{"id":121275,"date":"2011-11-03T00:00:00","date_gmt":"2011-11-02T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/union-of-india-anr-vs-ms-nitdip-text-processors-on-3-november-2011"},"modified":"2016-03-26T02:01:44","modified_gmt":"2016-03-25T20:31:44","slug":"union-of-india-anr-vs-ms-nitdip-text-processors-on-3-november-2011","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/union-of-india-anr-vs-ms-nitdip-text-processors-on-3-november-2011","title":{"rendered":"Union Of India & Anr vs M\/S Nitdip Text. Processors … on 3 November, 2011"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Union Of India & Anr vs M\/S Nitdip Text. Processors … on 3 November, 2011<\/div>\n
Author: A T Rao<\/div>\n
Bench: H.L. Dattu, Chandramauli Kr. Prasad<\/div>\n
                                                                         REPORTABLE\n\n\n\n\n                IN THE SUPREME COURT OF INDIA\n\n                 CIVIL APPELLATE JURISDICTION\n\n\n                   CIVIL APPEAL NO. 2960 OF 2006\n\n\n\n\nUnion of India and Ors.                              .............. Appellants\n\n\n\n\n                                    versus\n\n\n\n\nM\/s Nitdip Textile Processors\n\nPvt. Ltd. and Another                                           ..............Respondents\n\n\n                                   WITH\n\n\n                   CIVIL APPEAL NO. 2961 OF 2006\n\n\n\n\nUnion of India and Ors.                              .............. Appellants\n\n\n\n\n                                    versus\n\n\n\n\nM\/s Nitdip Textile Processors\n\nPvt. Ltd. and Another                                           ..............Respondents\n\n\n                                   WITH \n\n\n                   CIVIL APPEAL NO. 2962 OF 2006\n\n\n\n\nUnion of India and Ors.                              .............. Appellants\n\n\n\n\n                                    versus\n\n\n\n\nM\/s Rinkoo Processors\n\nPvt. Ltd. and Another                                           ..............Respondents\n\n\n\n\n                                                                                1\n\n\n                                   WITH \n\n\n                   CIVIL APPEAL NO. 2963 OF 2006\n\n\n\n\nUnion of India and Ors.                              .............. Appellants\n\n\n\n\n                                    versus\n\n\n\n\nM\/s Swiss Pharma \n\nPvt. Ltd. and Another                                           ..............Respondents\n\n\n                                   WITH \n\n\n                   CIVIL APPEAL NO. 2964 OF 2006\n\n\n\n\nUnion of India and Ors.                              .............. Appellants\n\n\n\n\n                                    versus\n\n\n\n\nM\/s New Age Industries and Another                 ..............Respondents\n\n\n                                   WITH \n\n\n                   CIVIL APPEAL NO. 3659 OF 2006\n\n\n\n\nUnion of India and Ors.                                  .............. Appellants\n\n\n\n\n                                    versus\n\n\n\n\nM\/s Aryan Finefab Ltd. and Others                        .............Respondents\n\n\n\n\n                                   WITH \n\n\n\n\n\n                                                                                2\n\n\n                   CIVIL APPEAL NO. 5616 OF 2006\n\n\n\n\nUnion of India and Ors.                                 .............. Appellants\n\n\n\n\n                                      versus\n\n\n\n\nM\/s Modern Denim Ltd. and Another               ..............Respondents\n\n\n                                     WITH \n\n\n                    CIVIL APPEAL NO. 990 OF 2007\n\n\n\n\nUnion of India and Ors.                                 .............. Appellants\n\n\n\n\n                                      versus\n\n\n\n\nM\/s Navdurga Calendaring \n\nWorks Surat and Others                                      ..............Respondents\n\n\n\n\n\n                              J U D G M E N T\n<\/pre>\n
H.L. Dattu, J.\n<\/p>\n<\/p>\n
1)                  The   present   batch   of   eight   appeals   arises   out   of   the <\/p>\n
             common   Judgment   and   Order   dated   25.07.2005   passed   by <\/p>\n
             the High Court of Gujarat at Ahmedabad in the Special Civil <\/p>\n
             Application No.735 of 1999 and connected applications filed <\/p>\n
             under Article 226 of the Constitution of India.   Since these <\/p>\n
                                                                                       3<\/span><\/p>\n
      appeals involve common question of law, they are disposed <\/p>\n
      of by this common Judgment and Order.\n<\/p>\n<\/p>\n
2)            All the parties in these present appeals before us were <\/p>\n
      duly   served   but   none   appeared   for   the   respondents   except <\/p>\n
      one in Civil Appeal No. 5616 of 2006.\n<\/p>\n<\/p>\n
3)            The   High   Court,  vide  its   impugned   Judgment   and <\/p>\n
      Order dated 25.07.2005, has declared that Section 87(m)(ii)<\/p>\n
      (b) of Finance (No.2) Act, 1998 is violative of Article 14 of <\/p>\n
      the   Constitution   of   India   insofar   as   it   seeks   to   deny   the <\/p>\n
      benefit   of   the   `Kar   Vivad   Samadhana   Scheme,   1998 <\/p>\n
      (hereinafter referred to as “the Scheme”) to those who were <\/p>\n
      in arrears of duties etc., as on 31.03.1998 but to whom the <\/p>\n
      notices were issued after 31.03.1998 and further, has struck <\/p>\n
      down   the   expression   “on   or   before   the   31st  day   of   March <\/p>\n
      1998” under Section 87(m)(ii)(b) of the Finance (No. 2) Act, <\/p>\n
      1998   as  ultra   vires  of   the   Constitution   of   India   and   in <\/p>\n
      particular, Article 14 of the Constitution on the ground that <\/p>\n
      the said expression prescribes a cut-off date which arbitrarily <\/p>\n
      excludes   certain   category   of   persons   from   availing   the <\/p>\n
      benefits under the Scheme.  The High Court has further held <\/p>\n
      that as per the definition of the `tax arrears’ in Section 87(m)<\/p>\n
                                                                                4<\/span><\/p>\n
(ii)(a) of the Act, the benefit of the Scheme was intended to <\/p>\n
be given to all persons against whom the amount of duties, <\/p>\n
cess,   interest,   fine   or   penalty   were   due   and   payable   as   on <\/p>\n
31.3.1998.   Therefore,   this   cut-off   date   in   Section   87(m)(ii)<\/p>\n
(b) arbitrarily denies the benefit of the Scheme to those who <\/p>\n
were in arrears of tax as on 31.03.1998 but to whom notices <\/p>\n
were   issued   after   31.3.1998.   This   would   result   in <\/p>\n
unreasonable   and   arbitrary   classification   between   the <\/p>\n
assessees merely on the basis of date of issuance of Demand <\/p>\n
Notices or Show Cause Notices which has no nexus with the <\/p>\n
purpose   and   object   of   the   Scheme.   In   other   words,   the <\/p>\n
persons who were in arrears of tax on or before 31.03.1998 <\/p>\n
were classified as those, to whom Demand Notices or Show <\/p>\n
Cause   Notices   have   been   issued   on   or   before   31.03.1998 <\/p>\n
and,   those   to   whom   such   notices   were   issued   after <\/p>\n
31.3.1998. The High Court observed that this classification <\/p>\n
has no relation with the purpose of the Scheme to provide a <\/p>\n
quick and voluntary settlement of tax dues. The High Court <\/p>\n
further   observed   that   this   artificial   classification   becomes <\/p>\n
more profound in view of the fact that the Scheme came into <\/p>\n
operation   with   effect   from   1.9.1998   which   contemplates <\/p>\n
filing of declaration by all persons on or after 1.9.1998 but <\/p>\n
                                                                           5<\/span><\/p>\n
on or before 31.1.1999.  The High Court further held that all <\/p>\n
persons who are in arrears of direct as well as indirect tax as <\/p>\n
on   31.3.1998   constitute   one   class,   and   any   further <\/p>\n
classification   among   them   on   the   basis   of   the   date   of <\/p>\n
issuance of Demand Notice or Show Cause Notice would be <\/p>\n
artificial  and discriminatory. The High Court concluded by <\/p>\n
directing   the   Revenue   to   consider   the   claims   of   the <\/p>\n
respondents for grant of benefit under the Scheme, afresh, in <\/p>\n
terms of the Scheme. The relevant portions of the impugned <\/p>\n
judgment of the High Court is extracted below:<\/p>\n
  “In   the   light   of   the   above,   we   shall   now   consider  <\/p>\n
  whether   definition   of   “tax   arrears”   contained   in  <\/p>\n
  Section   87   (m)(ii)(b)   is   arbitrary,   irrational   or  <\/p>\n
  violative of the doctrine of equality enshrined under  <\/p>\n
  Article   14   of   the   Constitution   and   whether   the  <\/p>\n
  petitioners   are   entitle   to   avail   benefit   under  <\/p>\n
  Scheme.   A   reading   of   the   speech   made   by   the  <\/p>\n
  Finance   Minister   and   the   objects   set   out   in  <\/p>\n
  memorandum to Finance (No.  2) Bill, 1998 shows  <\/p>\n
  that   the   Scheme   was   introduced   with   a   view   to  <\/p>\n
  quick   and   voluntary   settlement   of   tax   dues  <\/p>\n
  outstanding   as   on   31.3.1998   under   various   direct  <\/p>\n
  and indirect tax enactments by offering waiver of a  <\/p>\n
  part   of   the   arrears   of   taxes   and   interest   and  <\/p>\n
  providing   immunity   against   prosecution   and  <\/p>\n
  imposing of penalty. The definition of `tax arrear’  <\/p>\n
  contained   in   Section   87   (m)(i)   in   the   context   of  <\/p>\n
  direct tax enactment also shows that the legislation  <\/p>\n
  was   intended   to   give   benefit   of   the   scheme   to   the  <\/p>\n
  assessee who were in arrears of tax on 31.3.1998.  <\/p>\n
  The   use   of   the   words   as   on   “31st  day   of   March,  <\/p>\n
  1998” in Section 87(m)(ii) also shows that even in  <\/p>\n
                                                                           6<\/span><\/p>\n
relation   to   indirect   tax   enactments,   the   benefit   of  <\/p>\n
the   scheme   was   intended   to   be   given   to   those  <\/p>\n
against   whom   the  amount   of  duties,   cess,   interest,  <\/p>\n
fine or penalty were due or payable upto 31.3.1998.  <\/p>\n
Viewed in this context it is quite illogical to exclude  <\/p>\n
the   persons   like   the   petitioners   from   whom   the  <\/p>\n
amount   of   duties,   cess,   interest,   fine,   penalty,   etc.  <\/p>\n
were   due   as   on   31.3.1998   but   to   whom   Demand  <\/p>\n
Notices were issued after 31.3.1998. In our opinion,  <\/p>\n
the   distinction   made   between   those   who   were   in  <\/p>\n
arrears   of   indirect   taxes   as   on   31.3.1998   only   on  <\/p>\n
the basis of the date of issuance of notice is wholly  <\/p>\n
arbitrary   and   irrational.   The   classification   sought  <\/p>\n
to be made between those Demand Notices or Show  <\/p>\n
Cause Notices may have been issued on or before  <\/p>\n
31st  day   of   March,   1998   and   those   to   whom   such  <\/p>\n
notices   were   issued   after   31.3.1998   is   per   se  <\/p>\n
unreasonable and has no nexus with the purpose of  <\/p>\n
the   legislation,   namely   to   provide   a   quick   and  <\/p>\n
voluntary settlement of tax dues outstanding as on  <\/p>\n
31.3.1998.\n<\/p>\n
\nThe irrationality of the classification becomes more  <\/p>\n
pronounced   when   the   issue   is   examined   in   the  <\/p>\n
backdrop   of   the   fact   that   the   scheme   was   made  <\/p>\n
applicable with effect from 1.9.1998, and in terms  <\/p>\n
of   Sections   88   (amended)   a   declaration   was  <\/p>\n
required   to   be   filed   on   or   after   first   day   of  <\/p>\n
September, 1998 but on or before 31.1.1999. In our  <\/p>\n
opinion, all persons who were in arrears of direct  <\/p>\n
or   indirect   taxes   as   on   31.3.1998   constituted   one  <\/p>\n
class and no discrimination could have been made  <\/p>\n
among   them   by   introducing   an   artificial  <\/p>\n
classification with reference to the date of Demand  <\/p>\n
Notice   or   Show   Cause   Notice.   All   of   them   should  <\/p>\n
have   been   treated   equally   and   made   eligible   for  <\/p>\n
availing   benefit   under   the   Scheme   subject   to  <\/p>\n
compliance   of   conditions   contained   in   other  <\/p>\n
provisions of the Scheme.”\n<\/p>\n
                                                                         7<\/span><\/p>\n
4)           We   will   take   Civil   Appeal   No.   2960   of   2006   as   the <\/p>\n
      lead matter. The facts of the case, in brief, are hereunder:     <\/p>\n
             The   respondent   is   engaged   in   the   manufacture   of <\/p>\n
      textile   fabrics.   The   team   of   Preventive   Officers   of   the <\/p>\n
      Central   Excise,   Ahmedabad-I   conducted   a   surprise <\/p>\n
      inspection   of   the   premises   of   the   factory   on   5.9.1997.   The <\/p>\n
      Revenue   Officers   examined   the   statutory   Central   Excise <\/p>\n
      Records and physically verified the stocks at various stages <\/p>\n
      of   manufacturing   in   the   presence   of   two   independent <\/p>\n
      panchas   and   respondent   no.   2,   under   the   Panchnama   dated <\/p>\n
      5.9.1997.   The Revenue Officers found that the respondents <\/p>\n
      have cleared the Man Made Fabric admeasuring 38,726 l.m. <\/p>\n
      of  `5,38,449\/-   without   the   payment   of   excise   duty   of <\/p>\n
      `84,290\/-. In this regard, the Statement  of respondent no. 2 <\/p>\n
      was   recorded   on   5.9.1997   under   Section   14   of   the   Central <\/p>\n
      Excise   Act,   1944   (hereinafter   referred   to   as   “the   Excise <\/p>\n
      Act”).   The respondent no. 2, in his Statement has admitted <\/p>\n
      the   processing   of   the   said   fabric   in   his   factory,   after <\/p>\n
