
been imposed, whereas on each of the Directors/officers a penalty of Rs ..
D 2,00,000/- had been imposed, (c) that the Company as well as its Officers had
filed Appeals which were pending, (d) that not only the Company but each
of the Directors/Officers filed a declaration under the Kar Vivad Samadhan
Scheme, (e) that those declarations were also adjudicated upon and the
settlement amounts determined and paid not only by the Company but also
E by each of the Officers.

Relying upon the prov1s1ons of the Kar Vivad Samadhan Scheme,
Mr. Ganesh submitted that the Scheme was very clear. He submitted that
declarations had to be filed, not only by the Company but by each of the
Directors/Officers on whom show cause notice had been issued. He submitted
F that each declaration had to be separately dealt with and a settlement amount
arrived at for each declaration. He submitted that each declarant would then
have to pay the amount settled. He submitted that a plain reading of the Kar
Vivad Samadhan Scheme (Removal of Difficulties) Order showed that the
benefit was to be given only in those cases where the show cause notices
G were still pending adjudication. He submitted that once the show cause notice
had been adjudicated upon, as admittedly they were in this case, the Directors/
Officers were not entitled to the benefit of the Kar Vivad Samadhan Scheme
(Removal of Difficulties) Order. He submitted that this position had been
made clear by the clarificatory note dated 16th December, 1998 which had
been issued by the Commissioner. He submitted that the Judgment of the
H High Court of Gujarat is the correct Judgment. He submitted that the High
U.0.1. v. ONKAR S. KANWAR (S.N. VARIAVA, J.) 683

Court of Kerala misdirected itself and proceeded o.n an erroneous basis. He A
submitted that the High Court of Kerala has proceeded on the basis that as
the Appeals were still pending, the adjudication proceedings had not
terminated. He submitted that the reasoning of the High Court of Kerala
cannot be sustained as the benefit of Kar Vivad Samadhan Scheme (Removal
of Difficulties) Order was not to be given where the proceedings were pending B
adjudication but only where the show cause notices were pending adjudication.

Mr. Vellapally, on t~e other hand, submitted that only one show cause
notice had been issued. He submitted that in the same show cause notice the
· Company was called upon to show cause why excise duty and penalty be not
levied and the Directors/Officers were also called upon to show cause why C
penalty be not levied on them. He submitted that Section 91 of the Kar Vivad
Saniadhan Scheme makes it clear that on payment being made and a certificate
being granted, immunity is granted against prosecution for any offence and
from imposition of penalty. He submitted that once the Company settled
under the said Scheme, there was immunity in respect of the matter for which
the show cause notice was issued. He submitted that penalty was sought to D
be Imposed on the Directors/Officers for the same matter in respect of which
· the Show Cause Notice had been issued on the Company. He submitted that
once the Company got immunity in respect of that matter, nothing survived
even against the Directors/Officers.

We are unable to accept this submission. Under the Kar Vivad Samadhan
E
Scheme there is no adjudication o·n the subject matter of the demand notice
or show cause notice. There is a settlement of the "tax arrears". Even though
the same show cause notice may call upon the Company and its Directors/
Officers to show cause, there is a separate demand for "tax arrears" against
the Company and a separate demand for "tax arrears" against the Directors/ F
Officers. Thus each entity/person would have to file a declaration separately.
The settlement is in respect of each declaration. Section 91 only gives immunity
in respect of matters covered in the declaration. The matter covered in the
declaration by the Company is the "tax arrears" of the Company. The
declaration by the Company admittedly does not cover the tax arrears of the
Directors/Officers. Thus they get no immunity under Section 91 on a settlement G
by the Company.

Mr. Vellapally next submitted that the Kar Vivad Samadhan Scheme
(Removal of Difficulties) Order, if read as a whole, makes it clear that the
benefit of the declaration made by the Company was to accrue even to the H
684 SUPREME COURT REPORTS [2002] SUPP. 2 S.C.R.

