Pune Road vs Union Of India
2009 Latest Caselaw 157 Bom

                                            1

               IN THE HIGH COURT OF JUDICATURE AT BOMBAY




                                                                             
                         CIVIL APPELLATE JURISDICTION




                                                     
                        WRIT PETITION NO.10582 OF 2009




                                                    
    GKN Sinter Metals Private Limited,
    (formerly known as GKN Sinter Metals
    Limited), a Company incorporated under




                                           
    the Companies Act, 1956 and having
    its registered office at 146, Mumbai-
                         
    Pune Road, Pimpri, Pune - 411 018                      .....Petitioner
                        
                 V/s.


    1.    Union of India,
      

          (through the Secretary, Ministry
          of Law and Justice, Department of
   



          Legal Affairs, Branch Secretariat,
          Aayakar Bhavan Annexe, 2nd Floor,
          New Marine Lines, Mumbai - 20.





    2.    The Commissioner of Customs,
          ICE House, 41-A, Sasoon Road,
          Pune - 411 001.





    3.    The Dy. Commissioner of Customs,
          CFS, F-II Block, Telco Road,
          Yeshwantnagar, Pimpri, Pune 18                   .....Respondents.



    Mr.S.N. Kantawala i/by Shri Brijesh Pathak for the petitioner.

    Mr.R.V. Desai, Senior Advocate with Mr.R.B. Pardeshi for the respondents.



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                                CORAM : V.C. DAGA, & J.P. DEVADHAR, JJ.

Judgment reserved On : 18th December, 2009

Judgment delivered On : 19th December, 2009

ORAL JUDGMENT (Per J.P. Devadhar, J.)

1. The only question raised in this petition is, whether the

Customs authorities are justified in coercively collecting the customs duty

demand with interest on the ground that the petitioner has not produced the

export obligation discharge certificates (`EODC' for short) when, firstly the

application for EODC filed by the petitioner are pending before DGFT and

secondly the period of limitation for filing appeal before CESTAT against the

order of Commissioner (Appeals) has not expired ?

2. Since the above question is raised again and again, we admit

the writ petition and take it up for final hearing by consent of both the parties.

3. The petitioner company manufactures automobile components.

The petitioner had obtained several advance licenses from the Director

General of Foreign Trade (DGFT for short) under which the petitioner could

import raw materials duty free and the export the final product to the extent

specified in the respective advance licences. Accordingly, under the said

advance licences the petitioner had imported raw materials duty free and

exported the resultant product manufactured by it.

4. During the period 2008-2009, four show cause notices were

issued to the petitioner by the customs authorities and the Assistant

Commissioner of Customs, Pune by four adjudication orders held that the

petitioner was liable to pay the customs duty with interest on the duty free

imports made under the advance licences, mainly on the ground that the

petitioner has failed to produce the EODC to show that the export obligation

has been fulfilled. The case of the petitioner was that the export obligation

was fulfilled under several advance licenses and wherever the negligible

quantity had remained to be fulfilled, the petitioner had paid the customs

duty and applied for regularization and issuance of EODC by the DGFT and

the same are pending. However, the above contentions were rejected and

adjudication orders were passed under the Customs Act, 1962.

5. Challenging the aforesaid adjudication orders, the petitioner

filed appeals before the Commissioner (Appeals) who by his orders dated

24-4-2009 and 16-11-2009 dismissed all the four appeals either on the

ground of non compliance of pre-deposit order or on the ground of non

production of EODC. The petitioner thereupon filed four appeals before

CESTAT against the order of Commissioner (Appeals) with an application for

stay on 4-7-2009 and 9-12-2009 respectively.

6. Even before the aforesaid stay applications could be heard, the

Deputy Commissioner of Customs, Pune issued detention notices on

7-12-2009 seeking to recover from the petitioner the customs duty demand

amounting to Rs.3.57 crores determined under the aforesaid adjudication

orders. In the said detention notice, it was stated that if the amount specified

therein was not paid within 7 days, the goods detained shall be put to

auction. In these circumstances, the petitioner was compelled to pay Rs.

3,57,66,672/- which was paid under protest by two cheques vide covering

letter dated 9-12-2009. Thereafter, by letter dated 10-12-2009, the petitioner

pointed out to the Chief Commissioner of Customs, Pune, the Commissioner

of Customs, Pune and the Deputy Commissioner of Customs, Pimpri, Pune

that the above amount was virtually extorted from the petitioner contrary to

Board circular dated 2-6-1998 and called upon the respondents to forthwith

return the amounts collected under two cheques on 9-12-2009. As no

action was taken, the present writ petition is filed.

7.

Mr.Kantawala, learned counsel appearing on behalf of the

petitioner submitted that the coercive action of the Customs authorities in

seeking to recover the amount of customs duty during the pendency of the

stay application is totally high-handed and contrary to the Board Circulars

and the law laid down by this Court. In this connection, he relied upon the

Board Circulars and the Judgments of this Court in the case of Mahindra &

Mahindra Limited V/s. Collector reported in 59 ELT 505 (Bom), K.N.

