1 IN THE HIGH COURT OFJUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 1074 OF 1999 WRIT PETITION NO. 1074 OF 1999 WRIT PETITION NO. 1074 OF 1999 ARVIVA INDUSTRIES (INDIA) LTD. ) a Company incorporated under the ) Companies Act, 1956, and haing ) its registered office at 50-A/B, ) Got. Industrial Estate, Charkop, ) Kandivali (est), Mumbai 400 067. ).. Petitioners Versus 1. The Unino of India ) 2. Commissioner of Customs, ) Preentie having his office ) at New Customs House, ) Ballard Estate, Mumbai 400 001. )..Respondents Mr. D.B.Shroff, Senior Counsel with Mr. R.g.Sheth i/b. R.G.Sheth & Co. for the petitioners. Mr. R.V.Desai, Senior Counsel ith Mrs. S.V.Bharucha for the respondents. CORAM: F.I.REBELLO AND CORAM: F.I.REBELLO AND CORAM: F.I.REBELLO AND J.H.BHATIA,JJ. J.H.BHATIA,JJ. J.H.BHATIA,JJ. DATE: 23rd April, 2009. DATE: 23rd April, 2009. DATE: 23rd April, 2009. (JUDGMENT : (PER F.I.REBELLO,J.) (JUDGMENT : (PER F.I.REBELLO,J.) (JUDGMENT : (PER F.I.REBELLO,J.) 2 1. The petition raises the following questions :- "(i) Why the Customs duty amounting to Rs.21,13,482/- leviable on the said goods should not be recovered (details as per annexure B) under proviso to Section 28(1) of the Customs Act, 1962 read with notification No. 204/92 dt. 19.5.92? (ii) Why the Customs duty amounting to Rs.21,13,482/- recoverable as aforesaid should not be adjusted from the amount deposited voluntarily (details as per annexure D) ?" 2. A few facts: The petitioner company is a merchant exporter. It purchased finished fabrics and exported the same. Under the Import-Export Policy 1992-97 an incentive was given for exports. Under the DEEC Scheme, an exporter was allowed to import materials specified in the Advance License without payment of duty. On completing the export obligation, the licenses were made transferable and could be sold in the market after the licensing authorities had endorsed transferability on the same. 3. On 20th August 1995, Shri Raju Amarnani, a 3 Director of the petitioner was arrested and remanded to judicial custody on the ground that the petitioners had evaded customs duty. The banks accounts were frozen and the accounts seized. According to the petitioners, while in jail, the said Raju Amarnani was forcibly coerced to issue a cheque for Rs.20 lakhs towards the alleged evasion of customs duty. The petitioners filed Writ Petition No.1740 of 1995 and 1895/1995 against the freezing and seizure of the accounts. The respondents filed an affidavit alleging that the petitioners had evaded customs duty to the tune of Rs.1.10 crores. On 13.10.1995, this Court directed the petitioners to give a bank guarantee of Rs.80 lakhs and lifted the seizure and freezing of the petitioners’ bank accounts. 4. In the meantime, the application for cancellation of bail moved by the respondents against Raju Amarnani was rejected. On 7.12.1995, J.Amarnani and Raju Amarnani were detained under COFEPOSA. On 14.12.1995, Summons were issued to Raju Amarnani and his wife. Replies were given to the summons. According to the petitioners, on account of the detention and service of summons on Raju Amarnani and his wife, the petitioners were coerced into depositing a further amount of Rs.90 lakhs against the alleged customs duty evasion. On 17.1.199s6, the order passed under COFEPOSA was revoked. 4 According to the petitioners, thereafter they were coerced into deposit further amounts aggregating to Rs.20,55,000/- towards the alleged duty evasion without even the issue of show cause notice. The aggregate amount of money deposited under coercion between August 1995 and January 1997 was Rs.1.30 crores. 5. A show cause notice dated 8.12.1997 was issued by the respondents in respect of the alleged customs duty evasion and the demand for duty was made amounting to Rs.21,13,482/-. The show cause notice specifically sought to adjust the amount of Rs.21,13,482/- against the aforesaid deposit made by the petitioners. On 18.12.1997, in view of the fact that show cause notice had been issued, this Court passed an order cancelling the bank guarantee given by the petitioners. 6. In 1998-99, Budget, the Central Government introduced the Kar Vivad Samadhan Scheme. On 28.12.1998, the petitioners filed a declaration under Section 69 of the Scheme under which the petitioners were liable for only 50% of the tax arrears i.e. Rs.10,56,741/- against the total deposit of rs.1.30 crores. The 2nd respondent rejected the aforesaid application contending that there was no tax arrears as the duty demanded in the show cause notice had been 5 paid. 7. On behalf of the petitioners, it is submitted that on a true and proper interpretation of Explanation to clause 87(m)(ii) of the Kar Vivad Samadhan Scheme, the same would apply only if duty, cess, interest, fine or penalty has been already paid either voluntarily or under protest before filing the declaration of "tax arrears" under clause 87(m)(ii) of the Kar Vivad Samadhan Scheme. It is submitted that Explanation cannot and does not apply to amounts deposited which are not paid as duty which has not been ascertained. The amount of Rs.1.30 crores was not deposited pursuant to a show cause notice or an adjudication order. Amounts paid during investigation are only a deposit and not payment of duty. It cannot therefore be treated as "duty". Unless there is assessment and demand, the