Union Of India (Uoi) Through ... vs Honda Siel Cars India Ltd.
2006 Latest Caselaw 2289 Del

ORDER

Page 0260

1. In the writ petition it has been prayed that an appropriate writ, order or direction be issued quashing the impugned Order dated 20.8.2002 passed by the Settlement Commissioner, Principal Bench, New Delhi in the context of the Settlement Application filed by the Respondents.

2. The findings of the Ministry of Finance, Settlement Commission: Customs and Central Excise, Principal Bench, New Delhi which have been assailed read as follows:

21. In view of our findings, the case is ordered to be settled in following terms:

(i) The correct duty liability of the applicant in this case is Rs. 32,63,032/- which has been paid by them by appropriating from the deposit of Rs. 3 crores made during the investigation. Revenue shall consider the return of the balance amount of deposit in accordance with the law.

(ii) The applicant is granted immunity for offences under the Customs Act, 1962 read with the IPC in respect of the case covered under the application and the SCN in question.

(iii) The applicant is granted immunity from fine and penalty under the Customs Act, 1962 in respect of the case covered by the application and the SCN in question.

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(iv) No interest is chargeable under Section 28AB of the Act as the duty in this case became payable before the said Section was inserted in the Customs Act by Finance (no. 2) Act, 1996. Further, the importer made a large deposit during the investigation itself, far in excess of their correct duty liability.

3. The writ petition was listed before this Court for the first time on 25.4.2003 but was adjourned on the request of the counsel for the Petitioner to 28.5.2003, and thereafter for the same reason to 19.8.2003. On 19.8.2003 yet another adjournment was asked for in order "to cite some more judgments to satisfy the Court that despite the fact that the order passed by the Settlement Commission, under Section 127-C(1) of the Customs Act, 1962, on 17th October, 2001, was not challenged, the plea that the Settlement Commission did not have jurisdiction to proceed with the application is still open to the Petitioner". Yet another adjournment was granted on the asking of the counsel for the Petitioner posting proceedings to 5.11.2003, on which date notice was issued on the writ petition as well as on CM 4608/2003 in which a stay in the implementation of the impugned order had been pleaded for. On 8.1.2004 hearings were adjourned to 27.1.2004, on which date once again another request for an adjournment was made on behalf of the Petitioner. On 24.2.2004 the Respondents recorded that they had no objection if the Union of India is imp leaded and hence the application was allowed unopposed. On 13.7.2004 and 9.11.2004 adjournments were yet again granted on the request of the Petitioner. The writ petition was admitted on 4.1.2005 and set down for hearing on 7.2.2005. It is evident from a perusal of these Orders that stay of the operation of the impugned order had not even been prayed for, leave alone granted, and the writ petition was put down for hearing in the Regular List.

4. It is in these circumstances that the Respondents have filed CM 13551/2006 seeking the issuance of a direction to the Petitioner to refund Rs. 2,67,36,968/-, being the balance amount of principal deposit, along with interest thereon, which the Respondents were constrained/ compelled to deposit during the investigation. It appears that the Respondents had filed a Refund Application dated 10.4.2003 for the aforementioned sum, followed up by their letters dated 5.5.2003, 7.5.2003 and 13.5.2003. The evasive conduct of the Petitioners in these proceedings has also pervaded all throughout in their Departmental proceedings in respect of the said Refund Application in that the Petitioner has not replied or responded to any of the Respondents letters/reminders. Keeping all these factors in mind the following Orders came to be passed on the last date of hearing viz. 11.12.2006:

On the last date of hearing i.e. on 27.11.2006, we passed the following order:

CM 13551/2006

Reply be filed within one week. Rejoinder, if any, be filed within three days thereafter.

Prima facie there seems to be no justification in not refunding the amounts claimed by the Respondents. First, because no stay has been Page 0262 granted by this Court and secondly in the event that the Writ Petition is disposed of in favor of the Petitioner, the Respondent would have to pay interest, whereas in the present situation the Petitioner would have to pay interest to the Respondent.

List on 11th December, 2006.

Our attention has been drawn to circular No. 802/35/2004-CX., dated 8-12-2004. The salient portion of the circular reads as follows:

3. The Board has noted in the observations of the Hon'ble Supreme Court in its order dated 21-9-2004 and has decided that pre-deposits shall be returned within a period of three months of the disposal of the appeals in the assessed's favor.