      registering   it   in   the   lot   register,   and   its   subsequent <\/p>\n
      clandestine   removal   without   payment   of   the   excise   duty. <\/p>\n
      Accordingly,   a   Show   Cause   Notice   dated   06.01.1999   was <\/p>\n
      issued   to   the   respondents   demanding   a   duty   of  `84,290\/- <\/p>\n
                                                                               8<\/span><\/p>\n
under   Section   11A   of   the   Excise   Act   along   with   an   equal <\/p>\n
amount   of   penalty   under   Section   11AC   of   the   Excise   Act, <\/p>\n
and further penalty under Rule 173 Q of the Central Excise <\/p>\n
Rules,   1944   [hereinafter   referred   to   as   “the   Excise   Rules”] <\/p>\n
and interest under Section 11AB of the Excise Act for non-<\/p>\n
payment of excise duty on clandestine clearance of the said <\/p>\n
fabrics.     Further,   the   Respondent   no.   2   was   also   asked   to <\/p>\n
show   cause   as   to   why   penalty   under   Section   209   A   of  the <\/p>\n
Excise   Rules   should   not   be   imposed   on   him   for   his   active <\/p>\n
involvement   in   acquiring,   possession,   removal,   concealing, <\/p>\n
selling and dealing of the excisable goods, which are liable <\/p>\n
to be confiscated under the Excise Act.  In the meantime, the <\/p>\n
Scheme   was   introduced   by   the   Hon’ble   Finance   Minister <\/p>\n
through   the   1998   Budget,   which   was   contained   in   the <\/p>\n
Finance   (No.2)   Act   of   1998.     The   Scheme   was   made <\/p>\n
applicable to tax arrears outstanding as on 31.3.1998 under <\/p>\n
the direct as well as indirect tax enactments. Originally, the <\/p>\n
benefits   of   the   Scheme   could   be   availed   by   any   eligible <\/p>\n
assessee by filing a declaration of his arrears under Section <\/p>\n
88   of   the   Act   on   or   after   1.9.1998   and   on   or   before <\/p>\n
31.12.1998.   However, the period for declaration under the <\/p>\n
Scheme   was   extended   upto   31.1.1999   by   the   Ordinance <\/p>\n
                                                                         9<\/span><\/p>\n
dated 31.12.1998.   However, the cut-off date prescribed by <\/p>\n
the Scheme under Section 87 (m) (ii) (a) and (b) of the Act <\/p>\n
for   availing   the   benefits   under   the   Scheme   excluded   the <\/p>\n
respondents   from   its   ambit.   Being   aggrieved,   the <\/p>\n
respondents filed a Special Civil Application before the High <\/p>\n
Court of Gujarat, inter-alia, seeking a writ to strike down the <\/p>\n
words “on or before the 31st  day of March 1998” occurring <\/p>\n
in   Section   87   (m)   (ii)   of   the   Finance   Act,   1998.   They   had <\/p>\n
further prayed for issuance of an appropriate direction to the <\/p>\n
petitioner   to   give   them   benefit   of   the   Scheme,   1998   in <\/p>\n
respect of tax arrears under tax enactments for which Show <\/p>\n
Cause   Notices   or   Demand   Notices   were   issued   on   or   after <\/p>\n
31.03.1998.     The   High   Court,   vide   its   impugned   judgment <\/p>\n
and order dated 25.7.2005, struck down the expression “on <\/p>\n
or before the 31st day of March, 1998” in Section 87 (m) (ii) <\/p>\n
(b)   as   being   unconstitutional.   The   High   Court   further <\/p>\n
directed the competent authority to entertain and decide the <\/p>\n
declarations made by the assessees in terms of the Scheme. <\/p>\n
Aggrieved   by   the   Judgment   and   Order,   the   Revenue   is <\/p>\n
before us in this appeal.\n<\/p>\n
                                                                           10<\/span><\/p>\n
5)            The   Scheme   was   introduced   by   Finance   (No.2)   Act <\/p>\n
      and   is  contained   in   Chapter   IV   of   the   Act.   The   Scheme   is <\/p>\n
      known as Kar Vivad Samadhana  Scheme,  1998.   It was in <\/p>\n
      force between 1.9.1998 and 31.1.1999. Briefly, the Scheme <\/p>\n
      permits the settlement of “tax arrear” as defined in Section <\/p>\n
      87(m)   of   the   Act.   It   is   necessary   to   extract   the   relevant <\/p>\n
      provisions of the Scheme:\n<\/p>\n<\/p>\n
              “Section 87 – Definitions. <\/p>\n
\n              In   this   Scheme,   unless   the   context   otherwise  <\/p>\n
              requires,<\/p>\n
                                         ***<\/p>\n<\/blockquote>\n
              h)   “direct   tax   enactment”   means   the   Wealth-<\/p>\n
              tax Act, 1957 or the Gift-tax Act, 1958 or the  <\/p>\n
              Income-tax   Act,   1961   or   the   Interest-tax   Act,  <\/p>\n
              1974 or the Expenditure-tax Act, 1987;<\/p>\n<\/blockquote>\n
              (j)   “indirect   tax   enactment”   means   the  <\/p>\n
              Customs Act, 1962 or the Central Excise Act,  <\/p>\n
              1944   or   the   Customs   Tariff   Act,   1975   or   the  <\/p>\n
              Central Excise Tariff Act, 1985 or the relevant  <\/p>\n
              Act and includes the rules or regulations made  <\/p>\n
              under such enactment;\n<\/p><\/blockquote>\n
<\/blockquote>\n
                                         ***<\/p>\n<\/blockquote>\n
              (m) “tax arrear” means,-\n<\/p><\/blockquote>\n
<\/blockquote>\n
                  (i) in relation to direct tax enactment, the  <\/p>\n
                  amount   of   tax,   penalty   or   interest  <\/p>\n
                  determined on or before the 31st day of  <\/p>\n
                  March,   1998   under   that   enactment   in  <\/p>\n
                  respect   of   an   assessment   year   as  <\/p>\n
                  modified in consequence of giving effect  <\/p>\n
                                                                               11<\/span><\/p>\n
    to   an   appellate   order   but   remaining  <\/p>\n
    unpaid on the date of declaration;<\/p>\n<\/blockquote>\n<\/blockquote>\n
    (ii) in relation to indirect tax enactment,-<\/p>\n<\/blockquote>\n
      (a)   the   amount   of   duties   (including  <\/p>\n
      drawback of duty, credit of duty or any  <\/p>\n
      amount   representing   duty),   cesses,  <\/p>\n
      interest,   fine   or   penalty   determined   as  <\/p>\n
      due or payable under that enactment as  <\/p>\n
      on   the   31st   day   of   March,   1998   but  <\/p>\n
      remaining   unpaid   as   on   the   date   of  <\/p>\n
      making a declaration under section 88;\n<\/p>\n
      or<\/p>\n
      (b)   the   amount   of   duties   (including  <\/p>\n
      drawback of duty, credit of duty or any  <\/p>\n
      amount   representing   duty),   cesses,  <\/p>\n
      interest,   fine   or   penalty   which  <\/p>\n
      constitutes   the   subject   matter   of   a  <\/p>\n
      Demand Notice or a show-cause notice  <\/p>\n
      issued   on   or   before   the   31st   day   of  <\/p>\n
      March, 1998 under that enactment but  <\/p>\n
      remaining   unpaid   on   the   date   of  <\/p>\n
      making a declaration under section 88,<\/p>\n
      but   does   not   include   any   demand  <\/p>\n
      relating to erroneous refund and where  <\/p>\n
      a   show-cause   notice   is   issued   to   the  <\/p>\n
      declarant in respect of seizure of goods  <\/p>\n
      and   demand   of   duties,   the   tax   arrear  <\/p>\n
      shall   not   include   the   duties   on   such  <\/p>\n
      seized  goods where  such duties on the  <\/p>\n
      seized goods have not been quantified.\n<\/p>\n
\nExplanation.–Where   a   declarant   has  already  <\/p>\n
paid   either   voluntarily   or   under   protest,   any  <\/p>\n
amount   of   duties,   cesses,   interest,   fine   or  <\/p>\n
penalty   specified   in   this   sub-clause,   on   or  <\/p>\n
before   the   date   of   making   a   declaration   by  <\/p>\n
him   under   section   88   which   includes   any  <\/p>\n
deposit made by him pending any appeal or in  <\/p>\n
pursuance of a Court order in relation to such  <\/p>\n
duties,   cesses,   interest,   fine   or   penalty,   such  <\/p>\n
                                                                 12<\/span><\/p>\n
             payment shall not be deemed to be the amount  <\/p>\n
             unpaid   for   the   purposes   of   determining   tax  <\/p>\n
             arrear under this sub-clause;\n<\/p>\n
\n             Section 88 – Settlement of tax payable<\/p>\n
             Subject   to   the   provisions   of   this   Scheme,  <\/p>\n
             where   any   person   makes,   on   or   after   the   1st  <\/p>\n
             day   of  September,   1998  but   on  or  before   the  <\/p>\n
             31st day of December, 1998, a declaration to  <\/p>\n
             the   designated   authority   in   accordance   with  <\/p>\n
             the  provisions   of  section  89  in  respect   of  tax  <\/p>\n
             arrear,   then,   not-withstanding   anything  <\/p>\n
             contained   in   any   direct   tax   enactment   or  <\/p>\n
             indirect tax enactment or any other provision  <\/p>\n
             of   any   law   for   the   time   being   in   force,   the  <\/p>\n
             amount   payable   under   this   Scheme   by   the  <\/p>\n
             declarant   shall   be   determined   at   the   rates  <\/p>\n
             specified hereunder, namely …”\n<\/p>\n<\/p>\n
6)           The Scheme, as contained in Chapter IV of the Act, is <\/p>\n
      a Code in itself and statutory in nature and character.  While <\/p>\n
      implementing the scheme, liberal construction may be given <\/p>\n
      but   it   cannot   be   extended   beyond   conditions   prescribed   in <\/p>\n
      the   statutory   scheme.   In  Regional   Director,   ESI   Corpn.   v.  <\/p>\n
      Ramanuja Match Industries,<\/a>  (1985) 1  SCC  218,  this  Court <\/p>\n
      observed:\n<\/p>\n
         “10 … We do not doubt that beneficial legislations  <\/p>\n
         should   have   liberal   construction   with   a   view   to  <\/p>\n
         implementing the legislative intent but where such  <\/p>\n
         beneficial legislation has a scheme of its own there  <\/p>\n
         is   no   warrant   for   the   Court   to   travel   beyond   the  <\/p>\n
         scheme and extend the scope of the statute on the  <\/p>\n
                                                                                 13<\/span><\/p>\n
         pretext   of   extending   the   statutory   benefit   to   those  <\/p>\n
         who are not covered by the scheme.”\n<\/p>\n<\/p>\n
7)             In  Hemalatha   Gargya   v.   Commissioner   of   Income  <\/p>\n
      Tax, A.P.,<\/a> (2003) 9 SCC 510, this Court has held: <\/p>\n
         “10.  Besides,   the   Scheme   has  conferred   a   benefit  <\/p>\n
         on   those   who   had   not   disclosed   their   income  <\/p>\n
         earlier   by   affording   them   protection   against   the  <\/p>\n
         possible legal consequences of such non-disclosure  <\/p>\n
         under the provisions of the Income Tax Act. Where  <\/p>\n
         the   assessees   seek   to   claim   the   benefit   under   the  <\/p>\n
         statutory scheme they are bound to comply strictly  <\/p>\n
         with   the   conditions   under   which   the   benefit   is  <\/p>\n
         granted.   There   is   no   scope   for   the   application   of  <\/p>\n
         any   equitable   consideration   when   the   statutory  <\/p>\n
         provisions  of the Scheme are  stated  in such  plain  <\/p>\n
         language.”\n<\/p>\n<\/p>\n
8)             In  Union of India v. Charak Pharmaceuticals  (India) <\/p>\n
      Ltd.,<\/a> (2003) 11 SCC 689, this Court has observed thus:<\/p>\n
         “8. If benefit is sought under a scheme, like KVSS,  <\/p>\n
         the party must fully comply with the provisions of  <\/p>\n
         the Scheme. If all the requirements of the Scheme  <\/p>\n
         are   not   met   then   on   principles   of   equity,   courts  <\/p>\n
         cannot extend the benefit of that Scheme.”<\/p>\n
9)             In  Deepal Girishbhai Soni v. United India Insurance  <\/p>\n
      Co. Ltd.,<\/a> (2004) 5 SCC 385, at page 404, this Court observed <\/p>\n
      as :\n<\/p>\n
         “53. Although the Act is a beneficial one and, thus,  <\/p>\n
         deserves   liberal   construction   with   a   view   to  <\/p>\n
         implementing   the   legislative   intent   but   it   is   trite  <\/p>\n
         that where such beneficial legislation has a scheme  <\/p>\n
                                                                                14<\/span><\/p>\n
          of   its   own   and   there   is   no   vagueness   or   doubt  <\/p>\n
          therein, the court would not travel beyond the same  <\/p>\n
          and extend the scope of the statute on the pretext of  <\/p>\n
          extending the statutory benefit to those who are not  <\/p>\n
          covered   thereby.   (See  Regional   Director,   ESI  <\/p>\n
          Corpn. v. Ramanuja Match Industries)<\/a>”\n<\/p>\n<\/p>\n
10)            In Maruti Udyog Ltd. v. Ram Lal,<\/a> (2005) 2 SCC 638, <\/p>\n
       this Court has observed:\n<\/p>\n
          “A   beneficial   statute,   as   is   well   known,   may <\/p>\n
          receive liberal construction but the same cannot be <\/p>\n
          extended   beyond   the   statutory   scheme.   (See <\/p>\n
          Deepal Girishbhai Soni  v.  United India Insurance  <\/p>\n
          Co. Ltd.)<\/a>”\n<\/p>\n<\/p>\n
11)            In  Pratap Singh v. State of Jharkhand, (2005) 3 SCC <\/p>\n
       551, this Court has held:\n<\/p>\n
          “93. We are not oblivious of the proposition that a  <\/p>\n
          beneficent   legislation   should   not   be   construed   so  <\/p>\n
          liberally so as to bring within its fore a person who  <\/p>\n
          does not answer the statutory scheme. (See Deepal  <\/p>\n
          Girishbhai   Soni  v.  United   India   Insurance   Co.  <\/p>\n
          Ltd.)<\/a>”\n<\/p>\n<\/p>\n
12)            The object and purpose of the Scheme is to minimize <\/p>\n
       the   litigation   and   to   realize   the   arrears   of   tax   by   way   of <\/p>\n
