Case: Union Of India  Vs. Onkar S. Kanwar

The Respondents in Civil Appeal Nos. 6260-6265 of 2000 and the Appellants in all the other Appeals are Directors/Officers of M/s. Appollo Tuyres Limited. M/s. Apollo 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 issue show cause notices to the Company as to why excise 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 also required each Director/Officer of the Company to pay a sum of Rs. 2,00,000/- as personal penalty.3. The Company as well as the Officers filed Appeals before the Customs Excise and Gold (Control) Appellate Tribunal. While Appeals were pending the Kar Vivad Samadhan Scheme was announced.On 8th December, 1998 the Government passed the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order. This Order reads as(1) This order may be called the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998.(2) It shall be deemed to have come into force on the 1st day of September, 1998.2. 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 show cause notice issued on or before the 31st day of March, 1998 but remaining unpaid and pending determination on 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 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 (1) 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 mater covered 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 31st March, 1998 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.6. The Company as well as all its Directors/Officers filed separate 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.7. All the Directors/Officers then filed Writ Petitions. The Officers who were posted in the Kerala factory filed Writ Petition 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 that as they had paid the amounts under protest they were therefore entitled to refund of the amounts paid by them.8. The High Court of Kerala, by the impugned Order dated 7th 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 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 relied has been refused.

Reasoning:
It is settled law that when an Appeal is pending there is no 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 been 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 tobe read as a whole. If read as a whole, it s 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 read as a whole the words "pending 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 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-noticees. 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 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.