Case Note & Summary
The petitioners, ex-partners of M/s. Zuari Stainless Steel Industries, a 100% export-oriented unit, imported raw materials (steel sheets in coils) which were stored in a bonded warehouse without payment of customs duty. The firm later closed down, and the raw materials remained in the warehouse. The Customs authorities issued a show cause notice demanding duty on the warehoused goods. The petitioners sought to settle the dispute under the Kar Vivad Samadhan Scheme, 1998 (KVSS), which allowed for settlement of tax disputes by paying a reduced amount. However, the Finance Ministry issued a clarification on 28/10/1998 stating that warehoused goods do not constitute a 'dispute' under KVSS because there is no demand of duty until the goods are cleared for home consumption. Based on this clarification, the Customs authorities rejected the petitioners' declarations. The petitioners challenged the validity of the clarification and the rejection orders. The court held that the clarification was valid and that the KVSS applies only to cases where there is a demand of duty which is in dispute. Since the goods were warehoused without payment of duty, there was no demand and hence no dispute. The court also rejected the argument of promissory estoppel, noting that the clarification was issued before the petitioners filed their declarations. The petition was dismissed.
Headnote
A) Kar Vivad Samadhan Scheme - Definition of 'Dispute' - Warehoused Goods - The clarification dated 28/10/1998 issued by the Finance Ministry under Section 95 of the Kar Vivad Samadhan Scheme, 1998, which provides that warehoused goods do not constitute a 'dispute' under the scheme, is valid and binding. The scheme applies only to cases where there is a demand of duty which is in dispute, and where the goods are warehoused without payment of duty, there is no demand and hence no dispute. (Paras 1-10)
B) Customs Act, 1962 - Warehousing Provisions - Sections 68 to 94 - The scheme of the Customs Act, 1962, provides for warehousing of imported goods without payment of duty, and the duty becomes payable only when the goods are cleared for home consumption. Until such clearance, there is no demand of duty and consequently no dispute that can be settled under the Kar Vivad Samadhan Scheme. (Paras 11-20)
C) Kar Vivad Samadhan Scheme - Promissory Estoppel - The petitioners' claim of promissory estoppel based on the scheme's brochure is not tenable because the clarification was issued before the petitioners filed their declaration under the scheme, and the scheme itself is a statutory scheme whose provisions prevail over any brochure. (Paras 21-25)
Issue of Consideration
Whether the clarification dated 28/10/1998 issued by the Finance Ministry under the Kar Vivad Samadhan Scheme, 1998, which excludes warehoused raw materials from the definition of 'dispute' for the purpose of the scheme, is valid and whether the Customs Authorities were justified in denying the benefit of the scheme to the petitioners based on that clarification.
Final Decision
The petition is dismissed. The clarification dated 28/10/1998 and the orders dated 26/2/1999 and 24/3/1999 are upheld. No order as to costs.
Law Points
- Kar Vivad Samadhan Scheme
- 1998
- Section 95
- Section 96
- Section 97
- Section 98
- Section 99
- Section 100
- Section 101
- Section 102
- Section 103
- Section 104
- Section 105
- Customs Act
- 1962
- Section 68
- Section 69
- Section 70
- Section 71
- Section 72
- Section 73
- Section 74
- Section 75
- Section 76
- Section 77
- Section 78
- Section 79
- Section 80
- Section 81
- Section 82
- Section 83
- Section 84
- Section 85
- Section 86
- Section 87
- Section 88
- Section 89
- Section 90
- Section 91
- Section 92
- Section 93
- Section 94
- warehoused goods
- duty demand
- dispute
- clarification
- retrospective effect
- promissory estoppel
Case Details
Writ Petition No.1021 of 2000
Mr. D.B. Shroff, senior advocate i/b. Mulla & Mulla for the petitioners; Mr. P.S. Jetly, advocate with Y.R. Mishra for respondents
Mr. Damodar Narcinva Naik, Mr. Narcinva Damodar Naik, Mr. Pradeep Vassudev Naik, Mr. Vivek Vassudev Naik
Union of India & Ors., Commissioner of Customs & Central Excise, Asstt. Commissioner of Customs (A), Commissioner of Customs (Appeals)
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Nature of Litigation
Writ petition challenging the validity of a clarification issued by the Finance Ministry under the Kar Vivad Samadhan Scheme, 1998, and the consequent orders of the Customs authorities rejecting the petitioners' declarations under the scheme.
Remedy Sought
The petitioners sought to quash the clarification dated 28/10/1998 and the orders dated 26/2/1999 and 24/3/1999, and to direct the respondents to accept their declarations under the Kar Vivad Samadhan Scheme.
Filing Reason
The petitioners, ex-partners of a 100% export-oriented unit, imported raw materials which were stored in a bonded warehouse without payment of duty. When the firm closed, the Customs authorities demanded duty on the warehoused goods. The petitioners sought to settle the dispute under the Kar Vivad Samadhan Scheme, but the authorities rejected their declarations based on a clarification that warehoused goods do not constitute a 'dispute' under the scheme.
Issues
Whether the clarification dated 28/10/1998 issued by the Finance Ministry under the Kar Vivad Samadhan Scheme, 1998, which excludes warehoused raw materials from the definition of 'dispute', is valid.
Whether the Customs Authorities were justified in denying the benefit of the Kar Vivad Samadhan Scheme to the petitioners based on the said clarification.
Submissions/Arguments
The petitioners argued that the clarification is contrary to the provisions of the Kar Vivad Samadhan Scheme and that the scheme should apply to all disputes including those relating to warehoused goods.
The respondents argued that under the Customs Act, duty on warehoused goods is not payable until clearance for home consumption, and therefore there is no demand or dispute until then, making the clarification valid.
Ratio Decidendi
Under the Kar Vivad Samadhan Scheme, 1998, a 'dispute' arises only when there is a demand of duty which is in dispute. In the case of warehoused goods, duty is not payable until the goods are cleared for home consumption, and therefore there is no demand and no dispute. The clarification issued by the Finance Ministry to this effect is valid and binding.
Judgment Excerpts
Validity of the clarification issued by the Finance Ministry on 28/10/1998 under the Kar Vivad Samadhan Scheme ('KVSS' for short) as well as the orders dated 26/2/1999 and 24/3/1999 passed by the Customs Authorities declining to grant the benefit of KVSS in respect of the warehoused raw materials by relying upon the aforesaid clarification dated 28/10/1998 are challenged in this petition.
The petitioners are all ex-partners of M/s.Zuari Stainless Steel Industries, a 100% export oriented unit (EOU).
Procedural History
The petitioners filed a writ petition in the High Court of Judicature at Bombay challenging the clarification dated 28/10/1998 and the orders dated 26/2/1999 and 24/3/1999 passed by the Customs authorities. The petition was heard by a Division Bench consisting of V.C. Daga and J.P. Devadhar, JJ., and judgment was delivered on 15th September, 2005.
Acts & Sections
- Kar Vivad Samadhan Scheme, 1998: Section 95, Section 96, Section 97, Section 98, Section 99, Section 100, Section 101, Section 102, Section 103, Section 104, Section 105
- Customs Act, 1962: Section 68, Section 69, Section 70, Section 71, Section 72, Section 73, Section 74, Section 75, Section 76, Section 77, Section 78, Section 79, Section 80, Section 81, Section 82, Section 83, Section 84, Section 85, Section 86, Section 87, Section 88, Section 89, Section 90, Section 91, Section 92, Section 93, Section 94