       Settlement   in   an   expeditious   manner.   The   object   of   the <\/p>\n
       Scheme   can   be   gathered   from   the   Speech   of   the   Finance <\/p>\n
       Minister, whilst presenting the 1998-99 Budget:<\/p>\n
                                                                                   15<\/span><\/p>\n
                “Litigation has been the bane of both direct  <\/p>\n
             and   indirect   taxes.   A   lot   of   energy   of   the  <\/p>\n
             Revenue   Department   is   being   frittered   in  <\/p>\n
             pursuing   large   number   of   litigations  pending  <\/p>\n
             at   different   levels   for   long   periods   of   time.  <\/p>\n
             Considerable   revenue   also   gets   locked   up   in  <\/p>\n
             such disputes. Declogging the system will not  <\/p>\n
             only   incentivise   honest   taxpayers,   it   would  <\/p>\n
             enable   the   Government   to   realize   its  <\/p>\n
             reasonable   dues   much   earlier   but   coupled  <\/p>\n
             with   administrative   measures,   would   also  <\/p>\n
             make   the   system   more   user-friendly.   I  <\/p>\n
             therefore, propose to introduce a new scheme  <\/p>\n
             called   Samadhan.  he   scheme   would   apply   to  <\/p>\n
             both direct taxes and indirect taxes and offer  <\/p>\n
             waiver of interest, penalty and immunity from  <\/p>\n
             prosecution   on   payment   of   arrears   of   direct  <\/p>\n
             tax at the current rates. In respect of indirect  <\/p>\n
             tax,   where   in   recent   years   the   adjustment   of  <\/p>\n
             rates has been very sharp, an abatement of 50  <\/p>\n
             per   cent   of   the   duty   would   be   available  <\/p>\n
             alongwith   waiver   of   interest,   penalty   and  <\/p>\n
             immunity from prosecution”\n<\/p><\/blockquote>\n
\n<\/blockquote>\n
13)          The   Finance   Minister,   whilst   replying   to   the   debate <\/p>\n
       after incorporating amendments to the Finance (No. 2) Bill, <\/p>\n
       1998, made a Speech dated 17.7.1998. The relevant portion <\/p>\n
       of the Speech, which highlights the object or purpose of the <\/p>\n
       Scheme, is extracted below:\n<\/p>\n
         “The   Kar   Vivad   Samadhan   Scheme   has  evoked   a  <\/p>\n
         positive   response   from   a   large   number   of  <\/p>\n
         organizations   and   tax   professionals.   Hon’ble  <\/p>\n
         Members   of   Parliament   have   also   taken   a   keen  <\/p>\n
         interest in the scheme. The lack of clarity in regard  <\/p>\n
         to   waiver   of   interest   and   penalty   in   relation   to  <\/p>\n
         settlement   of   tax   arrears   under   the   indirect   tax  <\/p>\n
                                                                               16<\/span><\/p>\n
          enactments is being taken care of by rewording the  <\/p>\n
          relevant   clauses   of   the   Finance   Bill.   I   have   also  <\/p>\n
          carefully   considered   the   suggestions   emanating  <\/p>\n
          from   various   quarters   including   the   Standing  <\/p>\n
          Committee on Finance to extend the scope of this  <\/p>\n
          scheme so as to included tax disputes irrespective  <\/p>\n
          of the fact whether the tax arrears are existing or  <\/p>\n
          not. As you have seen from the scheme, it has two  <\/p>\n
          connected limbs-“Kar” and “Vivad”. Collection of  <\/p>\n
          tax   arrears   is   as   important   as   settlement   of  <\/p>\n
          disputes.   The   scheme   is   not   intended   to   settle  <\/p>\n
          disputes   when   there   is   no   corresponding   gain   to  <\/p>\n
          the other party. The basic objective of the scheme  <\/p>\n
          cannot be altered.”\n<\/p>\n<\/p>\n
14)           This   Court,   in   plethora   of   cases,   has   discussed   the <\/p>\n
       object   and   purpose   of   this   Scheme.   In  Sushila   Rani   v.  <\/p>\n
       Commissioner of Income Tax,<\/a> (2002) 2 SCC 697, this Court <\/p>\n
       observed:\n<\/p>\n<\/p>\n
             “5.  KVSS   was   introduced   by   the   Central  <\/p>\n
         Government   with   a   view   to   collect   revenues  <\/p>\n
         through   direct   and   indirect   taxes   by   avoiding  <\/p>\n
         litigation.   In   fact   the   Finance   Minister   while  <\/p>\n
         explaining the object of KVSS stated as follows:<\/p>\n
                “Litigation has been the bane of both direct  <\/p>\n
            and   indirect   taxes.   A   lot   of   energy   of   the  <\/p>\n
            Revenue   Department   is   being   frittered   in  <\/p>\n
            pursuing large number of litigations pending at  <\/p>\n
            different   levels   for   long   periods   of   time.  <\/p>\n
            Considerable   revenue   also   gets   locked   up   in  <\/p>\n
            such   disputes.   Declogging   the   system   will   not  <\/p>\n
            only   incentivise   honest   taxpayers,   it   would  <\/p>\n
            enable   the   Government   to   realize   its  <\/p>\n
            reasonable dues much earlier but coupled with  <\/p>\n
            administrative   measures,   would   also   make   the  <\/p>\n
            system more user-friendly….”\n<\/p>\n
                                                                                 17<\/span><\/p>\n
15)           In     Killick   Nixon   Ltd.,   Mumbai   v.   Deputy  <\/p>\n
       Commissioner of Income Tax, Mumbai,<\/a>  (2003) 1 SCC 145, <\/p>\n
       this Court has held:\n<\/p>\n
         “9.  The scheme of KVSS is to cut short litigations  <\/p>\n
         pertaining to taxes which were  frittering away the  <\/p>\n
         energy   of   the   Revenue   Department   and   to  <\/p>\n
         encourage litigants to come forward and pay up a  <\/p>\n
         reasonable   amount   of   tax   payable   in   accordance  <\/p>\n
         with the Scheme after declaration thereunder.”<\/p>\n
16)           In CIT v. Shatrusailya Digvijaysingh Jadeja, (2005) 7 <\/p>\n
       SCC 294, this Court has observed:\n<\/p>\n
         “11. The object of the Scheme was to make an offer  <\/p>\n
         by   the   Government   to   settle   tax   arrears   locked   in  <\/p>\n
         litigation at a substantial discount. It provided that  <\/p>\n
         any tax arrears could be settled by declaring them  <\/p>\n
         and   paying   the   prescribed   amount   of   tax   arrears,  <\/p>\n
         and it offered benefits and immunities from penalty  <\/p>\n
         and   prosecution.   In   several   matters,   the  <\/p>\n
         Government   found   that   a   large   number   of   cases  <\/p>\n
         were pending at the recovery stage and, therefore,  <\/p>\n
         the   Government   came   out   with   the   said   Scheme  <\/p>\n
         under which it was able to unlock the frozen assets  <\/p>\n
         and recover the tax arrears.\n<\/p>\n<\/p>\n
         12.  In   our   view,   the   Scheme   was   in   substance   a  <\/p>\n
         recovery scheme though it was nomenclatured as a  <\/p>\n
         “litigation settlement scheme” and was not similar  <\/p>\n
         to   the   earlier   Voluntary   Disclosure   Scheme.  As  <\/p>\n
         stated above, the said Scheme was a complete code  <\/p>\n
         by itself. Its object was to put an end to all pending  <\/p>\n
         matters in the form of appeals, references, revisions  <\/p>\n
         and writ petitions under the IT Act\/WT Act.” <\/p>\n
                                                                                18<\/span><\/p>\n
17)           In Master Cables (P) Ltd. v. State of Kerala,<\/a> (2007) 5 <\/p>\n
       SCC 416, this Court has held:\n<\/p>\n
         “8. The Scheme was enacted with a view to achieve  <\/p>\n
         the purposes mentioned therein viz. recovery of tax  <\/p>\n
         arrears   by   way   of   settlement.   It   applies   provided  <\/p>\n
         the conditions precedent therefor are satisfied.” <\/p>\n
18)           Further, the object of the Scheme and its application to <\/p>\n
       Customs and Central Excise cases involving arrears of taxes <\/p>\n
       has been explained in detail by the Trade Notice No. 74\/98 <\/p>\n
       dated   17.8.1998   issued   by   the   Commissioner   of   Central <\/p>\n
       Excise and Customs, Ahmedabad-I. The relevant portion of <\/p>\n
       the said Trade Notice has been extracted below:<\/p>\n
         OFFICE OF THE COMMISSIONER OF CENTRAL  <\/p>\n
               EXCISE & CUSTOMS: AHMEDABAD-1<\/p>\n
                          Trade Notice No.: 74\/98<\/p>\n
                               Basic No.: 34\/98<\/p>\n
               Sub: Kar Vivad Samadhan Scheme-1998<\/p>\n
        1.   As   a   part   of   this   year’s   Budget   proposals,   the  <\/p>\n
        Finance Minister had announced amongst others a  <\/p>\n
        scheme   termed   “Kar   Vivad   Samadhan   Scheme”  <\/p>\n
        essentially   to   provide   quick   and   voluntary  <\/p>\n
        settlement of tax dues. The basic aim of introducing  <\/p>\n
        this   scheme   has   been   to   bring   down   the   pending  <\/p>\n
        litigation\/disputes   between   the   Dept.   and   the  <\/p>\n
        assessees-   both   on   the   direct   tax   side   and   indirect  <\/p>\n
        tax side- as well as to speedily realize the arrears of  <\/p>\n
        taxes   (including   fines,   penalties   &   interest)  <\/p>\n
        considered   due   from   various   parties   which   are  <\/p>\n
        locked up in various disputes.\n<\/p>\n
                                                                                 19<\/span><\/p>\n
2.     Essentially,   these   disputed   cases   involving  <\/p>\n
duties, cesses, fine, penalty and interest on Customs  <\/p>\n
and Central Excise side are proposed to be settled –  <\/p>\n
case by case – if the concerned party agrees to pay  <\/p>\n
up in each case a particular amount (which may be  <\/p>\n
termed settled amount) calculated as per provisions  <\/p>\n
of   the   scheme,   following   the   laid   procedure.  <\/p>\n
Whereas   the   department   gets   immediate   revenue  <\/p>\n
and it results in reduction in pending disputes which  <\/p>\n
may   be   prolonged   otherwise   before   final  <\/p>\n
assessment, the party also gets significant benefit by  <\/p>\n
way   of   reduced   payments   instead   of   the   disputed  <\/p>\n
liability and immunity from prosecution.<\/p>\n
3…\n<\/p>\n
\n3.1.   The   relevant   extracts   containing   provisions   of  <\/p>\n
the   Samadhan   Scheme   as   incorporated   in   the  <\/p>\n
enacted   Finance   (No.   2)   Act,   98   (21   of   1998)   are  <\/p>\n
enclosed   herewith.   The   salient   features   of   the  <\/p>\n
Samadhan Scheme in relation to Indirect Taxes are  <\/p>\n
briefly discussed below:-\n<\/p>\n<\/p>\n
        4. APPLICABILITY OF THE SCHEME<\/p>\n
A. CATEGORY OF CASES TO WHICH SCHEME  <\/p>\n
APPLICABLE<\/p>\n
4.1.   The   Scheme   is   limited   to   Customs   or   Central  <\/p>\n
Excise   cases   involving   arrears   of   taxes   (including  <\/p>\n
duties, cesses, fine, penalty of (sic.) interest) which  <\/p>\n
were   not   paid   up   as   on   31.3.98   and   are   still   in  <\/p>\n
arrear and in dispute as on date of declaration (as  <\/p>\n
envisaged in section 98 (sic.) of the aforesaid Act).  <\/p>\n
The dispute and the case may be still at the stage of  <\/p>\n
Show  Cause   Notice  or  Demand  Notice  (other  than  <\/p>\n
those of erroneous refunds) when party come (sic.)  <\/p>\n
forward   and   makes   a   declaration   for   claiming   the  <\/p>\n
benefits of the scheme, or the duties, fine, penalty or  <\/p>\n
interest   after   the   issue   of   show   cause\/   Demand  <\/p>\n
Notice may have been determined, but the assessee  <\/p>\n
is disputing the same in appellate forums\/courts etc  <\/p>\n
and the amounts due have not been paid up. <\/p>\n
……\n<\/p>\n
                                                                         20<\/span><\/p>\n
4.3.  It is pertinent to note that when a party comes  <\/p>\n
forward   for   taking   the   benefits   of   the   Samadhan  <\/p>\n
Scheme and makes suitable declaration as provided  <\/p>\n
thereunder   (discussed   further   later)   there   must   be  <\/p>\n
dispute   pending   between   the   party   and   the   Dptt. <\/p>\n
(Section  98(ii)(c)  of  Finanace  Act  refers).   In  other  <\/p>\n
words, if in any case, there is no Show Cause Notice  <\/p>\n
pending   nor   the   party   is   in   dispute   at   the  <\/p>\n
appellate\/revision   stage   nor   there   is   an   admitted  <\/p>\n
petition   in   the   court   of   law   where   parties   is  <\/p>\n
contesting the stand of the Dptt., but certain arrears  <\/p>\n
of   revenue   due   in   case,   are   pending   payment,   the  <\/p>\n
benefits of the scheme will not be available in such  <\/p>\n
case.\n<\/p>\n
\nB.   TYPES   OF   REVENUE   ARREARS   CASES  <\/p>\n
COVERED BY THE SCHEME<\/p>\n
4.4. The intention of the scheme is to cover almost  <\/p>\n
all categories of cases involving revenue in arrears  <\/p>\n
and in dispute on Customs and Central Excise side  <\/p>\n
(with   few   exceptions   mentioned   specifically   in  <\/p>\n
section 95 of Finance Act). The cases covered may  <\/p>\n
involved   duty,   cess,   fine,   penalty   or   interest   –  <\/p>\n
whether   already   determined   as   due   or   yet   to   be  <\/p>\n
determined   (in   cases   where   show   cause\/Demand  <\/p>\n
Notice is yet to be decided). The term duty has been  <\/p>\n
elaborated   to   include   credit   of   duty,   drawback   of  <\/p>\n
duty   or   any   amount   representing   as  duty.   In   other  <\/p>\n
words,   the   scheme   would   extend   not   only   disorted  <\/p>\n
(sic.)   cases   of   duties   leviable   under   customs   or  <\/p>\n
