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M/S. NRC Limited v. Union of India and Ors.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 2820 of 2007)Decided 8 Oct 2015
Civil Appeal No. 2820 of 2007
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

The appellant company imported a chemical (Caprolactum) in the late 1980s and disputed the Customs Department's demand for additional duty on certain charges, securing the disputed amount through bank guarantees while litigating in the Bombay High Court and later this Court. When the government later introduced the Kar Vivad Samadhan Scheme in 1998, a one-time settlement scheme letting taxpayers close pending tax disputes by paying 50% of the arrears, the company applied for its benefit, but the authorities rejected the application on the ground that no formal "show cause notice" or "demand notice" had been issued before 31 March 1998, a precondition under the Scheme.

Decision Breakdown

The Supreme Court allowed the appeal, holding that the endorsements made on the company's Bills of Entry demanding the additional duty amounted to a valid "notice of demand" for the purposes of the Scheme, even without a separate formal show-cause notice. Relying on its own recent decision in Swastika Enterprises v. Commissioner of Customs, Kolkata, the Court held that such endorsements, which had in fact prompted the company to go to court, were sufficient to bring the case within the Scheme's definition of "tax arrear." The Court set aside the High Court's judgment, directed that the company be given the benefit of the Scheme, and ordered any balance of the amount already deposited to be refunded within two months, without interest.

Lesson Learnt

When a tax amnesty or settlement scheme requires a prior "demand," courts will look at the practical substance of what the tax department actually communicated to the taxpayer (such as an endorsement on an official document) rather than insisting on a particular formal label or document.

Official source (sci.gov.in)View Judgment (PDF)

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