KVSS, 1998 - Since there is no procedure of 'admitting' a Reference Application, mere proof of pendency of RA before CESTAT should be sufficient for accepting declaration filed by Petitioner under KVSS: High Court
By TIOL News Service
NEW DELHI , APR 12, 2016: ON 24th December 1996, the CCE passed an order confirming CE duty demand of Rs.26,59,620/- and penalty of like amount against the Petitioner.
By a Majority decision dated 22nd December 1998, the Tribunal upheld the demand of excise duty but reduced the penalty to Rs.5 lakhs.
Against this order, the Petitioner preferred an application (RA) on 31st December 1998 for reference u/s 35G of the CEA, 1944 raising certain questions to be referred to the High Court.
Meanwhile, the KVSS was introduced by the FA, 1998 and the benefit of the scheme available till 31st December 1998was extended subsequently up to 31st January 1999.
The Petitioner filed a declaration u/s 88 of the Finance Act, 1998 on 11th January 1999 seeking settlement of the case under the KVSS. A reference was made in the application regarding the pending RA before the CEGAT. The Petitioner offered to pay 50% of the disputed tax amount and sought waiver of the balance 50% and the entire amount of penalty.
On 9th March 1999, the AC, CEX issued a letter to the Petitioner stating that the Petitioner cannot seek to apply under KVSS. It was stated that the RA filed before the CEGAT was not on a point of law and "It has no meaning and will not alter the decision of CEGAT". Accordingly, the Petitioner's declaration filed on 11th January 1999 was returned to the Petitioner and it was asked to pay the amount of tax arrears in full.
The Petitioner made a representation on 20th March 1999, in which a reference was made to the circular issued by the CBDT on 3rd September 1998 (as the scheme was common to both, direct and indirect taxes) wherein in response to a question as to when a reference could be said to be pending, the answer was "If the taxpayer has filed within the statutory time a legally valid reference application under Section 256(1) or 256(2) of the Income Tax Act, 1961, the condition of pendency of reference could be said to have been satisfied".
However, the Petitioner's representation was again turned down on 13th April 1999 stating that the declaration furnished by the Petitioner was not covered under the ambit of KVSS.
The petitioner, thereafter, filed a Writ Petition before the Delhi High Court praying that the aforesaid letters of the AC, CEX be set aside and the Respondents be directed to accept the declaration filed by the Petitioner under the KVSS and pass suitable orders u/s 90 of the Finance Act, 1998.
It was informed by the petitioner that the RA filed by it before the CESTAT was still pending consideration.
++ As far as the present case is concerned, the only reason given by the Respondent for not considering the declaration filed by the Petitioner was because the RA was pending before the CESTAT but not 'admitted. In other words the Respondent did note that the RA is pending before the CESTAT. It has been clarified even in the circular issued by the CBDT that " If the taxpayer has filed within the statutory time a legally valid reference application under Section 256(1) or 256(2)" of the IT Act (corresponding to Section 35G of the CE Act) 1944 "the condition of pendency of reference could be said to have been satisfied" .
++ Further it has been clarified that there could be cases where there may be no procedure for admitting an appeal and in such cases the mere proof of filing an appeal would be sufficient. In other words, as far as the RA filed by the Petitioner is concerned, since there is no procedure of 'admitting' such an RA, the mere proof of pendency of the RA before the CESTAT should be sufficient for accepting the declaration filed by the Petitioner under the KVSS .
The letters issued by the AC, CEX were quashed and a direction was issued to accept the declaration filed by the Petitioner under the KVSS.
In passing: The Kar Vivad Samadhan Scheme, 1998 (KVSS) was introduced by the Government as a part of the Finance Act (No.2) of 1998. In his Budget speech the Finance Minister outlined the following benefits from the scheme (a) declogging the system will provide incentive to honest tax payers; and (b) government willl be able to realise its reasonable dues much earlier. The scheme envisaged an abatement of 50 percent of the outstanding tax alongwith waiver of penalty, interest & immunity from prosecution.
The benefits of the scheme were available in respect of tax arrears where (a) notice of demand was issued on or before 31 March 1998, or (b) an appeal, revision or writ was admitted and pending before any appellate authority/court on the date of filling of the declaration under the Scheme. The benefit of the scheme was, however, not available in cases where prosecution for any offence punishable under any provision of any Direct tax and other enactments had been instituted on or before the date of filing of the declaration.
Also see 2016-TIOL-714-HC-DEL-ST.
(See 2016-TIOL-733-HC-DEL-CX)