4. Accordingly, the contents of the Circular No. 275/37/2000-CX. 8A dated 2-1-2002 [2002(139) E.L.T. T38], as to the modalities for return of the pre-deposits are reiterated. It is again reiterated that in terms of Hon'ble Supreme Court's order such pre-deposit must be returned within 3 months from the date of the order passed by the Appellate Tribunal/Court or other Final Authority unless there is a stay on the order of the Final Authority/CESTAT/Court, by a superior Court.

5. Delay beyond this period of three months in such cases will be viewed adversely and appropriate disciplinary action will be initiated against the concerned defaulting officers. All concerned are requested to note that default will entail an interest liability, if such liability accrues by reason of any orders of the CESTAT/Court, such orders will have to be complied with and it may be recoverable from the concerned officers.

6. All Commissioners may advise implementation of these instructions and ensure their implementation through a suitable monitoring mechanism. Field formation may be suitably informed. Copies of the instructions issued may be endorsed to this office for information.

The refund application has been moved by the Respondents as far back on 10.4.2003. That application does not appear to have been disposed of till date. No reply has been filed by the petitioner to the present application also. The effect may be that the Revenue would be at a loss in not making the refund. We have noticed this position in several cases.

It is in these circumstances that we direct the personal presence of the Commissioner of Customs(Import & General) New Custom House, near IGI Airport, New Delhi for 19.12.2006. Copy of order be given dusty under the signature of Court master.

5. Mr. S.K. Dubey, learned Counsel for the Petitioner/Department has sought to rely on paragraph 2 of Circular No. 788/21/2004-CX dated 25.5.2004 issued by the Government of India, Ministry of Finance, Department of Revenue, Central Board of Excise & Customs, New Delhi, which reads thus -

The matter has been examined. The Board has taken the following decisions:

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 Page 0263 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 fulfilllment of the conditions but conditions are not fulfillled 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 fulfilllment of the conditions.

(c) In respect of stay applications pending against the Orders-In- Original of the Commissioners before the CESTAT a view similar to Board's Circular No. 396/29/98-CX dated 2.6.1998 should be taken. The two provisos to Section 35C(2A) of the Central Excise Act, 1944 read as follows:

Provided that where an order of stay is made in any proceeding relating to an appeal filed under Sub-section (1) of Section 35B, the Appellate Tribunal shall dispose of the appeal within a period of one hundred and eighty days from the date of such order.

Provided further that if such appeal is not disposed of within the period specified in the first proviso, the stay order shall, on the expiry of that period, stand vacated". In view of the above stated legal position, the field officers should refrain from taking coercive action till the period of six months of filing a stay petition before the CESTAT, or till the disposal of the stay petition, whichever is earlier.

The instructions in this clause relate to only stay application filed with first stage appeals not to those with further appeals i.e. only in respect of stay applications filed with appeals filed against the Orders-In-Original of the Commissioners.

6. Reliance has also been placed on behalf of the Department, but with no apparent justification, on Circular No. 396/29/98-CX dated 2.6.1998, which is also reproduced for facility of perusal:

Circular No. 396/29/28-CX

dated 2/6/1998

F. No. 201/04/98-CX.6

Government of India

Ministry of Finance, Department of Revenue

Central Board of Excise & Customs, New Delhi

Subject: Central Excise - Whether coercive measures to recover duty demanded as a result of adjudication till such time as the appeal/stay applications filed by the appellant has been disposed of by Commissioner (Appeals) be taken - Regarding.

On the question of recovery of dues during pendency of stay application before the Commissioner (Appeal), the matter was examined by the Board and necessary instructions were issued vide Circular No. 23/Page 0264 90-CX.6 dated 12.12.1990 issued from F. No. 209/107/89-CX.6 and Circular No. 16/92-CX.6 dated 12.11.1992 issued from F. No. 208/59/92-CX.6. According to these instructions, Central Excise Officers were to allow a period of three months from the date of decision for payment of dues adjudicated before resorting to coercive measures to recover such dues. However, if the stay application is rejected by the Commissioner(Appeal) even before the lapse of time of three months, recovery proceedings should be initiated immediately. The Commissioner(Appeals) were also directed to dispose of stay application within the period of two months in case the Commissioner(Appeal) was not in a position to dispose of the main appeal within the same time-frame.

2. Recently, the Bombay High Court has ordered that Commissioner(Appeal) may be directed to dispose of stay application within the specified time limit and during the pendency of stay application no coercive action should be taken to realise the arrears of revenue.