Central   Excise   Acts   and   relevant   tariff   Acts   or  <\/p>\n
various specified Act….\n<\/p>\n
\n4.5.   The   nature   of   cases   covered   will   vary  <\/p>\n
depending   upon   contraventions\/offence   involved,  <\/p>\n
but   essentially   it   must   involve   quantified   duty\/cess  <\/p>\n
and or penalty, fine or interest. Simple Show Cause  <\/p>\n
Notices   which   do   not   quantify   any   amount   of   duty  <\/p>\n
being   demanded   and   which   propose   only   penal  <\/p>\n
action   –   like   confiscation   of   ceased   goods   and   or  <\/p>\n
imposition   of   penalty   for   violation   of   statutory  <\/p>\n
provisions\/collusion\/abetment   etc.   thus   will   not   be  <\/p>\n
covered   by   the   scheme.   However,   whenever  <\/p>\n
                                                                       21<\/span><\/p>\n
         quantified   amount   of   duties   are   demanded   and  <\/p>\n
         penal   action   also   proposed   for   various   violations  <\/p>\n
         even at Show Cause Notice stage benefits under the  <\/p>\n
         scheme   for   such   Show   Cause   Notices   can   be  <\/p>\n
         claimed.\n<\/p>\n<\/p>\n
19)            In view of the aforementioned Trade Notice, it is clear <\/p>\n
       that the object of the Scheme with reference to indirect tax <\/p>\n
       arrears   is   to   bring   down   the   litigation   and   to   realize   the <\/p>\n
       arrears  which  are   considered   due  and   locked   up  in   various <\/p>\n
       disputes.   This Scheme  is mutually beneficial as it benefits <\/p>\n
       the   Revenue   Department   to   realize   the   duties,   cess,   fine, <\/p>\n
       penalty   or   interest   assessed   but   not   paid   in   an   expeditious <\/p>\n
       manner   and   offers   assessee   to   pay   disputed   liability   at <\/p>\n
       discounted rates and also afford immunity from prosecution. <\/p>\n
       It is a settled law that the Trade Notice, even if it is issued by <\/p>\n
       the Revenue Department of any one State, is binding on all <\/p>\n
       the other departments with equal force all over the country. <\/p>\n
       The Trade Notice guides the traders and business community <\/p>\n
       in   relation   to   their   business   as   how   to   regulate   it   in <\/p>\n
       accordance   with   the   applicable   laws   or   schemes.   In  Steel  <\/p>\n
       Authority   of   India   v.   Collector   of   Customs,<\/a>  (2001)   9   SCC <\/p>\n
       198, this Court has held:\n<\/p>\n
                                                                                 22<\/span><\/p>\n
         “3. Learned counsel for the Revenue submitted that  <\/p>\n
         this   trade   notice   had   been   issued   only   by   the  <\/p>\n
         Bombay Customs House. It is hardly to be supposed  <\/p>\n
         that the Customs Authorities can take one stand in  <\/p>\n
         one State and another stand in another State.  The  <\/p>\n
         trade   notice   issued   by   one   Customs   House   must  <\/p>\n
         bind all Customs Authorities and, if it is erroneous,  <\/p>\n
         it   should   be   withdrawn   or   amended,   which   in   the  <\/p>\n
         instant case, admittedly, has not been done.”<\/p>\n
20)           In  Purewal   Associates   Ltd.   v.   CCE,   (1996)   10   SCC <\/p>\n
       752, this Court has held:\n<\/p>\n
         “10.  We   must   take   it   that   before   issuing   a   trade  <\/p>\n
         notice   sufficient   care   is   taken   by   the   authorities  <\/p>\n
         concerned as it guides the traders to regulate their  <\/p>\n
         business   accordingly.  Hence   whatever   is  the   legal  <\/p>\n
         effect   of   the   trade   notice   as   contended   by   the  <\/p>\n
         learned Senior Counsel for the respondent, the last  <\/p>\n
         portion of the above trade notice cannot be faulted  <\/p>\n
         as it is in accordance with the views expressed by  <\/p>\n
         this   Court.   Though   a   trade   notice   as   such   is   not  <\/p>\n
         binding on the Tribunal or the courts, it cannot be  <\/p>\n
         ignored when the authorities take a different stand  <\/p>\n
         for   if   it   was   erroneous,   it   would   have   been  <\/p>\n
         withdrawn.”\n<\/p>\n<\/p>\n
21)           However, the Trade Notice, as such, is not binding on <\/p>\n
       the Courts but certainly binding on the assessee and can be <\/p>\n
       contested   by   the   assessee.   (see  CCE   v.   Kores   (India)   Ltd., <\/p>\n
       (1997)   10   SCC   338;  Union   of   India   v.   Pesticides  <\/p>\n
       Manufacturing   and   Formulators   Association   of   India,<\/a> <\/p>\n
                                                                                 23<\/span><\/p>\n
       (2002) 8 SCC 410; and CCE v. Jayant Dalal (P) Ltd., (1997) <\/p>\n
       10 SCC 402 ) <\/p>\n
22)            Shri. R.P. Bhatt, learned senior counsel, has appeared <\/p>\n
       for the Revenue and the respondents in civil appeal no. 5616 <\/p>\n
       of 2006 are represented by Shri. Paras Kuhad, learned senior <\/p>\n
       counsel.\n<\/p>\n<\/p>\n
23)            Learned senior counsel Shri. R.P. Bhatt, submits that <\/p>\n
       an assessee can claim benefits under the Scheme only when <\/p>\n
       his   tax   arrears   are   determined   and   outstanding,   or   a   Show <\/p>\n
       Cause   Notice   has   been   issued   to   him,   prior   to   or   on <\/p>\n
       31.3.1998 in terms of Section 87 (m) (ii) (a) and (b) of the <\/p>\n
       Act. He further submits that the determination of the arrears <\/p>\n
       can be arrived at by way  of adjudication or by issuance  of <\/p>\n
       the Show Cause Notice to the assessee. He submits that once <\/p>\n
       this   condition   is   satisfied,   then   the   assessee   is   required   to <\/p>\n
       submit a declaration under Section 88 of the Act on or after <\/p>\n
       1.9.1998   and   on   or   before   31.1.1999,   provided   that   the <\/p>\n
       arrears   are   unpaid   at   the   time   of   filing   the   declaration.   He <\/p>\n
       further   submits   that   the   present   Scheme   is   statutory   in <\/p>\n
       character and its provision should be interpreted strictly and <\/p>\n
                                                                                   24<\/span><\/p>\n
those   who   do   not   fulfill   the   conditions   of   eligibility <\/p>\n
contained in the Scheme are not allowed to avail the benefit <\/p>\n
under the Scheme. In support of his contention, he has relied <\/p>\n
on the Judgment of this Court in  Union of India v. Charak  <\/p>\n
Pharmaceuticals (India) Ltd.,<\/a>  (2003) 11 SCC 689.  Learned <\/p>\n
senior   counsel,   relying   on   the,  Speech   of   the   Finance  <\/p>\n
Minister dated  17.7.1998, [232 ITR 1998  (14)] asserts  that <\/p>\n
the   purpose   or   the   basic   object   of   the   Scheme   is   the <\/p>\n
collection of tax and settlement of disputes and it is intended <\/p>\n
to be beneficial to both assessee as well as the Revenue.  He <\/p>\n
further contends that the determination of arrears or issuance <\/p>\n
of   Show   Cause   Notice   before   or   on   31.3.1998   is   a <\/p>\n
substantive requirement for eligibility under the Scheme and <\/p>\n
filing   of   declaration   of   unpaid   arrears   under   Section   88   of <\/p>\n
the Act is the procedural formality for availing the benefits <\/p>\n
of the Scheme.   Therefore, he submits that the extension of <\/p>\n
time   to   file   declaration   under   the   Scheme   on   or   before <\/p>\n
31.1.1999   is   just   a   procedural   formality   and   in   no   manner <\/p>\n
discriminatory, so as to violate the mandate of Article 14 of <\/p>\n
the Constitution.  Learned senior counsel, on the strength of <\/p>\n
Trade Notice dated 17.8.1998 and the observations made by <\/p>\n
this   Court   in   the   case   of  Charak   Pharmaceuticals  (supra), <\/p>\n
                                                                         25<\/span><\/p>\n
further submits that, in cases of Central Excise and Customs, <\/p>\n
the Scheme is limited only to two categories of cases: firstly, <\/p>\n
the arrears of tax which are assessed as on 31.3.1998 and are <\/p>\n
still   unpaid   and   in   dispute   on   the   date   of   filing   of <\/p>\n
declaration; secondly, the arrears for which, the Show Cause <\/p>\n
Notice or Demand Notice has been issued by the Revenue as <\/p>\n
on 31.3.1998 and which are still unpaid and are in dispute on <\/p>\n
the   date   of   filing   of   declaration.     He   submits   that   the   said <\/p>\n
Trade   Notice   indicates   that   the   concept   of   actual <\/p>\n
determination or assessment has been extended to the Show <\/p>\n
Cause Notice in order to grant the benefit of the Scheme to <\/p>\n
duty demanded in such Show Cause Notice.  He submits that <\/p>\n
the Show Cause Notice is in the nature of tentative charge, <\/p>\n
which has been included in the ambit of the Scheme in order <\/p>\n
to realize the tax\/duty dues but not yet paid. He submits that <\/p>\n
the Scheme contemplates the conferring of the benefits only <\/p>\n
on   the   quantified   duty   either   determined   by   way   of <\/p>\n
adjudication or demanded in a Show Cause Notice.  Learned <\/p>\n
senior   counsel   contends   that   in   the   present   case,   the   Show <\/p>\n
Cause   Notice   demanding   the   duty   was   issued   to   the <\/p>\n
respondents   only   on   6.1.1999   and,   therefore,   the   duty   was <\/p>\n
determined  as quantified only on the issuance  of the  Show <\/p>\n
                                                                             26<\/span><\/p>\n
Cause  Notice.   Hence, respondents are not eligible to avail <\/p>\n
the   benefit   under   this   Scheme.   Learned   senior   counsel <\/p>\n
submits   that   the   cut-off   date   of   on   or   before   31.3.1998 <\/p>\n
prescribed by Section 87 (m) (ii) (b) cannot be considered as <\/p>\n
discriminatory   or   unreasonable   only   on   the   basis   that   it <\/p>\n
creates two classes of assessees unless it appears on the face <\/p>\n
of it as capricious or  malafide. The cut-off date of 31.3.1998 <\/p>\n
in   indirect   tax   enactments   under   the   Scheme   has   been <\/p>\n
purposively   chosen   in   order   to   maintain   uniformity   with <\/p>\n
direct   tax   enactments   where   assessment   year   ends   on   the <\/p>\n
said   date.   In   support   of   his   submission,   learned   senior <\/p>\n
counsel relies on  Union of India v. M.V. Valliappan,<\/a>  (1999) <\/p>\n
6 SCC 259, Sudhir Kumar Consul v. Allahabad Bank,<\/a> (2011) <\/p>\n
3   SCC   486   and  Government   of   Andhra   Pradesh   v.   N.  <\/p>\n
Subbarayudu,<\/a>  (2008)   14  SCC   702.   He   further   submits   that <\/p>\n
the   present   Scheme   extends   the  benefit   of  reduction   of  tax <\/p>\n
and does not deprive or withdraw any existing benefit to the <\/p>\n
assessees. He also submits that if certain section of assessees <\/p>\n
is   excluded   from   its   scope   by   virtue   of   cut-off   date,   they <\/p>\n
cannot   challenge   the   entire   Scheme   merely   on   ground   of <\/p>\n
their exclusion.\n<\/p>\n
                                                                          27<\/span><\/p>\n
24)            Per contra, Shri. Paras Kuhad, learned senior counsel, <\/p>\n
       submits   that   the   Scheme   became   effective   from   1.09.1998 <\/p>\n
       and remained operative till 31.1.1999. However, the arrears <\/p>\n
       in   question   should   relate   to   the   period   prior   to   or   as   on <\/p>\n
       31.3.1998   which   is   the   essence   of   the   Scheme   or   the <\/p>\n
       qualifying condition. He submits that Section 87 (f) defines <\/p>\n
       `disputed   tax’   as   the   total   tax   determined   and   payable,   in <\/p>\n
       respect of an assessment year under any direct tax enactment <\/p>\n
       but   which   remains   unpaid   as   on   the   date   of   making   the <\/p>\n
       declaration under Section 88.  In this regard, he submits that <\/p>\n
       the   factum   of   arrears   exists   even   on   the   date   of   filing   of <\/p>\n
       declaration.   He   contends   that   the   Finance   Act   uses   the <\/p>\n
       expression   `determination’   instead   of  `assessment’   in   order <\/p>\n
       to include the cases of self assessment.   He submits that in <\/p>\n
       the   case   of   direct   tax   and   payment   of   advance   tax,   the <\/p>\n
       process   of   determination   arises   before   the   assessment.   He <\/p>\n
       further   argues   that   the   purpose   of   the   Scheme   is  to   reduce <\/p>\n
       litigation   and   recover   revenue   arrears   in   an   expeditious <\/p>\n
       manner. The classification should be in order to attain these <\/p>\n
       objectives or purpose. The classification of assessees on the <\/p>\n
       basis of date of issuance of Show Cause Notice or Demand <\/p>\n
       Notice is unreasonable and has no nexus with the purpose of <\/p>\n
                                                                                   28<\/span><\/p>\n
the legislation. He further submits that all the assessees who <\/p>\n
are in arrears of tax on or before 31.3.1998 formed one class <\/p>\n
but   further   classification   among   them   just   on   the   basis   of <\/p>\n
issuance   of   Show   Cause   Notice   is   arbitrary   and <\/p>\n
unreasonable.   The   criterion   of   date   of   issuance   of   Show <\/p>\n
Cause  Notice is  per se  unreasonable as based on fortuitous <\/p>\n
circumstances.   It   is   neither   objective   nor   uniformly <\/p>\n
applicable.     He   further   submits   that   the   High   Court   has <\/p>\n
correctly struck down the words “on or before the 31st day of <\/p>\n
March 1998” in Section 87 (m) (ii) (b) and, thereby, created <\/p>\n
a   right   in   favour   of   assessee   to   claim   benefit   under   the <\/p>\n