Guruwsami Oil Mills Limited V/s. Union of India reported in 2000 (12)

E.L.T. 57 (Bom), Noble Asset Company Limited V/s. Union of India

reported in 2005 (187) E.L.T. 438 (Bom.), Castrol India Limited V/s. Union

of India reported in 2007 (208) E.L.T. 490 (Bom.), Legrand (India) Private

Limited V/s. Union of India reported in 2007 (216) E.L.T. 678 (Bom.) and

a decision of the Andhra Pradesh High Court in the case of Lanco

Kondapalli Power Private Limited V/s. Union of India reported in 2009

(142) E.L.T. 340 (A.P.), Mr.Kantawala submitted that in view of the willful

disobedience on the part of customs officers in disobeying the decisions of

this Court, stern action be taken and further the respondents be directed to

forthwith return the amount of Rs.3,57,66,672/- illegally recovered from the

petitioner with interest at such rate as this Court deems fit and proper.

8. Mr.R.V. Desai, learned Senior Advocate appearing on behalf of

the respondents on the other hand submitted that although the decisions of

this Court are binding on the respondents, in the present case, Mr.R. Sekar,

Commissioner of Customs, Pune is of the opinion that the respondents are

justified in recovering the amount from the petitioner, because, firstly, the

CBEC Circular dated 2-6-1998 relied upon by the petitioner is applicable in

respect of recovery of dues during the pendency of the stay application

before the Commissioner (Appeals) and not before CESTAT, secondly, as

per para 1.3, Part III, Chapter 18 of the Central Excise Manual, no coercive

action can be taken during the pendency of the stay application only if the

appeal filed before the CESTAT is the first stage appeal, whereas, in the

present case, the appeal pending before the CESTAT is the second stage

appeal. Thirdly, Mr.Desai relied upon the Circular No.788 dated 25-5-2004,

the relevant portion of which reads thus :-

"a) For cases where the appeals lie with the Commissioner (Appeals) and no stay application is filed along with the appeal, recovery proceedings may be initiated after 60 days

from the date of communication of the order. In respect of Orders-In-Original of Commissioners where the first appeal lies with the Tribunal and no stay application is filed along with the appeal, the aforesaid time period would be 90 days.

b) Where conditional stay orders are issued specifying the time limit for fulfillment of the conditions but conditions are not fulfilled as per the directions of the Tribunal or Commissioner (Appeals), as the case may be, recovery proceedings should be initiated immediately after the lapse of the time period prescribed in the appellate stay order for fulfillment of the conditions."

Fourthly, Mr.Desai submitted that two appeals filed by the

petitioner were dismissed on 24-4-2009 for non-compliance of pre-deposit

order. In these circumstances, he submitted that the respondents were

justified in taking coercive action against the petitioner.

9. In our opinion, the argument advanced on behalf of the

respondents are wholly unsustainable. Way back in the year 1992, this

Court in the case of Mahindra & Mahindra Limited (supra), has held thus :

"4.

In our opinion, it was highly improper on the part of the Collector and Assistant Collector to encash the bank guarantees before expiry of the statutory period of three

months and in particular when petitioners had specifically informed that the stay application is fixed for hearing on 17th February 1992. Be that as it may, we accordingly direct Respondents Nos. 2 and 3 to pay entire amount recovered by encashing bank guarantees to the petitioners within 10 days

from today. On receipt of the said amount by the petitioners, they shall execute bank guarantee in favour of the Collector of

Central Excise within two weeks thereafter. It is also made clear that until disposal of the stay application bank guarantee will continue and in the event if the Tribunal rejects the application for stay, the said order shall not be executed for a period of two weeks from the date of its service on the

petitioners.

(emphasis supplied)

10. In the case of Noble Asset Company Limited (supra), this Court

held that encashment of bank guarantee pending disposal of stay application

before CESTAT is illegal. Similar view is taken in the case of Castrol India

Limited (supra).

11. Again this Court in the case of Legrand (India) Private Limited

(supra) after considering the Board Circular dated 25-5-2004 and various

decisions of this Court as well as the Apex Court held thus :-

           "9.   From the above           four    decisions,    the     following
           prepositions emerge :




                                                       
           a)      It is immaterial that in a previous litigation the particular

petitioner before the Court was or was not a party, but if a law on a particular point has been laid down by the High Court, it must be followed by all authorities and tribunals in the State;

b) The law laid down by the High Court must be followed by all authorities and subordinate tribunals when it has been declared by the highest Court in the State and they cannot ignore it either in initiating proceedings or deciding on the rights

involved in such a proceeding;

c)

If inspite of the earlier exposition of law by the High Court having been pointed out and attention being pointedly drawn to that legal position, in utter disregard of that position,

proceedings are initiated, it must be held to be a wilful disregard of the law laid down by the High Court and would amount to civil contempt as defined in S. 2(b) of the Contempt of Courts Act, 1971."

