Sunny Detergent Pvt. Ltd. vs Commissioner of C. Ex.

Ashim Kumar Banerjee, J.—On November 30, 1997 Commissioner of Central Excise passed an order as against the appellant demanding a sum of Rs. 33,36,289.00 by way of duty, Rs. 7.00 lacs by way of penalty and interest u/s 11AB of the Central Excise Act, 1944 (hereinafter referred to as the "Act of 1944"). The appellant filed an appeal before the Customs, Excise and Gold Control Appellate Tribunal (hereinafter referred to as "CEGAT"). To prefer an appeal from the order of the Commissioner the appellant was required to deposit the amount so directed to be paid on protest. The appellant, however, did not deposit the disputed amount and filed an application for dispensation of the deposit. The Tribunal heard the said application and admitted the appeal on condition that the appellant must deposit Rs. 5.00 lacs towards duty, Rs. 2.00 lacs towards penalty and Rs. 11.00 lacs by adjustment of the amount if available in Modvat Account. The rest of the demand was stayed by the tribunal. The appellant filed another application for modification, inter alia, praying for dispensation of such deposit. The tribunal refused to modify the said order and only extended the period for such deposit. On December 31,1998 the appellant deposited a sum of Rs. 1,11,072.00. By this time the Central Government introduced the Kar Vivad Samadhan Scheme, 1998 (hereinafter referred to as the "said Scheme"). On January 8,1999 the appellant filed an application before the tribunal expressing their desire to settle the disputes under the said Scheme. The appellant also filed a declaration as required u/s 88 of the Finance Act, 1998. Since the total amount as adjudicated upon by the Commissioner was Rs. 33,36,289.00 and the appellant paid a sum of Rs. 1,11,072.00 the unpaid duty was Rs. 32,25,217.00. The appellant offered to pay Rs. 16,12,609.00 being 50% of the unpaid duty. Such declaration was, however, not accepted by the designated authority under the said scheme. The designated authority passed an order on February 10, 1999 holding that the appellant was already directed by the tribunal to make pre-deposit of Rs. 14,88,928.00 (being the balance of Rs. 16.00 lacs) at the time of admission of the appeal and such amount should not be included in the disputed tax for the purpose of finding out the actual amount payable under the scheme. The Tribunal held that since the appellant failed to deposit the said sum of Rs. 1,44,88,928/- (sic) being the remaining amount of Rs. 16.00 lacs so directed by the Tribunal the said amount should be paid by the appellant in addition to 50% of the balance amount being Rs. 18,47,361.00. In terms of the order of the designated authority the appellant was required to pay Rs. 26,12,689/- (Rs. 16.00 lacs - Rs. 1,11,072.00 = Rs. 14,88,928.00 + Rs. 9,23,681.00).

Being aggrieved by and dissatisfied with the order of the designated authority the appellant filed the instant writ petition. The same was heard and disposed of by the learned Single Judge by His Lordship''s judgment and order dated April 4, 2003. His Lordship held that the designated authority correctly adjudicated the amount under the said scheme and there was no scope for interference. The appellant, being aggrieved by and dissatisfied with the judgment by His Lordship, filed the instant appeal.

We have heard the parties. We have perused the written notes of submission submitted on behalf of the parties.

The Scheme was introduced with effect from September 1, 1998. "Disputed Tax" was defined in Section 87(f) of the Finance Act, 1998 wherein it stipulates that the "Disputed Tax" means the total tax determined and payable in respect of an assessment order under any tax enactment but which remains unpaid as on the date of making the declaration u/s 88. Section 88 of the said Act of 1998 provides that to avail benefit person would have to make a declaration between September 1, 1998 and December 31, 1998 to the designating authority that he intends to pay 50% of the disputed amount of duty including fine, penalty, interest due or payable as on the date of making of such declaration. In terms of Section 87(m)(ii) "tax arrear", inter alia, means in relation to indirect tax enactment, the amount of duty, cess, interest, fine or penalty determined as due or payable under that enactment as on March 31,1998 but remaining unpaid as on the date of making of such declaration. It was further clarified in the explanation clause of the said sub-section that where a declarant had already paid either voluntarily or under protest, any amount of duties, cess, interest, fine or penalty on or before the date of declaration which included any deposit made by him pending any appeal or in pursuance of a court order such payment would not be included in the tax arrear for the purpose of determination of the disputed tax. Explanation to Section 87(m)(ii) is quoted below:

Explanation. - Where a declarant has already paid either voluntarily or under protest, any amount of duties, cesses, interest, fine or penalty specified in this sub-clause, on or before the date of making a declaration by him u/s 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-clause.

In the instant case Commissioner assessed the duty as well as penalty and interest. When the appeal was filed the Tribunal directed deposit of a sum of Rs. 16.00 lacs. The appellant, however, deposited only a sum of Rs. 1,11,072.00 instead of Rs. 16.00 lacs. Such order of deposit was subject to the final order being passed in appeal. Hence, although the Tribunal passed an order for deposit of Rs. 16.00 lacs the appellant only deposited a sum of Rs. 1,11,072.00. It was open for the tribunal to dismiss the appeal for non-deposit of the balance amount so directed by the tribunal. However, the fact remains that the appeal was kept pending on the date of introduction of the said scheme. The test, in our view, is, what was the actual amount payable on the date when the scheme was introduced. We have no hesitation to observe that the said amount being the amount so assessed by the Commissioner less the amount deposited by the appellant and the said sum was Rs. 32,25,217.00 and the appellant was entitled to settle the disputes by payment of 50% of the said sum being Rs. 16,12,609.00. The learned Judge proceeded on the basis that to have the appeal admitted the appellant obtained an order for deposit of Rs. 16.00 lacs which did not constitute the entire duty so assessed by the Commissioner. By not depositing the said sum the appellant was not entitled to take advantage of their own wrong. Such analogy, in our view, is not at all applicable in the instant case. The Government by introduction of the said scheme through Finance Act, 1998 gave three months time to the assessees who were litigating before the appropriate forum on assessment, an opportunity to settle the disputes by payment of 50% of the amount due as on the date of declaration. Our observation is supported by the explanation quoted (supra) where it was categorically made clear that to determine the tax arrear the deposit or payment already made either voluntarily or under protest or in terms of order by any authority would not be taken into account meaning thereby the legislature wanted collection of 50% of unpaid tax by way of settlement of tax disputes. Hence, to determine the amount the designated authority was only to find out what was the actual amount due to the Revenue as on the date of making of the declaration. The authority had no power to find out as to whether there was any default on the part of the assessee in making deposit of any amount in terms of any order of any forum where the dispute was pending. On perusal of the subject provisions we are of the view that dispute under the scheme means not only non-payment but also proceeding pending before the appropriate forum. To find out the actual tax arrear two tests are to be under gone:

(i) What was the actual amount of tax due by the declarant?

(ii) What was the actual amount unpaid during pendency of a proceeding?

In the instant case admittedly there was an appeal pending before CEGAT as on the date of making of such declaration. As per revenue a sum of Rs. 32,25,216.00 was payable against the assessed duty of Rs. 33,36,289.00 taking into account payment of Rs. 1,11,072.00. Hence, it is crystal clear that as on the date of making of the declaration the unpaid amount being Rs. 32,25,217.00 was to be taken into account as tax arrear as defined under the said scheme of 1998.

The designated authority held that the declarant did not deposit the redemption fine of Rs. 3.5 lacs and there was no dispute on that score. Such finding of the authority was totally erroneous. The entire adjudication by the Commissioner was pending in appeal as we find from the Memorandum of Appeal filed before CEGAT. Hence, the adjudication made by the Commissioner could not be segregated as had been done by the designated authority. The entire dispute was before the CEGAT. The amount covered under the dispute was Rs. 33,36,289.00 against which Rs. 1,11,072.00 was deposited. We are unable to appreciate how the designated authority could bifurcate the duty so assessed by the Commissioner for the purpose of adjudication of the tax arrear within the meaning of the said scheme of 1998.