A Officers of the Company so long as the adjudication proceedings were pending.
He submitted that the interpretation sought to be given by the Department
would render nugatory the Kar Vivad Samadhan Scheme (Removal of
Difficulties) Order. He submitted that such an interpretation would lead to
uncertainty. He submitted that the applicability of the Order could not depend
B upon whether or not an Officer has been proceeded with adjudication
expeditiously or not. He submitted that the object was to give benefit to all
Directors/Officers of the Company. He submitted that the restricted
interpretation would defeat the object.

We have heard the parties. In our view, a reading of the Kar Vivad
C Samadhan Scheme (Removal of Difficulties) Order shows that where a
declaration had been made in respect of a tax arrear and where in respect of
the same matter a show cause notice had also been issued to any other
person, then the settlement in favour of the declarant has to be deemed to be
full and final in respect of other persons on whom show cause notices had ...
been issued. It is settled law that when an Appeal is pending there is no
D finality to the proceedings. The proceedings are then deemed to be continuing.
Undoubtedly, at one place the Kar Vivad Samadhan Scheme (Removal of
Difficulties) Order seems does state that the show cause notice should be
pending adjudication. However, the same order also talks of the show cause
notice being in respect of same matter on which the show cause notice has
E bean issued to the main declarant. Then the Order provides that a settlement
in favour of the declarant will be deemed to be full and final in respect of
other persons also. This Order has to be read as a whole. If read as a whole,
it is dear that a settlement by the main declarant is to operate as full and final
settlement in respect of all other persons on whom show cause notice was
issued in respect of the same matter. Thus read as a whole the words "pending
F adjudication" cannot be read to exclude cases where the proceedings are still
pending in Appeal. Even otherwise the order has to be read along with the
Kar Vivad Samadhan Scheme. Under the Kar Vivad Samadhan Scheme a
party can file a declaration so long as the proceedings are pending. Thus,
even though the show cause notice may have been adjudicated upon and an
G Appeal is pending a party could still take the benefit of the Kar Vivad
Samadhan Scheme and file a declaration: The object of the Kar Vivad
Samadhan scheme (Removal of Difficulties) Order is to give benefit of a
settlement by the main party (i.e. the Company in this case) to all other co-
notices. This being the object a classification, restricting the benefit only to
cases where the show cause notice is pending adjudication, would be
I-
H unreasonable. Ifread in this manner the Order would be discriminatory. An
U.0.1. v. ONKAR S. KANWAR [S.N. VARIAVA, J.) 685
interpretation which leads to discrimination must be avoided. An interpretation, A
as suggested by Mr. Ganesh, would also be against the object of the Kar
Vivad Samadhan Scheme (Removal of Difficulties) Order. It is therefore not
possible to accept the submissions of Mr. Ganesh. In our view the reasoning
given by the High Court of Kerala is correct and needs to be upheld.

In any event this would clearly be a case where two views are possible. B
It is settled law that if two views are possible then the one which is in favour
of the assessee must be adopted. On this ground also the interpretation sought
to be given by Mr. Ganesh cannot be accepted.

In this view of the matter. Civil Appeal Nos. 6260-6265 of 2000 are
dismissed. Civil Appeal Nos. 633 to 642 of 2002 are accordingly allowed C
and the Judgment of the High Court of Gujarat is set aside.

The question now arises whether the Directors/Officers are entitled to
a refund. Section 93 of the Kar Vivad Samadhan Scheme reads as follows:

"93. Any amount paid in pursuance of a declaration made under D
section 88 shall not be· refundable under any circumstances."

Admittedly, in this case, all the Officers have paid the amounts in pursuance
of the declaration made by them under Section 88. Even if they have paid the
amounts under protest they are not entitled to refund. The Directors/Officers E
in Kerala would also not have been entitled to refund by virtue of Section 93.
However, Section 93 does not seem to have been pointed out to the High
Court of Kera la. As, pursuant to the Order of the High Court of Kerala, they
have received refund we do not direct that they should repay the amounts to
the Revenue.
F
The Appeals stand disposed of accordingly. There will be no order as
to costs.

K.K.T. Appeals disposed of.