Scheme   for   all   arrears   of   tax   arising   as   on   31.3.1998.   He <\/p>\n
further   submits   that   by   application   of   the   doctrine   of <\/p>\n
severability,   the   Scheme   can   operate   as   a   valid   one   for   all <\/p>\n
purposes.   Learned   senior   counsel   submits   that   the   carving <\/p>\n
out of sub-group only on the basis of whether Show Cause <\/p>\n
Notice  has been  issued  or not and the Scheme  being made <\/p>\n
effective   from   prospective   date   would   render   the   operation <\/p>\n
or   availability   of   Scheme   variable   or   uncertain,   depending <\/p>\n
on case to case.  He further submits that this has no relation <\/p>\n
with the purpose of the Scheme which is beneficial in nature. <\/p>\n
He further submits that the date of issuance of Show Cause <\/p>\n
                                                                           29<\/span><\/p>\n
Notice   is   not   controlled   by   the   assessee.   Therefore,   it   is <\/p>\n
fortuitous   circumstance   which   is  per   se  unreasonable.   The <\/p>\n
objective of the doctrine of classification is that the unequal <\/p>\n
should   not   be   treated   equally   in   order   to   achieve   equality. <\/p>\n
The basis for classification in terms of Article 14 should be <\/p>\n
intelligible criteria which should have nexus with the object <\/p>\n
of   the   legislation.   He   argues   that   the   criterion   of   date   of <\/p>\n
issuance   of   Show   Cause   Notice   is   just   a   fortuitous   factor <\/p>\n
which   is   variable,   uncertain,   and   fateful   and   cannot   be <\/p>\n
considered  as intelligible criteria  for the purpose  of Article <\/p>\n
14   of   the   Constitution.   He   submits,   however,   criterion   for <\/p>\n
classification   is   the   prerogative   of   the   Parliament   but   it <\/p>\n
should be certain and not vacillating like date of issuance of <\/p>\n
Show   Cause   Notice.   He   further   submits   that   the   hardships <\/p>\n
arising   out   of   normal   cut-off   criteria   is   acceptable   and <\/p>\n
justified   but   when   injustice   arises   out   of   operation   of   the <\/p>\n
provision which prescribe criteria which is variable for same <\/p>\n
class   of   persons   for   availing   the   benefit   of   the   Scheme,   is <\/p>\n
against   the   mandate   of   Article   14   of   the   Constitution.   He <\/p>\n
relies on  the  decision  of this Court  in  State  of Jammu  and  <\/p>\n
Kashmir v. Triloki Naths Khosa,<\/a> (1974) 1 SCC 19 in order to <\/p>\n
buttress   his   argument   that   the   classification   is   a   subsidiary <\/p>\n
                                                                           30<\/span><\/p>\n
rule to the Fundamental Right of Equal Protection of Laws <\/p>\n
and should not be used in a manner to submerge and drown <\/p>\n
the   principle   of   equality.   Learned   senior   counsel   contends <\/p>\n
that   the   purpose   of   the   Scheme   is   to   end   the   dispute   qua <\/p>\n
assessee,   who   is   in   arrears   of   taxes   and   has   not   paid   such <\/p>\n
arrears. He further submits that in case of Central Excise, the <\/p>\n
excise duty is determined on removal of goods but the actual <\/p>\n
payment is made later and also, in case of self assessment, <\/p>\n
the tax arrears are determined before the actual payment or <\/p>\n
possible   dispute.  He  submits  that as per  Rule  173 F  of  the <\/p>\n
Excise Rules, the assessee is required to determine the duty <\/p>\n
payable   by   self   assessment   of   the   excisable   goods   before <\/p>\n
their removal   from the  factory.  He further  submits  that  the <\/p>\n
methodology   of   re-assessment   under   Section   11   A   of   the <\/p>\n
Excise   Act,   rate   of   product   approved   before   hand   under <\/p>\n
Section   173B   and  ad   valorem  for   value   of   goods   under <\/p>\n
Section   173C   contemplates   the   determination   of   duty <\/p>\n
payable by the assessee.  In this regard, he submits that the <\/p>\n
word   `determined’   has   been   used   purposively   and <\/p>\n
deliberately   in   the   Scheme   instead   of   `assessment’.     He <\/p>\n
further   argues   that   in   view   of   the   object   of   the   Scheme   to <\/p>\n
collect   revenue,   the   Scheme   envisages   two   elements:   first, <\/p>\n
                                                                            31<\/span><\/p>\n
       the determination of the amount of tax due and payable on or <\/p>\n
       before 31.3.1998 and, second, whether the tax so determined <\/p>\n
       is in arrears on date of declaration under Section 88. In other <\/p>\n
       words,   he   submits   that   the   tax   so   determined   on   or   before <\/p>\n
       31.3.1998   should   be   in   arrears   on   the   date   of   declaration <\/p>\n
       under Section 88.  Learned senior counsel, in support of his <\/p>\n
       submissions,   relies   on   the   decision   of   this   Court   in <\/p>\n
       Government   of   India   v.   Dhanalakshmi   Paper   and   Board  <\/p>\n
       Mills, 1989 Supp. (1) SCC 596.\n<\/p>\n<\/p>\n
25)            Taxation   is   a   mode   of   raising   revenue   for   public <\/p>\n
       purposes.     In   exercise   of   the   power   to   tax,   the   purpose <\/p>\n
       always   is   that   a   common   burden   shall   be   sustained   by <\/p>\n
       common   contributions,   regulated   by   some   fixed   general <\/p>\n
       rules, and apportioned by the law according to some uniform <\/p>\n
       ratio of equality.\n<\/p>\n<\/p>\n
26)            The word `duty’ means an indirect tax imposed on the <\/p>\n
       importation or consumption of goods.   `Customs’ are duties <\/p>\n
       charged   upon  commodities   on   their   being  imported   into   or <\/p>\n
       exported from a country.\n<\/p>\n<\/p>\n
27)            The expression `Direct Taxes’ include those assessed <\/p>\n
       upon   the   property,   person,   business,   income,   etc.,   of   those <\/p>\n
                                                                                32<\/span><\/p>\n
       who   are   to   pay   them,   while   indirect   taxes   are   levied   upon <\/p>\n
       commodities   before   they   reach   the   consumer,   and   are   paid <\/p>\n
       by those upon whom they ultimately fall, not as taxes, but as <\/p>\n
       part of the market price of the commodity.  For the purpose <\/p>\n
       of   the   Scheme,   indirect   tax   enactments   are   defined   as <\/p>\n
       Customs   Act,   1962,   Central   Excise   Act,   1944   or   the <\/p>\n
       Customs   Tariff   Act,   1985   and   the   Rules   and   Regulations <\/p>\n
       framed thereunder.\n<\/p>\n<\/p>\n
28)            The   Scheme   defines   the   meaning   of   the   expression <\/p>\n
       `Tax Arrears’, in relation to indirect tax enactments. It would <\/p>\n
       mean  the determined amount of duties, as due and payable <\/p>\n
       which would include drawback of duty, credit of duty or any <\/p>\n
       amount   representing   duty,   cesses,   interest,   fine   or   penalty <\/p>\n
       determined. The legislation, by using its prerogative power, <\/p>\n
       has restricted the dues of duties quantified and payable as on <\/p>\n
       31st  day   of   March,   1998   and   remaining   unpaid   till   a <\/p>\n
       particular   event   has   taken   place,   as   envisaged   under   the <\/p>\n
       Scheme.   The   date   has   relevance,   which   aspect   we   would <\/p>\n
       elaborate a little later. The definition is inclusive definition. <\/p>\n
       It also envisages instances where a Demand Notice or Show <\/p>\n
       Cause   Notice   issued   under   indirect   tax   enactment   on   or <\/p>\n
                                                                                33<\/span><\/p>\n
before   31st  day   of   March,   1998   but   not   complied   with   the <\/p>\n
demand   made   to   be   treated   as   tax   arrears   by   legal   fiction. <\/p>\n
Thus, legislation has carved out two categories of assessees <\/p>\n
viz. where tax arrears are quantified but not paid, and where <\/p>\n
Demand Notice or Show Cause Notice issued but not paid. <\/p>\n
In both the circumstances, legislature has taken cut off date <\/p>\n
as on 31st  day of March 1998. It cannot be disputed that the <\/p>\n
legislation   has   the   power   to   classify   but   the   only   question <\/p>\n
that requires to be considered is whether such classification <\/p>\n
is proper.  It is now well settled by catena of decisions of this <\/p>\n
Court that a particular classification is proper if it is based on <\/p>\n
reason and not purely arbitrary, caprice or vindictive. On the <\/p>\n
other   hand,   while   there   must   be   a   reason   for   the <\/p>\n
classification,   the   reason   need   not   be   good   one,   and   it   is <\/p>\n
immaterial that the Statute is unjust. The test is not wisdom <\/p>\n
but good faith in the classification. It is too late in the day to  <\/p>\n
contend   otherwise.   It   is   time   and   again   observed   by   this <\/p>\n
Court   that   the   Legislature   has   a   broad   discretion   in   the <\/p>\n
matter of classification. In taxation, `there is a broader power <\/p>\n
of classification than in some other exercises of legislation’. <\/p>\n
When   the   wisdom   of   the   legislation   while   making <\/p>\n
classification   is   questioned,   the   role   of   the   Courts   is   very <\/p>\n
                                                                          34<\/span><\/p>\n
       much   limited.   It   is   not   reviewable   by   the   Courts   unless <\/p>\n
       palpably   arbitrary.   It   is   not   the   concern   of   the   Courts <\/p>\n
       whether the classification is the wisest or the best that could <\/p>\n
       be made.  However, a discriminatory tax cannot be sustained <\/p>\n
       if the classification is wholly illusory.  <\/p>\n
29)            Kar   Vivad   Samadhan   Scheme   is   a   step   towards   the <\/p>\n
       settlement of outstanding disputed tax liability.  The Scheme <\/p>\n
       is a complete  Code  in itself  and exhaustive  of matter  dealt <\/p>\n
       with   therein.     Therefore,   the   courts   must   construe   the <\/p>\n
       provisions   of   the   Scheme   with   reference   to   the   language <\/p>\n
       used   therein   and   ascertain   what   their   true   scope   is   by <\/p>\n
       applying   the   normal   rule   of   construction.     Keeping   this <\/p>\n
       principle in view, let us consider the reasoning of the High <\/p>\n
       Court.\n<\/p>\n<\/p>\n
30)            The   tests   adopted   to   determine   whether   a <\/p>\n
       classification is reasonable or not are, that the classification <\/p>\n
       must   be   founded   on   an   intelligible   differentia   which <\/p>\n
       distinguishes person or things that are grouped together from <\/p>\n
       others   left   out   of   the   groups   and   that   the   differentia   must <\/p>\n
       have a rational relation to the object sought to be achieved <\/p>\n
       by   Statute   in   question.     The   Legislature   in   relation   to   `tax <\/p>\n
                                                                                  35<\/span><\/p>\n
arrears’ has classified two groups of assessees.  The first one <\/p>\n
being those assessees in whose cases duty is quantified and <\/p>\n
not   paid   as   on   the   31st  day   of   March,   1998   and   those <\/p>\n
assessees   who   are   served   with   Demand   or   Show   Cause <\/p>\n
Notice issued on or before the 31st day of March, 1998.  The <\/p>\n
Scheme   is   not   made   applicable   to   such   of   those   assessees <\/p>\n
whose   duty   dues   are   quantified   but   Demand   Notice   is   not <\/p>\n
issued   as   on   31st  day   of   March,   1998   intimating   the <\/p>\n
assessee’s   dues   payable.     The   same   is   the   case   of   the <\/p>\n
assessees   who   are   not   issued   with   the   Demand   or   Show <\/p>\n
Cause   Notice   as   on   31.03.1998.     The   grievance   of   the <\/p>\n
assessee   is  that   the  date   fixed   is  arbitrary   and  deprives  the <\/p>\n
benefit for those assessees who are issued Demand Notice or <\/p>\n
Show Cause Notice after the cut off date namely 31st day of <\/p>\n
March, 1998.  The Legislature, in its wisdom, has thought it <\/p>\n
fit   to   extend   the   benefit   of   the   scheme   to   such   of   those <\/p>\n
assessees   whose   tax   arrears   are   outstanding   as   on <\/p>\n
31.03.1998,   or   who   are   issued   with   the   Demand   or   Show <\/p>\n
Cause Notice on or before 31st  day of March, 1998, though <\/p>\n
the   time   to   file   declaration   for   claiming   the   benefit   is <\/p>\n
extended   till   31.01.1999.   The   classification   made   by   the <\/p>\n
legislature   appears   to   be   reasonable   for   the   reason   that   the <\/p>\n
                                                                          36<\/span><\/p>\n
legislature has grouped two categories of assessees namely, <\/p>\n
the assessees whose dues are quantified but not paid and the <\/p>\n
assessees who are issued with the Demand and Show Cause <\/p>\n
Notice on or before a particular date, month and year.   The <\/p>\n
Legislature   has   not   extended   this   benefit   to   those   persons <\/p>\n
who do not fall under this category or group.   This position <\/p>\n
is made clear by Section 88 of the Scheme which provides <\/p>\n
for   settlement   or   tax   payable   under   the   Scheme   by   filing <\/p>\n
declaration after 1st day of September, 1998 but on or before <\/p>\n
the 31st  day of December, 1998 in accordance with Section <\/p>\n
89   of   the   Scheme,   which   date   was   extended   upto <\/p>\n
31.01.1999.     The   distinction   so   made   cannot   be   said   to   be <\/p>\n
arbitrary or illogical which has no nexus with the purpose of <\/p>\n
