[Swan Mills Ltd. v. Union of India, (2008) 296 ITR 1
(SC)]
The appellant is a composite textile mill engaged in the
manufacture of cotton yarn, man-made yarn, cotton fabrics and man-made fabrics,
as well as processing amongst other activities. For the period from October,
1994 to February, 1997, the appellant was served with 14 show-cause notices for
recovery of differential duty of approximately Rs.50 lakhs. The said show-cause
notices were adjudicated by the Assistant Commissioner of Central Excise,
Mumbai-II vide order-in-original Nos. 781/398/97 to 794/411/97, dated November
12, 1997, confirming the demands covered thereunder along with interest. The
Assistant Commissioner of Central Excise also imposed penalty of Rs.5,000. There
being incorrect computation, he directed the Range Superintendent to verify
figures and work out a fresh demand. The Range Superintendent re-worked the duty
amount of Rs.9,40,753 and issued a demand notice on May 18, 1998, requiring the
appellant to pay the said amount along with penalty of Rs.5,000. Dissatisfied
with the order dated November 12, 1997, passed by the Assistant Commissioner of
Central Excise and the order of Range Superintendent, dated May 18, 1998, the
appellant preferred an appeal before the Commissioner of Central Excise
(Appeals) on September 2, 1998, along with a stay application. The Commissioner
of Central Excise (Appeals), vide order dated December 28, 1998, asked the
appellant to deposit the amount of duty and penalty within four weeks from the
date of the order. The Finance (No. 2) Act, 1998 came out with a scheme known as
‘Kar Vivad Samadhan Scheme, 1998’ (for short ‘KVSS’). The said scheme provided
for settling the tax arrears by paying 50 per cent of the disputed tax arrears.
Under the KVSS, the Commissioner of Central Excise was appointed as designated
authority. The scheme was operative from September 1, 1998, to January 31, 1999.
The appellant filed a declaration u/s.89 of the Finance (No. 2) Act, 1998,
before the Commissioner of Central Excise on December 31, 1998. The aforesaid
declaration filed by the appellant came to be rejected by the designated
authority, vide his order dated February 25, 1999, on the ground that the appeal
was filed by the appellant before the Commissioner of Central Excise (Appeals)
after the limitation for filing the appeal had already expired and that delay in
filing the appeal was not condoned by the Commissioner of Central Excise
(Appeals). Aggrieved by the order in appeal dated February 25, 1999, the
appellant preferred an appeal before the Customs, Excise and Gold (Control)
Appellate Tribunal, West Regional Bench, Mumbai (for short, ‘the Tribunal’). The
Tribunal vide its order dated November 29, 1999, held that the appeal preferred
by the appellant before the Commissioner (Appeals) was within time and,
accordingly, set aside the order of the Commissioner (Appeals) and remanded the
matter back to him for fresh disposal in accordance with law. On remand, the
Commissioner (Appeals) vide order dated June 29, 2001, upheld the order dated
November 12, 1997. After the Tribunal passed by the order on November 29, 1999,
holding that the appeal preferred by the appellant before the Commissioner
(Appeals) was within time, the appellant approached the designed authority, vide
its letter dated April 24, 2001, for reconsideration of the earlier order dated
February 25, 1999, and give the appellant the benefit of the KVSS in the matter
of the application filed u/s.89 of the KVSS on January 28, 1999. The
Superintendent of Central Excise, Range-II, on January 18, 2002, informed the
appellant that the application u/s.89 of the KVSS was re-examined by the Chief
Commissioner’s Office, Mumbai, and since the KVSS no longer exists, the question
of accepting the application does not arise. The appellant approached the Bombay
High Court by filing a writ petition. The appellant challenged principally the
order dated February 25, 1999, passed by the designated authority. It prayed for
direction to the respondents to accept the appellant’s declaration dated
December 31, 1998, made u/s.89 of the Finance (No. 2) Act, 1998, in respect of
the KVSS and restrain the respondents from recovery of interest amount of
Rs.11,58,647 as per the demand dated December 7, 2005. Analysing the various
provisions of the KVSS, the High Court held that since the appeal was filed
after the limitation and the delay was not condoned, the appellant was not
entitled to get the benefit of KVSS. On appeal the Supreme Court held that
undisputedly, the Tribunal had held that the appeal was within time. That being
so, for the purpose of the KVSS, the appeal was to be treated as pending. The
ratio in CIT v. Shatrusailya Digvijaysingh Jadeja, (2005) 7 SCC 294, was
clearly applicable. In the instant case, the appeal is to be treated as pending.
The High Court was not justified in dismissing the writ petition. The Supreme
Court set aside the order of the High Court and quashed the orders of the
designated authority, rejecting the declaration filed by the appellant.
