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M/S. Swastika Enterprises & Anr. v. Commissioner of Customs, Kolkata & Ors.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 7570 of 2004)Decided 4 Aug 2015
Civil Appeal No. 7570 of 2004
Justice A.K. Sikri · Justice Rohinton Fali Nariman

Background

Swastika Enterprises imported an old ship for scrap and was asked to pay additional customs duty of about Rs. 52.2 lakh via an endorsement on its Bill of Entry, which it disputed. The company later tried to settle the dispute under the government's Kar Vivad Samadhan Scheme (a one-time tax dispute settlement scheme), but the designated authority rejected its application on the ground that no formal show-cause notice or demand notice had been issued, and the High Court's Division Bench agreed.

Decision Breakdown

The Supreme Court held that the endorsement on the Bill of Entry directing payment of additional customs duty did amount to a "notice of demand" under Section 95(ii)(b) of the Finance (No. 2) Act, 1998, even without a formal show-cause notice, because both sides had treated it as a demand and interest would have accrued on non-payment. The Court also found that the related bar in clause (c) of Section 95(ii) did not apply, partly because the Revenue itself had not relied on that ground. Concluding that the company qualified as having "tax arrears" eligible for settlement, the Court set aside the High Court's judgment, allowed the appeals, and held that the appellants were entitled to the benefit of the Scheme.

Lesson Learnt

A government's demand for payment does not need to follow a particular formal label or procedure to count as a "notice of demand": courts will look at the practical effect and how both sides treated the communication, not just its paperwork format, especially when interpreting a beneficial tax-settlement scheme.

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

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