3. Keeping the aforesaid in view, the Board has decided that no coercive action should be taken to realise the dues till the disposal of the stay application by the Commissioner(Appeal) and the Commissioner(Appeal) must dispose of the stay application within one month of its filing.

7. The argument of Mr. Dubey, learned Counsel for the Department, is that the Department had entertained a bona fide impression that it would not be proper to effect a refund whilst the stay application filed in the present proceedings remained pending. In our opinion, however, there is no scope for claiming bonafides to make the refund, at least on a reading of the Orders passed by this Court on 27.11.2006. In our view there is no reason for the reliance on the above extracted Circulars because the focus of both the Circulars is on the Department. The Circulars direct that the officers of the Department should not adopt coercive steps for recovery of duty in a precipitate manner.

8. It is a matter of great regret that till date requisite action has not been taken by the Petitioners. Instead, Mr. Dubey would have us believe that the concerned Commissioner was under the bona fide belief that the refund ought not to be made during the pendency of this writ petition and more particularly owing to the pendency of the stay application. We may simply reiterate that no orders had been passed, or for that matter have been pressed for, on the stay application. We may add that we find it difficult to accept this plea of "bonafide belief" particularly when the Department would itself never accept such a plea of an assessed who has gone in appeal against an outstanding demand of duty and has failed to obtain a stay of recovery of such demand. These very officers, who seem to "bonafide" believe that mere pendency of a stay application of the Department tantamounts to a stay, would insist that the assessed should in fact produce an order of stay of recovery. What is sauce for the goose is sauce for the gander. The yardstick can be no different when the appellant/petitioner is the Department.

9. It is a matter of regret that although three and half years have elapsed since the Respondent filed an application seeking refund, the petitioners Page 0265 have not till date passed orders thereon. This has necessitated the filing of the present application by the Respondents, who perhaps were sanguine that this Court had granted adjournments on 27.11.2006 as well as on 11.12.2006 to enable the Petitioner to make the refunds in the interregnum, as per the expectation of Circular dated 8.12.2004 issued by the Government of India, Ministry of Finance (Department of Revenue), Central Board of Excise and Customs, New Delhi. The loss to the public exchequer due to the willful inaction of the Commissioner of Customs is indeed staggering. In the wake of these Orders we cannot but express our doubts whether the obduracy of the Commissioner was bonafide. Since the impugned Order is dated 20.8.2002, the refund ought to have been made within three months thereof, i.e. latest by 20.11.2002. Section 27A was inserted into the Customs Act by Act 22 of 1995 by Section 55 thereof with effect from 26.5.1995; Section 11BB was inserted into the Central Excise Act, 1944 also by Act 22 of 1995 by Section 75 thereof with effect from 26.5.1995. Prior to these changes in the statutes both these Sections stipulated that if a refund is not made within three months from the date of the receipt of the application, interest at such rate not below ten per cent and not exceeding thirty per cent per annum as may be fixed by the Central Government by Notification in the Official Gazette would become payable. Act 14 of 2001 has substituted the words "not below ten per cent" by the words "not below five per cent".

10. In Afrique Tradelinks Pvt. Ltd. v. Union of India Manu/GJ/0079/2004, a Division Bench of the Gujarat High Court noted that at the time of the filing of the petition a prayer for the refund of Rs. 5,21,099/- along with interest under Section 27A of the Customs Act, 1962 had been made in respect of the period from 31.1.1996 till the date of actual payment. At the time of the final hearing it was further noted that the said amount had already been paid on 30.6.2001. The Department was directed by the Division Bench to pay interest at the rate applicable in accordance with Notifications issued under Section 27A on the said amount for the period from the date of expiry of three months from the date on which the Petitioner initiated the Refund Application till the date of payment of refund. In Rishi Gases Pvt. Ltd. v. Collector of Customs, Calcutta, the High Court of Calcutta was confronted with the claim for the refund of additional customs duty, fine and penalty totalling a sum of Rs. 1,64,963.33p. The Court directed the refund together with interest at the rate of 15 per cent per annum as per the then existing Notification. Our learned Brother Badar Durrez Ahmed, J. in Siddharth Intercontinental Hotels (I) Ltd. v. Collector of Customs , had directed payment of interest on the amount of the refund from the date of the application viz. 22.11.1984 at 12 per cent per annum and pendente lite interest at the rate of 6 per cent per annum. Reliance had been placed before him on Calcutta Paper Mills Mfg. Co. v. CEGAT ; Hope Textiles Ltd. v. U.O.I. 2000 (119) E.L.T. 321 (Bom.) and Metal Distributors Ltd. v. U.O.I. .

