Legal principle

Instructions issued under section 96(1) of the Finance Act, 1999 [1998] serve only the 'proper administration' of the Kar Vivad Samadhan Scheme and cannot curtail its scope by excluding classes of cases, such as warehoused goods under sections 61 and 72 of the Customs Act, 1962, which the statute itself does not exclude; any such direction in excess of section 96 is null and void.

Court decision

The petition was allowed. The impugned decision of respondent No.2 communicated by letter dated 16.02.1999 was quashed and set aside; the petitioner Company was held entitled to the benefit of the Kar Vivad Samadhan Scheme, 1998 in respect of its duly filed declaration under section 88 of the Finance Act, 1998, and the respondents were directed to accept the declaration (Annexure 'D') and pass appropriate orders thereon in terms of the Scheme. Rule was made absolute with no order as to costs.

Facts

Petitioner No.1, Equinox Semiconductor Ltd, a 100% Export Oriented Unit, held a private bonded warehouse licence under section 58 of the Customs Act, 1962 and procured imported and indigenous material valued at Rs.21,09,466 duty free for packaging, testing, burn-in and programming of integrated circuits; production did not commence and the warehouse licence (renewed up to 1991) could not be renewed further. A show cause notice dated 29.06.1995 went unanswered as the factory was closed, and the Assistant Commissioner passed an ex parte order on 19.02.1998 confirming duty, ordering confiscation and imposing penalty and interest. With an appeal pending before the Commissioner (Appeals), the petitioner filed a declaration on 16.12.1998 under section 88 of the Finance Act, 1998 seeking settlement of the demand under the Kar Vivad Samadhan Scheme, 1998. By letter dated 16.02.1999 the designated authority rejected the declaration, relying on a Government of India clarification dated 28.10.1998 that warehoused goods demanded under section 72 of the Customs Act involve no dispute as to duty and therefore fall outside the Scheme.

Key provisions

• Section 72, Customs Act, 1962 — Goods improperly removed from warehouse, etc
• Section 61, Customs Act, 1962 — Period for which goods may remain warehoused
• Section 15, Customs Act, 1962 — Date for determination of rate of duty and tariff valuation of imported goods
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Section 58, Customs Act, 1962 — Licensing of private warehouses
• Section 117, Customs Act, 1962 — Penalties for contravention etc not expressly mentioned