The learned Judge, in our view, was not right in holding that allowing the writ petition would amount to allowing the petitioner to take advantage of his wrong which was wholly undesirable. Such decision of His Lordship, with all humility, we say, is not proper in deciding the subject controversy. The Government wanted to collect the disputed tax by giving opportunity to the assessees to resolve the dispute by making payment of 50%. Whether such dispute was tenable or not or whether the assessees were entitled to raise such dispute, was not a question to be considered for the purpose of adjudication of the amount of duty for the purpose of resolution of disputes under the said scheme of 1998. It might be true that the appellant had a frivolous defence to the duty so assessed by the Commissioner. The appellant might lose in the appeal. The tribunal admitted their appeal with a pre-condition of deposit. The appellant did not deposit the same so directed by the tribunal in its entirety. It was open for the tribunal to dismiss their appeal. The tribunal did not do so. Hence, on the date of introduction of the scheme and on the date of making of such declaration the appeal was pending as per the record of the said tribunal and such appeal was for the entire amount of duty. On that score the appellant deposited only a sum of Rs. 1,11,072.00. Hence, the rest of the duty must come within the purview of the said scheme. Question of conduct of the appellant would not be a relevant factor to decide the present controversy.

Four decisions of the Apex Court were relied on by the appellant:

(i) Union of India (UOI) Vs. Charak Pharmaceuticals (India) Ltd.,

(ii) Navinchandra Chotelal Vs. Central Board of Excise and Customs and Others,

(iii) Vijay Prakash D. Mehta and Another Vs. Collector of Customs (Preventive), Bombay,

(iv) 2003 (259) Income Tax Reports, Supreme Court, Page 258 Dr. Mrs. Renuka Datla and Ors. v. Commissioner of Income Tax

We, however, feel it expedient to quote a passage from the decision in the case of Dr. Mrs. Renuka Datla and Ors. (supra).

On an analysis of these provisions, it is clear that a person could avail of the benefit of the scheme, if:

(1) there was a determination of the amount of tax, etc., on or before March 31,1998; [Section 87(m)(i)]; and

(2) the determination has been modified in consequence of giving effect to an appellate order; (ibid) and

(3) the declaration had been filed in the prescribed form before the designated authority between September 1, 1998, and December 31, 1998 (Sections 88, 89); and

(4) the amount of the modified demand has remained unpaid on the date of declaration; [Section 87(m)(i)]; and

(5) an appeal or reference or writ petition before the authorities or court in respect of items (1), (2) and (4) on the date of the filing of the declaration is pending; [Section 95(i)(c)]

The aforesaid passage of the recent Supreme Court decision clearly supports our view as discussed above.

The appeal thus succeeds. The judgment and order under appeal is set aside. The writ petition is allowed. The order of the designated authority impugned in the writ petition appearing at pages 167 to 169 dated February 10, 1999 is quashed and set aside. The writ petitioner appellant be refunded a sum of Rs. 10.00 lacs so deposited with the Registrar, Original Side together with interest as accrued thereon. We hold that the Revenue was entitled to claim Rs. 16,12,609.00 under the said Scheme as per the declaration. The said amount already paid to the Revenue in terms of the order of this Court on March 1, 1999 Sunny Detergent Pvt. Ltd. Vs. Commr. of C. Ex., appearing at pages 181-185 of the Paper Book be treated as payment to the Revenue in full and final settlement under the said Scheme.

The appeal is disposed of accordingly without any order as to costs.

There would be stay of operation of the judgment and order till November 15, 2006.

Urgent xerox certified copy would be given to the parties, if applied for.

Tapan Mukherjee, J.

I agree.