12. In the present case, it is not in dispute that the petitioner has

fulfilled the export obligation substantially and wherever there is little short

fall, the petitioner has sought regularization and issuance of EODC by

offering to pay customs duty proportionately to that extent. In fact, advance

licence No.3110022667 has already been redeemed by DGFT, but still duty

amounting to Rs.56,72,534/- has been recovered under that advance licence

(see page 56 of the Petition). Similarly, in respect of advance licence No.

3110006115, the export obligation fulfilled is to the extent of 94% and for the

balance export obligation proportionate customs duty with interest has been

paid and application for regularization and issuance of EODC is pending

before DGFT (see page 56 of the petition). Similarly, in respect of other

advance licences the export obligation has been substantially complied with

and for the balance the petitioner has offered to pay the proportionate

customs duty with interest and application for regularization and issuance of

EODC is pending before the DGFT. The fact that the matter is pending

before DGFT is not disputed by the respondents. If there is delay in

regularization and issuance of EODC by the DGFT, the customs authorities

cannot penalise the petitioner by resorting to coercive action.

13. It is not the case of the respondents that the petitioner with a

view to defeat the interests of the revenue was trying to dispose of the

assets and, therefore, coercive action was necessitated. In fact, the specific

case of the respondents is that the customs duty has been coercively

collected under Section 142 of the Customs Act, 1962 read with the

provisions of the Customs (Attachment of Property of Defaulters for recovery

of Government dues) Rules, 1995, because the petitioner has not produced

the EODC.

14. It is pertinent to note that neither Section 142 nor the 1995

Rules authorize recovery of customs duty even before the expiry of the

statutory period of limitation for filing appeal before CESTAT. In the present

case, admittedly, the appeal with stay application has been filed before

CESTAT on 9-12-2009 against the order of Commissioner (Appeals) dated

16-11-2009. Statutory period of limitation for filing appeal against the order

of Commissioner (Appeals) dated 16-11-2009 expires on 14-2-2010.

Therefore, in the facts of the present case, where the export obligation has

been substantially complied with and application for regularization on

payment of proportionate customs duty with interest and issuance of EODC

is pending before DGFT, coercively collecting the entire customs duty even

before the expiry of the statutory period for filing appeal is wholly unjustified,

especially when no case is made out for initiating coercive action against the

petitioner.

15. In these circumstances, we are clearly of the opinion that

coercively collecting the customs duty even though one of the advance

licences is redeemed by DGFT and even though application for

regularization and issuance of EODC in respect of other advance licences

are pending before DGFT, is wholly unjustified. Moreover, the period for

filing appeal and obtaining stay has not expired. Accordingly, we direct the

respondents to return to the petitioner Rs.2,85,47,277/- being the amount of

customs duty coercively collected from the petitioner in respect of which the

period of limitation for filing appeal against the order of Commissioner of

Customs (Appeals) has not even expired.

16. As regards the validity of the coercive action even before the

expiry of the period of limitation for filing appeal, it was contended that the

decisions of this Court relate to first stage appeals before CESTAT and not

the second stage appeal as in the present case. It is also contended that in

spite of the decisions of this Court, in view of the Circular dated 25-5-2004,

the respondents are justified in taking coercive action.

17. We are not impressed by these arguments. The Circular dated

25-5-2004 has been considered by this Court in the case of Legrand (India)

Private Limited (supra). At this juncture, we may place it on record that at

the request of Mr.Desai time was granted to take fresh instructions in the

matter. Mr.Desai, after taking instructions from Mr.R. Sekar, Commissioner

of Customs, Pune reiterated and emphasised his stand and invited a

reasoned order. In the circumstances, we are left with no other alternative

but to ink the same.

18. In our prima facie opinion, coercively collecting customs duty in

spite of redemption certificate issued by DGFT in respect of one advance

licence and in spite of pendency of the application for regularization and

issuance of EODC in respect of other licences and even before the expiry of

the period of limitation for filing appeal before CESTAT is highly improper

and contrary to the decisions of this Court.

19. Accordingly, we allow the writ petition by directing the

respondents to return the amount of Rs.2,85,47,277/- with interest at the rate

of 6% per annum illegally collected from the petitioner from the date of

realisation till payment.

20. We further direct the registry to issue show-cause notice to Shri

R. Sekar, Commissioner of Customs, Pune to show cause as to why action

should not be taken against him under the Contempt of Courts Act, 1971 for

coercively collecting the customs duty and retaining the same in spite of the

fact that the DGFT has granted redemption certificate in respect of one of

the advance licence and in respect of the remaining licence the applications

are pending before the DGFT and in spite of various decisions of this Court

brought to the notice of the customs authorities. Notice be made returnable

after eight weeks.

21. The writ petition is disposed of in the above terms with no order

as to costs.

                   (J.P. Devadhar, J.)                               (V.C. Daga, J.)