legislation.     In   determining   whether   classification   is <\/p>\n
reasonable,   regard   must   be   had   to   the   purpose   for   which <\/p>\n
legislation   is   designed.          As   we   have   seen,   while <\/p>\n
understanding the Scheme  of the legislation, the legislation <\/p>\n
is based on a reasonable basis which is firstly, the amount of <\/p>\n
duties,   cesses,   interest,   fine   or   penalty   must   have   been <\/p>\n
determined as on 31.03.1998 but not paid as on the date of <\/p>\n
declaration and secondly, the date of issuance of Demand or <\/p>\n
Show   Cause   Notice   on   or   before   31.03.1998,   which   is   not <\/p>\n
                                                                        37<\/span><\/p>\n
       disputed but the duties remain unpaid on the date of filing of <\/p>\n
       declaration.   Therefore, in our view, the Scheme 1998 does <\/p>\n
       not   violate   the   equal   protection   clause   where   there   is   an <\/p>\n
       essential   difference   and   a   real   basis   for   the   classification <\/p>\n
       which   is   made.     The   mere   fact   that   the   line   dividing   the <\/p>\n
       classes   is   placed   at   one   point   rather   than   another   will   not <\/p>\n
       impair   the   validity   of   the   classification.       The   concept   of <\/p>\n
       Article   14   vis-a-vis   fiscal   legislation   is   explained   by   this <\/p>\n
       Court in several decisions.\n<\/p>\n<\/p>\n
31)            In  Amalgamated   Tea   Estates   Co.   Ltd.   v.   State   of  <\/p>\n
       Kerala,<\/a> (1974) 4 SCC 415, this Court has held:<\/p>\n
          8. It may be pointed out that the Indian Income Tax  <\/p>\n
          Act   also   makes   a   distinction   between   a   domestic  <\/p>\n
          company   and   a   foreign   company.   But   that  <\/p>\n
          circumstance   per   se   would   not   help   the   State   of  <\/p>\n
          Kerala.  The  impugned  legislation,   in  order  to  get  <\/p>\n
          the green light from Article 14, should satisfy  the  <\/p>\n
          classification test evolved by this Court in a catena  <\/p>\n
          of   cases.   According   to   that   test:   (1)   the  <\/p>\n
          classification   should   be   based   on   an   intelligible  <\/p>\n
          differentia   and   (2)   the   differentia   should   bear   a  <\/p>\n
          rational relation to the purpose of the legislation.<\/p>\n
          9. The classification test is, however, not inflexible  <\/p>\n
          and doctrinaire. It gives due regard to the complex  <\/p>\n
          necessities   and   intricate   problems   of   government.  <\/p>\n
          Thus   as  revenue   is   the   first   necessity   of   the   State  <\/p>\n
          and  as  taxes  are  raised  for  various  purposes  and  <\/p>\n
          by   an   adjustment   of   diverse   elements,   the   Court  <\/p>\n
          grants to the State greater choice of classification  <\/p>\n
                                                                                    38<\/span><\/p>\n
         in   the   field   of   taxation   than   in   other   spheres.  <\/p>\n
         According to Subba Rao, J.:\n<\/p>\n<\/p>\n
             “(T)he   courts   in   view   of   the   inherent  <\/p>\n
             complexity   of   fiscal   adjustment   of   diverse  <\/p>\n
             elements,   permit   a   larger   discretion   to   the  <\/p>\n
             Legislature   in   the   matter   of   classification,  <\/p>\n
             so   long   as   it   adheres   to   the   fundamental  <\/p>\n
             principles underlying the said doctrine. The  <\/p>\n
             power   of   the   Legislature   to   classify   is   of  <\/p>\n
             wide   range   and   flexibility   so   that   it   can  <\/p>\n
             adjust   its   system   of   taxation   in   all   proper  <\/p>\n
             and   reasonable   ways.”   (Khandige   Sham  <\/p>\n
             Bhat  v.  Agricultural   Income   Tax   Officer,  <\/p>\n
             Kasargod<\/a>;  V.   Venugopala   Ravi   Verma  <\/p>\n
             Rajah v. Union of India.)<\/a><\/p>\n<\/blockquote>\n
         10.   Again,   on   a   challenge   to   a   statute   on   the  <\/p>\n
         ground   of   Article   14,   the   Court   would   generally  <\/p>\n
         raise   a   presumption   in   favour   of   its  <\/p>\n
         constitutionality.           Consequently,           one         who  <\/p>\n
         challenges   the   statute   bears   the   burden   of  <\/p>\n
         establishing  that  the  statute  is  clearly   violative  of  <\/p>\n
         Article 14. “The presumption is always in favour of  <\/p>\n
         the   constitutionality   of   an   enactment   and   the  <\/p>\n
         burden   is   upon   him   who   attacks   it   to   show   that  <\/p>\n
         there is a clear transgression of the constitutional  <\/p>\n
         principle.” (See Charanjit Lal v. Union of India.)<\/a><\/p>\n
32)          In  Anant Mills Co. Ltd. v. State of Gujarat,<\/a> (1975) 2 <\/p>\n
       SCC 175, this Court has observed:\n<\/p>\n
         “25.  It   is   well-established   that   Article   14   forbids  <\/p>\n
         class legislation but does not forbid classification.  <\/p>\n
         Permissible   classification   must   be   founded   on   an  <\/p>\n
         intelligible differentia which distinguishes persons  <\/p>\n
         or things that are grouped together from others left  <\/p>\n
         out   of   the   group,   and   the   differentia   must   have   a  <\/p>\n
         rational   relation   to   the   object   sought   to   be  <\/p>\n
         achieved by the statute in question. In permissible  <\/p>\n
                                                                                   39<\/span><\/p>\n
          classification   mathematical   nicety   and   perfect  <\/p>\n
          equality are not required. Similarity, not identity of  <\/p>\n
          treatment,   is   enough.   If   there   is   equality   and  <\/p>\n
          uniformity  within  each  group,  the law  will  not be  <\/p>\n
          condemned as discriminative,  though due to some  <\/p>\n
          fortuitous  circumstances  arising   out  of  a  peculiar  <\/p>\n
          situation   some   included   in   a   class   get   an  <\/p>\n
          advantage   over   others,   so   long   as   they   are   not  <\/p>\n
          singled   out   for  special   treatment.   Taxation  law   is  <\/p>\n
          not   an   exception   to   this   doctrine.   But,   in   the  <\/p>\n
          application of the principles, the courts, in view of  <\/p>\n
          the   inherent   complexity   of   fiscal   adjustment   of  <\/p>\n
          diverse elements, permit a larger discretion to the  <\/p>\n
          Legislature  in  the  matter  of  classification   so  long  <\/p>\n
          as   it   adheres   to   the   fundamental   principles  <\/p>\n
          underlying   the   said   doctrine.   The   power   of   the  <\/p>\n
          Legislature   to   classify   is   of   wide   range   and  <\/p>\n
          flexibility so that it can adjust its system of taxation  <\/p>\n
          in   all   proper   and   reasonable   ways   (see  Ram  <\/p>\n
          Krishna   Dalmia  v.  Justice   S.R.   Tendolkar  and  <\/p>\n
          Khandige   Sham   Bhat<\/a>  v.  Agricultural   Income   Tax  <\/p>\n
          Officer, Kasaragod) Keeping the above principles  <\/p>\n
          in   view,   we   find   no   violation   of   Article   14   in  <\/p>\n
          treating   pending   cases   as   a   class   different   from  <\/p>\n
          decided cases. It cannot be disputed that so far as  <\/p>\n
          the   pending   cases   covered   by   clause   (i)   are  <\/p>\n
          concerned, they have been all treated alike.”<\/p>\n
33)           In Jain Bros v. Union of India,<\/a> (1969) 3 SCC 311, the <\/p>\n
       issue before this Court was whether the clause (g) of Section <\/p>\n
       297(2) of the Income Tax Act, 1961 is violative of Article 14 <\/p>\n
       of the Constitution inasmuch as in the matter of imposition <\/p>\n
       of   penalty,   it   discriminated   between   two   sets   of   assessees <\/p>\n
       with   reference   to   a   particular   date,   namely,   those   whose <\/p>\n
       assessment had been completed before 1st day of April 1962 <\/p>\n
                                                                                40<\/span><\/p>\n
       and others whose assessment was completed on or after that <\/p>\n
       date.   Whilst   upholding  the   validity   of  the   above   provision, <\/p>\n
       this Court has observed:\n<\/p>\n<\/p>\n
            “Now   the   Act   of   1961   came   into   force   on   first  <\/p>\n
          April   1962.   It   repealed   the   prior   Act   of   1922.  <\/p>\n
          Whenever  a  prior  enactment  is  repealed   and  new  <\/p>\n
          provisions   are   enacted   the   Legislature   invariably  <\/p>\n
          lays   down   under   which   enactment   pending  <\/p>\n
          proceedings   shall   be   continued   and   concluded.  <\/p>\n
          Section 6 of the General Clauses Act, 1897, deals  <\/p>\n
          with   the   effect   of   repeal   of   an   enactment   and   its  <\/p>\n
          provisions   apply   unless   a   different   intention  <\/p>\n
          appears   in  the   statute.   It   is  for  the  Legislature   to  <\/p>\n
          decide   from   which   date   a   particular   law   should  <\/p>\n
          come   into   operation.   It   is   not   disputed   that   no  <\/p>\n
          reason   has   been   suggested   why   pending  <\/p>\n
          proceedings   cannot   be   treated   by   the   Legislature  <\/p>\n
          as a class for the purpose of Article 14. The date  <\/p>\n
          first   April,   1962,   which   has   been   selected   by   the  <\/p>\n
          Legislature for the purpose of clauses (f) and (g) of  <\/p>\n
          Section   297(2)   cannot   be   characterised   as  <\/p>\n
          arbitrary or fanciful.”\n<\/p>\n<\/p>\n
34)           In  Murthy Match Works v. CCE, (1974) 4 SCC  428, <\/p>\n
       this Court has observed:\n<\/p>\n
          “15.   Certain   principles   which   bear   upon  <\/p>\n
          classification may be mentioned here. It is true that  <\/p>\n
          a   State   may   classify   persons   and   objects   for   the  <\/p>\n
          purpose   of   legislation   and   pass   laws   for   the  <\/p>\n
          purpose   of   obtaining   revenue   or   other   objects.  <\/p>\n
          Every   differentiation   is   not   a   discrimination.   But  <\/p>\n
          classification can be sustained only it it is founded  <\/p>\n
          on  pertinent   and  real  differences   as distinguished  <\/p>\n
          from   irrelevant   and   artificial   ones.   The  <\/p>\n
          constitutional standard by which the sufficiency of  <\/p>\n
                                                                                   41<\/span><\/p>\n
the   differentia   which   form   a   valid   basis   for  <\/p>\n
classification   may   be   measured,   has   been  <\/p>\n
repeatedly   stated   by   the   Courts.   If   it   rests   on   a  <\/p>\n
difference   which   bears   a   fair   and   just   relation   to  <\/p>\n
the   object   for   which   it   is   proposed,   it   is  <\/p>\n
constitutional. To put it differently, the means must  <\/p>\n
have nexus with the ends. Even so, a large latitude  <\/p>\n
is   allowed   to   the   State   for   classification   upon   a  <\/p>\n
reasonable   basis   and   what   is   reasonable   is   a  <\/p>\n
question   of   practical   details   and   a   variety   of  <\/p>\n
factors   which   the   Court   will   be   reluctant   and  <\/p>\n
perhaps   ill-equipped   to   investigate.   In   this  <\/p>\n
imperfect world perfection even in grouping is an  <\/p>\n
ambition hardly ever accomplished. In this context,  <\/p>\n
we have to remember the relationship between the  <\/p>\n
legislative and judicial departments of Government  <\/p>\n
in   the   determination   of   the   validity   of  <\/p>\n
classification.   Of   course,   in   the   last   analysis  <\/p>\n
Courts   possess   the   power   to   pronounce   on   the  <\/p>\n
constitutionality   of   the   acts   of   the   other   branches  <\/p>\n
whether a classification is based upon substantial  <\/p>\n
differences   or   is   arbitrary,   fanciful   and  <\/p>\n
consequently illegal. At the same time, the question  <\/p>\n
of   classification   is   primarily   for   legislative  <\/p>\n
judgment   and   ordinarily   does   not   become   a  <\/p>\n
judicial   question.   A   power   to   classify   being  <\/p>\n
extremely   broad   and   based   on   diverse  <\/p>\n
considerations   of   executive   pragmatism,   the  <\/p>\n
Judicature   cannot   rush   in   where   even   the  <\/p>\n
Legislature   warily   treads.   All   these   operational  <\/p>\n
restraints   on   judicial   power   must   weigh   more  <\/p>\n
emphatically where the subject is taxation.<\/p>\n
    …\n<\/p>\n<\/p>\n
19. It is well-established that the modern state, in  <\/p>\n
exercising   its  sovereign   power   of  taxation,  has  to  <\/p>\n
deal with complex factors relating to the objects to  <\/p>\n
be taxed, the quantum to be levied, the conditions  <\/p>\n
subject to which the levy has to be made, the social  <\/p>\n
and economic policies which the tax is designed to  <\/p>\n
subserve,   and   what   not.   In   the   famous   words   of  <\/p>\n
Holmes, J. in Bain Peanut Co. v. Pinson2:<\/p>\n
                                                                         42<\/span><\/p>\n
               “We   must   remember   that   the   machinery   of  <\/p>\n
           Government   would   not   work   if   it   were   not  <\/p>\n
           allowed a little play in its joints.”<\/p>\n<\/blockquote>\n
35)          In    R.K. Garg v. Union of India, (1981) 4 SCC 675, <\/p>\n
       this Court has held:\n<\/p>\n<\/p>\n
