- (1.) The present batch of eight appeals arises out of the common Judgment and Order dated 25.07.2005 passed by the High Court of Gujarat at Ahmedabad in the Special Civil Application No.735 of 1999 and connected applications filed under Article 226 of the Constitution of India. Since these appeals involve common question of law, they are disposed of by this common Judgment and Order.
(2.) All the parties in these present appeals before us were duly served but none appeared for the respondents except one in Civil Appeal No. 5616 of 2006.
(3.) The High Court, vide its impugned Judgment and Order dated 25.07.2005, has declared that Section 87(m)(ii) (b) of Finance (No.2) Act, 1998 is violative of Article 14 of the Constitution of India insofar as it seeks to deny the benefit of the 'Kar Vivad Samadhana Scheme, 1998 (hereinafter referred to as "the Scheme") to those who were in arrears of duties etc., as on 31.03.1998 but to whom the notices were issued after 31.03.1998 and further, has struck down the expression "on or before the 31st day of March 1998" under Section 87(m)(ii)(b) of the Finance (No. 2) Act, 1998 as ultra vires of the Constitution of India and in particular, Article 14 of the Constitution on the ground that the said expression prescribes a cut-off date which arbitrarily excludes certain category of persons from availing the benefits under the Scheme. The High Court has further held that as per the definition of the 'tax arrears' in Section 87(m) (ii)(a) of the Act, the benefit of the Scheme was intended to be given to all persons against whom the amount of duties, cess, interest, fine or penalty were due and payable as on 31.3.1998. Therefore, this cut-off date in Section 87(m)(ii) (b) arbitrarily denies the benefit of the Scheme to those who were in arrears of tax as on 31.03.1998 but to whom notices were issued after 31.3.1998. This would result in unreasonable and arbitrary classification between the assessees merely on the basis of date of issuance of Demand Notices or Show Cause Notices which has no nexus with the purpose and object of the Scheme. In other words, the persons who were in arrears of tax on or before 31.03.1998 were classified as those, to whom Demand Notices or Show Cause Notices have been issued on or before 31.03.1998 and, those to whom such notices were issued after 31.3.1998. The High Court observed that this classification has no relation with the purpose of the Scheme to provide a quick and voluntary settlement of tax dues. The High Court further observed that this artificial classification becomes more profound in view of the fact that the Scheme came into operation with effect from 1.9.1998 which contemplates filing of declaration by all persons on or after 1.9.1998 but on or before 31.1.1999. The High Court further held that all persons who are in arrears of direct as well as indirect tax as on 31.3.1998 constitute one class, and any further classification among them on the basis of the date of issuance of Demand Notice or Show Cause Notice would be artificial and discriminatory. The High Court concluded by directing the Revenue to consider the claims of the respondents for grant of benefit under the Scheme, afresh, in terms of the Scheme. The relevant portions of the impugned judgment of the High Court is extracted below: "In the light of the above, we shall now consider whether definition of "tax arrears" contained in Section 87 (m)(ii)(b) is arbitrary, irrational or violative of the doctrine of equality enshrined under Article 14 of the Constitution and whether the petitioners are entitle to avail benefit under Scheme. A reading of the speech made by the Finance Minister and the objects set out in memorandum to Finance (No. 2) Bill, 1998 shows that the Scheme was introduced with a view to quick and voluntary settlement of tax dues outstanding as on 31.3.1998 under various direct and indirect tax enactments by offering waiver of a part of the arrears of taxes and interest and providing immunity against prosecution and imposing of penalty. The definition of 'tax arrear' contained in Section 87 (m)(i) in the context of direct tax enactment also shows that the legislation was intended to give benefit of the scheme to the assessee who were in arrears of tax on 31.3.1998. The use of the words as on "31st day of March, 1998" in Section 87(m)(ii) also shows that even in relation to indirect tax enactments, the benefit of the scheme was intended to be given to those against whom the amount of duties, cess, interest, fine or penalty were due or payable upto 31.3.1998. Viewed in this context it is quite illogical to exclude the persons like the petitioners from whom the amount of duties, cess, interest, fine, penalty, etc. were due as on 31.3.1998 but to whom Demand Notices were issued after 31.3.1998. In our opinion, the distinction made between those who were in arrears of indirect taxes as on 31.3.1998 only on the basis of the date of issuance of notice is wholly arbitrary and irrational. The classification sought to be made between those Demand Notices or Show Cause Notices may have been issued on or before 31st day of March, 1998 and those to whom such notices were issued after 31.3.1998 is per se unreasonable and has no nexus with the purpose of the legislation, namely to provide a quick and voluntary settlement of tax dues outstanding as on 31.3.1998. The irrationality of the classification becomes more pronounced when the issue is examined in the backdrop of the fact that the scheme was made applicable with effect from 1.9.1998, and in terms of Sections 88 (amended) a declaration was required to be filed on or after first day of September, 1998 but on or before 31.1.1999. In our opinion, all persons who were in arrears of direct or indirect taxes as on 31.3.1998 constituted one class and no discrimination could have been made among them by introducing an artificial classification with reference to the date of Demand Notice or Show Cause Notice. All of them should have been treated equally and made eligible for availing benefit under the Scheme subject to compliance of conditions contained in other provisions of the Scheme.";