amount deposited cannot be appropriated as it is not duty. The word "duty" does not and cannot refer to the amount of Rs.1.30 crores which the petitioners were coercively compelled to deposit before the issue of show cause notice. It is submitted that the amounts were paid under coercion and cannot be said to be voluntary deposit. The fact that the show cause notice demands only an amount of Rs.21,13,482/-, whereas the respondents coercively recovered Rs.1.30 crores pending 6 investigation would indicate that amounts were not voluntarily paid. The order dated 11.2.1999 rejecting the petitioners’ application under the Scheme on the ground that no amount was in arrears against the show cause notice as on the date of filing the application under the Scheme is manifestly incorrect and deserves to be set aside. 8. Reply has been filed on behalf of the respondents by K.V.P. Unii, Assistant Commissioner of Customs (Prev.). It is submitted that allegations against the petitioners are for evasion of customs duty and misuse of DEEC Scheme by the petitioners. In the course of the investigation, the petitioners agreed to pay voluntarily to the respondents various amounts by way of customs duty and penalty. These amounts were paid voluntarily and not under coercion as falsely alleged by the petitioners. Considering the provisions of the Scheme, the application under the Scheme was rightly rejected. 9. To consider the submissions, it will be necessary to consider the relevant provisions of the Scheme. The relevant portion of Section 87(m)(ii) reads as under :- "87 (m) "Tax arrear" means,- 7 (i) .... (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 determined as due or payable under that enactment as on the 31st day of March, 1998 but remaining unpaid as on the date of making a declaration under section 88; (b) 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 show cause notice issued on or before the 31st 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 and demand of duties, the tax arrears shall not include the duties on such seized goods where such duties on the seizure goods have not been quantified. 8 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 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-clause;" What would be applicable to the petitioners would be Section 87(m)(ii)(b) as the show cause notice was issued on 8.10.1997. 10. The only issue is whether in terms of the Explanation, the amount paid by the petitioners can be said to be the amount unpaid for the purpose of determining tax arrears under the sub-clause. . At the outset, it may be mentioned that the respondents had issued a show cause notice to the petitioners. The amount had been collected before the issuance of the show cause notice The show cause notice 9 is clear inasmuch as it sets out why customs duty amounting to Rs.21,13,482/- should not be recovered and further why that amount should not be adjusted from the amount deposited voluntarily. The exact phraseology used is as under :- "Why the Customs duty amounting to Rs.21,13,482/- recoverable as aforesaid should not be adjusted from the amount deposited voluntarily (details as per annexure D)." Further, the show cause notice says why the penalty should not be imposed. . The language therefore is clear. As on the date of the show cause notice, the amount from the deposit had not been adjusted. Therefore, as on the date of the show cause notice, neither was the duty ascertained nor was the amount adjusted. In the absence of the amount of deposit having been adjusted the question whether the deposit was voluntary or not is immaterial. Under Section 87(m)(ii) (5) of the Scheme, the application could have been rejected. Though the amount of duty was specified in the notice, the amount specified had remained unpaid on the date of making a declaration under Section 88 as the show cause notice itself set out 10 as to why the deposit should not be adjusted. There is nothing in the affidavit of K.V.P.Unii which is dated 14.6.1999 to show that the amount was adjusted on the date of making the declaration. The declaration was filed on 28.12.1998. The duty therefore as set out in the show cause notice remained unpaid as on 28.12.1998. . The respondent No.2, therefore, acted without jurisdiction in rejecting the application by its order dated 11.2.1999. . As we are disposing of this petition on this point, the other submissions raised bythe petitioners are not dealt with. 11. On behalf of the respondents, the learned Counsel sought to contend that there was an order of detention against the petitioners. Our attention was invited by the learned Counsel for the petitioners to the order dated 17.1.1996 whereby the order of detention has been revoked. It is not necessary for us to deal with the said aspect as the application was not rejected on that count. 13. For the aforesaid reasons, the Petition is made 11 absolute in terms of prayer clause (a). The respondent No.2 is directed to consider the petitioners’ declaration dated 28.12.1998 and pass appropriate orders according to law expeditiously. Pending the said decision the Respondents not to proceed with the show cause notice. In the circumstances of the case, there shall be no order as to costs. (J.H.BHATIA,J.) (F.I.REBELLO,J.) (J.H.BHATIA,J.) (F.I.REBELLO,J.) (J.H.BHATIA,J.) (F.I.REBELLO,J.)