         7.  Now   while   considering   the   constitutional  <\/p>\n
         validity of a statute said to be violative of Article  <\/p>\n
         14,   it   is   necessary   to   bear   in   mind   certain   well  <\/p>\n
         established principles which have been evolved by  <\/p>\n
         the courts as rules of guidance in discharge of its  <\/p>\n
         constitutional function of judicial review. The first  <\/p>\n
         rule is that there is always a presumption in favour  <\/p>\n
         of the constitutionality of a statute and the burden  <\/p>\n
         is upon him who attacks it to show that there has  <\/p>\n
         been   a   clear   transgression   of   the   constitutional  <\/p>\n
         principles.   This   rule   is   based   on   the   assumption,  <\/p>\n
         judicially   recognised   and   accepted,   that   the  <\/p>\n
         legislature   understands   and   correctly   appreciates  <\/p>\n
         the needs of its own people, its laws are directed to  <\/p>\n
         problems   made   manifest   by   experience   and   its  <\/p>\n
         discrimination   are   based   on   adequate   grounds.  <\/p>\n
         The   presumption   of   constitutionality   is   indeed   so  <\/p>\n
         strong   that   in   order   to   sustain   it,   the   Court   may  <\/p>\n
         take   into   consideration   matters   of   common  <\/p>\n
         knowledge, matters of common report,  the history  <\/p>\n
         of   the   times   and   may   assume   every   state   of   facts  <\/p>\n
         which   can   be   conceived   existing   at   the   time   of  <\/p>\n
         legislation.\n<\/p>\n
\n         “8.  Another rule of equal importance is that laws  <\/p>\n
         relating   to   economic   activities   should   be   viewed  <\/p>\n
         with greater latitude than laws touching civil rights  <\/p>\n
         such as freedom of speech, religion etc. It has been  <\/p>\n
         said by no less a person than Holmes, J., that the  <\/p>\n
         legislature   should   be   allowed   some   play   in   the  <\/p>\n
         joints,   because  it   has   to   deal   with   complex  <\/p>\n
         problems   which   do   not   admit   of   solution   through  <\/p>\n
         any doctrinaire or strait-jacket formula and this is  <\/p>\n
                                                                                  43<\/span><\/p>\n
         particularly true in case of legislation dealing with  <\/p>\n
         economic   matters,   where,   having   regard   to   the  <\/p>\n
         nature   of   the   problems   required   to   be   dealt   with,  <\/p>\n
         greater play in the joints has to be allowed to the  <\/p>\n
         legislature. The court should feel more inclined to  <\/p>\n
         give   judicial   deference   to   legislative   judgment   in  <\/p>\n
         the   field   of   economic   regulation   than   in   other  <\/p>\n
         areas   where   fundamental   human   rights   are  <\/p>\n
         involved.”\n<\/p>\n<\/p>\n
36)          In Elel Hotels and Investments Ltd. v. Union of India,<\/a>  <\/p>\n
       (1989) 3 SCC 698, this Court has held:\n<\/p>\n
         “20. It is now well settled that a very wide latitude  <\/p>\n
         is   available   to   the   legislature   in   the   matter   of  <\/p>\n
         classification   of   objects,   persons   and   things   for  <\/p>\n
         purposes of taxation. It must need to be so, having  <\/p>\n
         regard   to   the   complexities   involved   in   the  <\/p>\n
         formulation   of   a   taxation   policy.   Taxation   is   not  <\/p>\n
         now   a   mere   source   of   raising   money   to   defray  <\/p>\n
         expenses   of   Government.  It   is   a   recognised   fiscal  <\/p>\n
         tool   to   achieve   fiscal   and   social   objectives.   The  <\/p>\n
         differentia   of   classification   presupposes   and  <\/p>\n
         proceeds   on   the   premise   that   it   distinguishes   and  <\/p>\n
         keeps   apart   as   a   distinct   class   hotels   with   higher  <\/p>\n
         economic   status   reflected   in   one   of   the   indicia   of  <\/p>\n
         such economic superiority.”\n<\/p>\n<\/p>\n
37)          In     P.M.   Ashwathanarayana   Setty               v.     State   of  <\/p>\n
       Karnataka, (1989) Supp. (1) SCC 696, this Court has held:<\/p>\n
         “…   the   State   enjoys   the   widest   latitude   where  <\/p>\n
         measures   of   economic   regulation   are   concerned.  <\/p>\n
         These measures for fiscal and economic regulation  <\/p>\n
         involve   an   evaluation   of   diverse   and   quite   often  <\/p>\n
         conflicting   economic   criteria   and   adjustment   and  <\/p>\n
         balancing   of   various   conflicting   social   and  <\/p>\n
                                                                                 44<\/span><\/p>\n
         economic values and interests. It is for the State to  <\/p>\n
         decide   what  economic   and  social  policy  it  should  <\/p>\n
         pursue   and   what   discriminations   advance   those  <\/p>\n
         social and economic policies.”\n<\/p>\n<\/p>\n
38)          In  Kerala   Hotel   and   Restaurant   Assn.  v.  State   of  <\/p>\n
       Kerala, (1990) 2 SCC 502, this Court has observed:<\/p>\n
         “24.   The   scope   for   classification   permitted   in  <\/p>\n
         taxation   is   greater   and   unless   the   classification  <\/p>\n
         made   can   be   termed   to   be  palpably   arbitrary,   it  <\/p>\n
         must be left to the legislative wisdom to choose the  <\/p>\n
         yardstick   for   classification,   in   the   background   of  <\/p>\n
         the fiscal policy of the State….”\n<\/p>\n<\/p>\n
39)          In  Spences   Hotel   (P)   Ltd.   v.   State   of   W.B.,   (1991)   2 <\/p>\n
       SCC 154, this Court has observed:\n<\/p>\n
         “26.   What   then   `equal   protection   of   laws’   means  <\/p>\n
         as applied to taxation? Equal protection cannot be  <\/p>\n
         said to be denied by a statute which operates alike  <\/p>\n
         on  all persons  and  property   similarly  situated,  or  <\/p>\n
         by proceedings for the assessment and collection of  <\/p>\n
         taxes which follows the course  usually pursued in  <\/p>\n
         the   State.   It   prohibits   any   person   or   class   of  <\/p>\n
         persons   from  being   singled  out  as special  subject  <\/p>\n
         for   discrimination   and   hostile   legislation;   but   it  <\/p>\n
         does   not   require   equal   rates   of   taxation   on  <\/p>\n
         different   classes   of   property,   nor   does   it   prohibit  <\/p>\n
         unequal   taxation   so   long   as   the   inequality   is   not  <\/p>\n
         based   upon   arbitrary   classification.   Taxation   will  <\/p>\n
         not   be   discriminatory   if,   within   the   sphere   of   its  <\/p>\n
         operation,   it   affects   alike   all   persons   similarly  <\/p>\n
         situated.   It,   however,   does   not   prohibit   special  <\/p>\n
         legislation,   or   legislation   that   is   limited   either   in  <\/p>\n
         the   objects   to   which   it   is   directed,   or   by   the  <\/p>\n
         territory within which it is to operate. In the words  <\/p>\n
                                                                                  45<\/span><\/p>\n
of   Cooley:   It   merely   requires   that   all   persons  <\/p>\n
subjected to such legislation shall be treated alike,  <\/p>\n
under   like   circumstances   and   conditions,   both   in  <\/p>\n
the   privileges   conferred   and   in   the   liabilities  <\/p>\n
imposed.   The   rule   of   equality   requires   no   more  <\/p>\n
than that the same means and methods be applied  <\/p>\n
impartially to all the constituents of each class, so  <\/p>\n
that   the   law   shall   operate   equally   and   uniformly  <\/p>\n
upon   all   persons   in   similar   circumstances.   Nor  <\/p>\n
does this requirement preclude the classification of  <\/p>\n
property, trades, profession and events for taxation  <\/p>\n
— subjecting one kind to one rate of taxation, and  <\/p>\n
another to a different rate. “The rule of equality of  <\/p>\n
taxation   is   not   intended   to   prevent   a   State   from  <\/p>\n
adjusting   its   system   of   taxation   in   all   proper   and  <\/p>\n
reasonable   ways.   It   may,   if   it   chooses,   exempt  <\/p>\n
certain classes of property from any taxation at all,  <\/p>\n
may  impose different  specific taxes upon different  <\/p>\n
trades and professions.” “It cannot be said that it  <\/p>\n
is   intended   to   compel   the   State   to   adopt   an   iron  <\/p>\n
rule of equal taxation.” In the words of Cooley :21 <\/p>\n
  “Absolute equality is impossible.  Inequality of  <\/p>\n
  taxes   means   substantial   differences.   Practical  <\/p>\n
  equality  is  constitutional  equality.  There   is no  <\/p>\n
  imperative   requirement   that   taxation   shall   be  <\/p>\n
  absolutely equal. If there were,  the operations  <\/p>\n
  of   government   must   come   to   a   stop,   from   the  <\/p>\n
  absolute  impossibility  of fulfilling it. The most  <\/p>\n
  casual attention to the nature and operation of  <\/p>\n
  taxes   will   put   this   beyond           question.   No  <\/p>\n
  single   tax   can   be   apportioned   so   as   to   be  <\/p>\n
  exactly   just   and   any   combination   of   taxes   is  <\/p>\n
  likely in individual cases to increase instead of  <\/p>\n
  diminish the inequality.”\n<\/p>\n<\/p>\n
27. “Perfect equality in taxation has been said time  <\/p>\n
and   again,   to   be   impossible   and   unattainable.  <\/p>\n
Approximation to it is all that can be had. Under  <\/p>\n
any   system   of   taxation,   however,   wisely   and  <\/p>\n
carefully   framed,   a   disproportionate   share   of   the  <\/p>\n
public   burdens   would   be   thrown   on   certain   kinds  <\/p>\n
of property, because they are visible and tangible,  <\/p>\n
while others are of a nature to elude vigilance. It is  <\/p>\n
                                                                        46<\/span><\/p>\n
         only where statutes are passed which impose taxes  <\/p>\n
         on   false   and   unjust   principle,   or   operate   to  <\/p>\n
         produce   gross   inequality,   so   that   they   cannot   be  <\/p>\n
         deemed   in   any   just   sense   proportional   in   their  <\/p>\n
         effect on those who are to bear the public charges  <\/p>\n
         that courts can interpose and arrest the course of  <\/p>\n
         legislation   by   declaring   such   enactments   void.”  <\/p>\n
         “Perfectly equal taxation”, it has been said, “will  <\/p>\n
         remain an unattainable good as long as laws and  <\/p>\n
         government   and   man   are   imperfect.”   `Perfect  <\/p>\n
         uniformity and perfect equality of taxation’, in all  <\/p>\n
         the aspects in which the human mind can view it, is  <\/p>\n
         a baseless dream.”\n<\/p>\n<\/p>\n
40)          In  Venkateshwara   Theatre  v.  State   of   A.P.,   (1993)   3 <\/p>\n
       SCC 677, this Court has held:\n<\/p>\n
         “21. Since in the present case we are dealing with  <\/p>\n
         a taxation measure it is necessary to point out that  <\/p>\n
         in the field of taxation the decisions of this Court  <\/p>\n
         have   permitted   the   legislature   to   exercise   an  <\/p>\n
         extremely   wide   discretion   in   classifying   items   for  <\/p>\n
         tax purposes, so long as it refrains from clear and  <\/p>\n
         hostile   discrimination   against   particular   persons  <\/p>\n
         or classes.”\n<\/p>\n<\/p>\n
41)          In State of Kerala v. Aravind Ramakant Modawdakar,<\/a> <\/p>\n
       (1999) 7 SCC 400, this Court has held:\n<\/p>\n
         “Coming   to   the   power   of   the   State   in   legislating  <\/p>\n
         taxation law, the court should bear in mind that the  <\/p>\n
         State has a wide discretion in selecting the persons  <\/p>\n
         or objects it will tax and thus a statute is not open  <\/p>\n
         to attack on the ground that it taxes some persons  <\/p>\n
         or objects and not others. It is also well settled that  <\/p>\n
         a very wide latitude is available to the legislature  <\/p>\n
         in   the   matter   of   classification   of   objects,   persons  <\/p>\n
                                                                                47<\/span><\/p>\n
         and   things   for   the   purpose   of   taxation.   While  <\/p>\n
         considering   the   challenge   and   nature   that   is  <\/p>\n
         involved in these cases, the courts will have to bear  <\/p>\n
         in  mind the  principles laid  down  by this Court  in  <\/p>\n
         the case of Murthy Match Works v. CCE2 wherein  <\/p>\n
         while considering different types of classifications,  <\/p>\n
         this Court held: (AIR Headnote)<\/p>\n
           “[T]hat a pertinent principle of differentiation,  <\/p>\n
           which was visibly linked to productive process,  <\/p>\n
           had been adopted in the broad classification of  <\/p>\n
           power-users and manual manufacturers. It was  <\/p>\n
           irrational to castigate this basis as unreal. The  <\/p>\n
           failure however, to mini-classify between large  <\/p>\n
           and   small   sections   of   manual   match  <\/p>\n
           manufacturers   could   not   be   challenged   in   a  <\/p>\n
           court   of   law,   that   being   a   policy   decision   of  <\/p>\n
           Government   dependent   on   pragmatic   wisdom  <\/p>\n
           playing   on   imponderable   forces   at   work.  <\/p>\n
           Though  refusal  to  make rational  classification  <\/p>\n
           where grossly dissimilar subjects are treated by  <\/p>\n