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11. Judicial pronouncements on the question of whether a writ of mandamus could issue in respect of a claim of refund are available. In Union of India v. Orient Enterprises , the maintainability of such an action was negatived by noting that the statutory right to claim interest could only be pressed under Section 27A of the Customs Act and, therefore, for the period prior to its introduction a writ could not issue in this regard. However, more recently the Division Bench of the Bombay High Court in Shri Balaji Automobiles v. Union of India 2002 (83) ECC 524, granted simple interest at the rate of 6 per cent per annum after observing that a writ petition subsequent to the introduction of Section 27A was maintainable.

12. Mr. Dubey has drawn our attention to Notification No. 75/2003-Cus. (N.T.) dated 12.9.2003 and Notification No. 26/2002-Cus. (N.T.), dated 13.5.2002, which read as follows:

NOTIFICATION UNDER SECTION 27A

Interest @ 6% per annum for delayed refund.--In exercise of the powers conferred by Section 27A of the Customs Act, 1962 (52 of 1962) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 25/2002-Customs(N.T.), dated 13th May, 2002 [GSR 356(E), dated 13th May, 2002], except as respects things done or omitted to be done before such supersession, the Central Government hereby fixes the rate of interest at six per cent per annum for the purposes of the said section.

NOTIFICATION UNDER SECTION 28AA

Interest @ 15% for delayed payment of duty.-- In exercise of the powers conferred by Section 28AA of the Customs Act, 1962 (52 of 1962) and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 32/2000-Customs(N.T.), dated 12th May, 2000[GSR 438(E), dated the 12th May, 2000], the Central Government hereby fixes the rate of interest at fifteen per cent per annum for the purposes of the said section

13. Assuming that the Respondent is entitled to a refund of Rs. 2,67,36,968/-, the Department has needlessly incurred a liability for payment of interest at the rate of 6 per cent from 20.11.2002 to 19.12.2006 i.e. Rs. 65,50,557/-. Furthermore, it has often been contended on behalf of Department that where a party presses for a refund and it is ultimately found that no refund was legitimately due, the Department would be entitled to claim interest at the rate of 15 per cent on the said amount at least on the premise of delayed payment of duty. In the event that the writ petition were to be decided in favor of the Petitioner/Department, by 19.12.2006 the Respondents would have become liable to pay interest at the rate of 15 per cent on the said sum of Rs. 2,67,36,968/- which from 20.12.2002 to 19.12.2006, would be as much as Rs. 1,63,76,392/-. In other words if the Respondents request for refund the excise duty had been acceded to Page 0267 instead of paying Rs. 65,50,557/- the Department may have been able to stake a claim for the amount of refund together with Rs. 1,63,76,392/-. It is thus always in the interest of the Department to refund the excess amount of duties as per the adjudication given at that point of time. The failure to take prompt action on an application for refund may give rise to a legitimate apprehension that such inaction was not bonafide.

14. It is in these circumstances that we allow C.M. 13551/2006 by directing the Petitioner to comply with the Circular No. 802/35/2004-CX., dated 8.12.2004, the relevant portions of which had been extracted by us in our Order dated 11.12.2006. Furthermore, in terms of paragraph 5 of the Circular dated 8.12.2004 it prima facie appears to us that appropriate disciplinary action should be initiated against the concerned defaulting officers and the additional liability incurred by the Department should be recovered from the concerned officers if they fail to furnish a plausible defense. We order accordingly. Departmental proceedings should be commenced against Commissioner-Refund (Customs), I.C.D. Tughlakabad, Assistant Commissioner (Refund) I.C.D. Tughlakabad, among other officers. The Petitioner shall file a Report before the next date of hearing furnishing details of the action that has been initiated against the delinquent officers and its progress. The Petitioner shall pay costs of Rs. 25,000/-, within four weeks from today, to be deposited with the Prime Minister's Relief Fund. The application is allowed in these terms.

15. A copy of this Order be dispatched by the Registry to the Comptroller & Auditor General of India, and Chairman, Central Board of Excise & Customs, New Delhi.