           the law violates the mandate of Article 14, even  <\/p>\n
           so, as the limited classification  adopted in the  <\/p>\n
           present   case   was   based   upon   a   relevant  <\/p>\n
           differentia which had a nexus to the legislative  <\/p>\n
           end   of   taxation,   the   Court   could   not   strike  <\/p>\n
           down the law on the score that there was room  <\/p>\n
           for further classification.”\n<\/p>\n<\/p>\n
42)          In  State of U.P. v. Kamla Palace,<\/a> (2000) 1 SCC 557, <\/p>\n
       this Court has observed:\n<\/p>\n<\/p>\n
         11.  Article   14   does   not   prohibit   reasonable  <\/p>\n
         classification   of persons,  objects and  transactions  <\/p>\n
         by   the   legislature   for   the   purpose   of   attaining  <\/p>\n
         specific   ends.   To   satisfy   the   test   of   permissible  <\/p>\n
         classification,   it   must   not   be   “arbitrary,   artificial  <\/p>\n
         or   evasive”   but   must   be   based   on   some   real   and  <\/p>\n
         substantial   distinction   bearing   a   just   and  <\/p>\n
                                                                                48<\/span><\/p>\n
reasonable   relation   to   the   object   sought   to   be  <\/p>\n
achieved   by   the   legislature.   (See  Special   Courts  <\/p>\n
Bill,   1978,   Re,   seven-Judge   Bench;  R.K.   Garg  v.  <\/p>\n
Union   of   India,   five-Judge   Bench.)   It   was   further  <\/p>\n
held   in  R.K.   Garg   case  that   laws   relating   to  <\/p>\n
economic activities or those in the field of taxation  <\/p>\n
enjoy   a   greater   latitude   than   laws   touching   civil  <\/p>\n
rights such as freedom of speech, religion etc. Such  <\/p>\n
a   legislation   may   not   be   struck   down   merely   on  <\/p>\n
account   of   crudities   and   inequities   inasmuch   as  <\/p>\n
such   legislations   are   designed   to   take   care   of  <\/p>\n
complex   situations   and   complex   problems   which  <\/p>\n
do not admit of solutions through any doctrinaire  <\/p>\n
approach or straitjacket formulae. Their Lordships  <\/p>\n
quoted   with   approval   the   observations   made   by  <\/p>\n
Frankfurter, J. in Morey v. Doud:\n<\/p>\n
\n  “In the utilities, tax and economic regulation  <\/p>\n
  cases,   there   are   good   reasons   for   judicial  <\/p>\n
  self-restraint   if   not   judicial   deference   to  <\/p>\n
  legislative judgment. The legislature after all  <\/p>\n
  has the affirmative responsibility. The courts  <\/p>\n
  have   only   the   power   to   destroy,   not   to  <\/p>\n
  reconstruct.   When   these   are   added   to   the  <\/p>\n
  complexity   of   economic   regulation,   the  <\/p>\n
  uncertainty,   the   liability   to   error,   the  <\/p>\n
  bewildering   conflict   of   the   experts,   and   the  <\/p>\n
  number   of   times   the   Judges   have   been  <\/p>\n
  overruled   by  events  — self-limitation  can  be  <\/p>\n
  seen   to   be   the   path   to   judicial   wisdom   and  <\/p>\n
  institutional prestige and stability.”<\/p>\n
12. The legislature gaining wisdom from historical  <\/p>\n
facts,   existing   situations,   matters   of   common  <\/p>\n
knowledge   and   practical   problems   and   guided   by  <\/p>\n
considerations of policy must be given a free hand  <\/p>\n
to   devise   classes   —   whom   to   tax   or   not   to   tax,  <\/p>\n
whom to exempt or not to exempt and whom to give  <\/p>\n
incentives   and   lay   down   the   rates   of   taxation,  <\/p>\n
benefits   or   concessions.   In   the   field   of   taxation   if  <\/p>\n
the   test   of   Article   14   is   satisfied   by   generality   of  <\/p>\n
provisions the courts would not substitute judicial  <\/p>\n
wisdom for legislative wisdom.\n<\/p>\n
                                                                            49<\/span><\/p>\n
43)          In  Aashirwad  Films  v. Union of  India,<\/a> (2007)  6 SCC <\/p>\n
       624, this Court has held:\n<\/p>\n<\/p>\n
         14.  It   has   been   accepted   without   dispute   that  <\/p>\n
         taxation laws must also pass the test of Article 14  <\/p>\n
         of the Constitution of India. It has been laid down  <\/p>\n
         in a large number of decisions of this Court that a  <\/p>\n
         taxation   statute   for   the   reasons   of   functional  <\/p>\n
         expediency   and   even   otherwise,   can   pick   and  <\/p>\n
         choose   to   tax   some.   Importantly,   there   is   a   rider  <\/p>\n
         operating   on   this   wide   power   to   tax   and   even  <\/p>\n
         discriminate in taxation that the classification thus  <\/p>\n
         chosen   must   be   reasonable.   The              extent   of  <\/p>\n
         reasonability  of   any   taxation   statute   lies   in   its  <\/p>\n
         efficiency   to   achieve   the   object   sought   to   be  <\/p>\n
         achieved   by   the   statute.   Thus,   the   classification  <\/p>\n
         must   bear   a   nexus   with   the   object   sought   to   be  <\/p>\n
         achieved. (See Moopil Nair v. State of Kerala, East  <\/p>\n
         India Tobacco Co. v. State of A.P., N. Venugopala  <\/p>\n
         Ravi   Varma   Rajah  v.  Union   of   India,  Asstt.  <\/p>\n
         Director of Inspection Investigation<\/a> v. A.B. Shanthi <\/p>\n
         and Associated Cement Companies Ltd. v. Govt. of  <\/p>\n
         A.P.)<\/p>\n
44)          In  Jai Vijai Metal Udyog Private Limited, Industrial  <\/p>\n
       Estate,   Varanasi   v.   Commissioner,   Trade   Tax,   Uttar  <\/p>\n
       Pradesh, Lucknow,<\/a> (2010) 6 SCC 705, this Court held: <\/p>\n
                     19. Now, coming to the second issue, it is  <\/p>\n
         trite   that   in   view   of   the   inherent   complexity   of  <\/p>\n
         fiscal   adjustment   of   diverse   elements,   a   wider  <\/p>\n
         discretion is given to the Revenue for the purpose  <\/p>\n
         of taxation and ordinarily different interpretations  <\/p>\n
         of a particular tariff entry  by different authorities  <\/p>\n
         as   such   cannot   be   assailed   as  violative   of   Article  <\/p>\n
                                                                                50<\/span><\/p>\n
          14 of the Constitution. Nonetheless, in our opinion,  <\/p>\n
          two   different   interpretations   of   a   particular   entry  <\/p>\n
          by the same authority on same set of facts, cannot  <\/p>\n
          be   immunised   from   the   equality   clause   under  <\/p>\n
          Article 14 of the Constitution. It would be a case of  <\/p>\n
          operating   law   unequally,   attracting   Article   14   of  <\/p>\n
          the Constitution.\n<\/p>\n<\/p>\n
45)            To   sum   up,   Article   14   does   not   prohibit   reasonable <\/p>\n
       classification   of   persons,   objects   and   transactions   by   the <\/p>\n
       Legislature   for   the   purpose   of   attaining   specific   ends.   To <\/p>\n
       satisfy   the   test   of   permissible   classification,   it   must   not   be <\/p>\n
       “arbitrary, artificial or evasive” but must be based on some <\/p>\n
       real and substantial distinction bearing a just and reasonable <\/p>\n
       relation   to   the   object   sought   to   be   achieved   by   the <\/p>\n
       Legislature.     The   taxation   laws   are   no   exception   to   the <\/p>\n
       application of this principle of equality enshrined in Article <\/p>\n
       14   of  the  Constitution   of   India.   However,  it   is  well  settled <\/p>\n
       that the Legislature enjoys very wide latitude in the matter of <\/p>\n
       classification of objects, persons and things for the purpose <\/p>\n
       of   taxation   in   view   of   inherent   complexity   of   fiscal <\/p>\n
       adjustment   of   diverse   elements.   The   power   of   the <\/p>\n
       Legislature to classify is of wide range and flexibility so that <\/p>\n
       it   can   adjust   its   system   of   taxation   in   all   proper   and <\/p>\n
       reasonable   ways.   Even   so,   large   latitude   is   allowed   to   the <\/p>\n
                                                                                   51<\/span><\/p>\n
State for classification upon a reasonable basis and what is <\/p>\n
reasonable is a question of practical details and a variety of <\/p>\n
factors   which   the   Court   will   be   reluctant   and   perhaps   ill-<\/p>\n
equipped   to   investigate.     It   has   been   laid   down   in   a   large <\/p>\n
number of decisions of this Court that a taxation Statute, for <\/p>\n
the   reasons   of   functional   expediency   and   even   otherwise, <\/p>\n
can pick and choose to tax some.  A power to classify being <\/p>\n
extremely   broad   and   based   on   diverse   considerations   of <\/p>\n
executive   pragmatism,   the   Judicature   cannot   rush   in   where <\/p>\n
even   the   Legislature   warily   treads.   All   these   operational <\/p>\n
restraints   on   judicial   power   must   weigh   more   emphatically <\/p>\n
where the subject is taxation.  Discrimination resulting from <\/p>\n
fortuitous circumstances arising out of particular situations, <\/p>\n
in which some of the tax payers find themselves, is not hit <\/p>\n
by   Article   14   if   the   legislation,   as   such,   is   of   general <\/p>\n
application and does not single them out for harsh treatment. <\/p>\n
Advantages   or   disadvantages   to   individual   assesses   are <\/p>\n
accidental   and   inevitable   and   are   inherent   in   every   taxing <\/p>\n
Statute as it has to draw a line somewhere and some  cases  <\/p>\n
necessarily   fall   on   the   other   side   of   the   line.     The   point   is <\/p>\n
illustrated by two decisions of this Court. In Khandige Sham  <\/p>\n
Bhat   vs.   Agricultural   Income   Tax   Officer,   Kasaragod   and<\/a>  <\/p>\n
                                                                                52<\/span><\/p>\n
Anr.  (AIR  1963  SC  591).    Travancore  Cochin   Agricultural <\/p>\n
Income Tax Act was extended to Malabar area on November <\/p>\n
01, 1956 after formation of the State of Kerala.  Prior to that <\/p>\n
date, there was no agricultural income tax in that area.  The <\/p>\n
challenge   under   Article   14   was   that   the   income   of   the <\/p>\n
petitioner was from areca nut and pepper crops, which were <\/p>\n
harvested after November in every year while persons who <\/p>\n
grew certain other crops could harvest before November and <\/p>\n
thus escape the liability to pay tax.  It was held that, that was <\/p>\n
only accidental and did not amount to violation of Article14. <\/p>\n
In Jain Bros. vs. Union of India<\/a> (supra), Section 297(2)(g) of <\/p>\n
Income   Tax   Act,   1961   was   challenged   because   under   that <\/p>\n
Section  proceedings  completed  prior  to  April,  1962  was to <\/p>\n
be dealt under the old Act and proceedings completed after <\/p>\n
the said date had to be dealt with under the Income Tax Act, <\/p>\n
1961   for   the   purpose   of   imposition   of   penalty.     April   01, <\/p>\n
1962   was   the   date   of   commencement   of   Income   Tax   Act, <\/p>\n
1961.     It   was   held   that   the   crucial   date   for   imposition   of <\/p>\n
Penalty   was   the   date   of   completion   of   assessment   or   the <\/p>\n
formation of satisfaction of authority that such act had been <\/p>\n
committed.     It   was   also   held   that   for   the   application   and <\/p>\n
implementation of the new Act, it was necessary to fix a date <\/p>\n
                                                                           53<\/span><\/p>\n
                        and provide for continuation of pending proceedings.  It was <\/p>\n
                        also   held   that   the   mere   possibility   that   some   officer   might <\/p>\n
                        intentionally delay the disposal of a case could hardly be a <\/p>\n
                        ground for striking down the provision as discriminatory.<\/p>\n
46)                                 In view of the above discussion, we cannot agree with <\/p>\n
                        the findings and the  conclusion reached by the  High Court <\/p>\n
                        for which, we have made reference earlier.  We have also not <\/p>\n
                        discussed in detail the individual issues raised by the learned <\/p>\n
                        senior counsel for the respondent, since those were the issues <\/p>\n
                        which   were   canvassed   and   accepted   by   the   High   Court. <\/p>\n
                        Accordingly,   the   appeals   are   allowed.   The   impugned <\/p>\n
                        common   judgment   and   order   is   set   aside.     Costs   are   made <\/p>\n
                        easy.\n<\/p>\n<\/p>\n
                                                                     …………………………………………J.<\/p>\n
                                                                                                             [H.L. DATTU]<\/p>\n
                                                                    …………………………………………J.<\/p>\n
                                                                   [CHANDRAMAULI  KR. PRASAD]<\/p>\n
            New Delhi,<\/p>\n
            November 03, 2011.\n<\/p>\n
                                                                                                                       54<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Union Of India & Anr vs M\/S Nitdip Text. Processors … on 3 November, 2011 Author: A T Rao Bench: H.L. Dattu, Chandramauli Kr. Prasad REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2960 OF 2006 Union of India and Ors. ………….. Appellants versus M\/s Nitdip […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-121275","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nUnion Of India & Anr vs M\/S Nitdip Text. 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