Gujarat High Court
M/S Msn Enterprises vs Union Of India on 16 February, 2021
Bench: Sangeeta K. Vishen
C/SCA/10195/2020 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 10195 of 2020
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M/S MSN ENTERPRISES
Versus
UNION OF INDIA
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Appearance:
MR PARESH M DAVE(260) for the Petitioner(s) No. 1
for the Respondent(s) No. 2,3
MR DEVANG VYAS(2794) for the Respondent(s) No. 1
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CORAM: HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MS. JUSTICE SANGEETA K. VISHEN
Date : 16/02/2021
ORAL ORDER
(PER : HONOURABLE MS. JUSTICE SANGEETA K. VISHEN)
1. With the consent of the learned advocates for the
respective parties, the matter is taken up for final disposal.
2. By this petition, inter alia, under Article 226 of the
Constitution of India, the petitioner has prayed to quash and
set aside the Order-in-Appeal No.OCESA-SRT (APPEALS)/PS-
636/2019-20 dated 27.2.2020 with a further direction to the
respondents to forthwith return and restitute Rs.50,00,000/-
deposited by the petitioner with the department.
3. Brief facts, as can be culled out from the memo of the
writ petition, are as under:-
3.1 The petitioner, has been a concern solely controlled and
operated by Ved Prakash Wadhwani, a citizen of India. The
petitioner, at the relevant point of time, was having a factory
at Udaipur in the State of Rajasthan, where parts and
C/SCA/10195/2020 ORDER
components of wrist watches and clocks were being
manufactured. The petitioner was registered with Central
Excise Authorities at Udaipur. According to the petitioner, it
was manufacturing the above-referred goods and removing
them on payment of appropriate excise duties leviable thereon
in accordance with the provisions of the Central Excise Act,
1944 (hereinafter referred to as 'the Act of 1944') and the
Rules framed thereunder.
3.2 It is the case of the petitioner that it sold and delivered
various parts and components to one M/s. Balaji Enterprises
and had paid the appropriate excise duties on the goods sold
and delivered to M/s. Balaji Enterprises and in furtherance
whereof, central excise invoices were also issued for said sales
and deliveries. According to the petitioner, M/s. Balaji
Enterprises availed CENVAT credit of central excise duties paid
by the petitioner on the goods sold and delivered. The final
products, namely, wrist watches and clocks manufactured by
M/s. Balaji Enterprises were exported on payment of central
excise duties leviable on such final product.
3.3 M/s. Balaji Enterprises had exported 221 consignments of
the goods manufactured by it during the period from
November, 2003 to September, 2004 and has accordingly,
claimed rebate of excise duty paid by it on the exported goods.
Not only this, the Central Excise Authorities, after in-depth
scrutiny, sanctioned as well as paid the rebate claims for all
221 exported consignments followed by regular orders
sanctioning rebate to the tune of Rs.7.06 crores. Somewhere
in the month of September, 2004, inquiries were initiated
against M/s. Balaji Enterprises on the basis that rebate claims
C/SCA/10195/2020 ORDER
were erroneously paid to it, inasmuch as, it had not received
any duty paid inputs and materials from its suppliers including
the petitioner. The inquiry led to the issuance of a show-cause
notice dated 15.2.2007 and the petitioner was one of the
noticees. The show cause notice required the petitioner as well
as others to show cause as to why penalty should not be
imposed.
3.4 According to the petitioner, during the investigation, it
was forced to deposit a sum of Rs.50,00,000/-, though there
was no duty liability which the petitioner was required to
discharge; however, the petitioner deposited Rs.50,00,000/-
under protest in the month of October, 2004. Thereafter, an
Order-in-Original No.5/MP/Daman/2011 dated 30.3.2011 was
passed by the Commissioner, Daman, inter alia, imposing
penalties on the petitioner and also its authorised signatories.
Being aggrieved, the petitioner and others against whom
liabilities were confirmed, preferred appeals along with stay
applications before the Customs, Excise and Service Tax
Appellate Tribunal, Ahmedabad (hereinafter referred to as 'the
Appellate Tribunal') which, passed a common order dated
4.9.2012, inter alia, observing that, against the penalty
imposed, there is a deposit of an amount of Rs.50,00,000/-,
which was enough deposit to hear and dispose of the appeal of
M/s. MSN Enterprises i.e. the petitioner. The appeals were
thereafter heard by the Appellate Tribunal which, after hearing
all the concerned, passed an order dated 10.7.2019, whereby,
the appeal filed by the petitioner was allowed and the matter
was remanded to the Adjudicating Authority for fresh
determination.
C/SCA/10195/2020 ORDER
3.5 The petitioner thereafter, filed a detailed reply dated
30.7.2019 before the Adjudicating Authority and the
Adjudicating Authority thereafter, held a personal hearing on
15.10.2019 when the petitioner and its advocate appeared and
had made various submissions in support of its case. It has
been averred that the case is still pending and final order has
not been made.
3.6 According to the petitioner, the amount of Rs.50,00,000/-
which was deposited by it under protest during the
investigation and subsequently considered to be an adequate
pre-deposit by the Appellate Tribunal for hearing of the appeal
on merits, was supposed to be returned by the Revenue
inasmuch as, there has been no confirmed penal or other
liability against the petitioner any longer. Accordingly, the
petitioner made a formal application for refund of the amount
of pre-deposit of Rs.50,00,000/- on 24.7.2019 with the Deputy
Commissioner of Central Excise, Daman.
3.7 Apropos the application dated 24.7.2019, the officer of
the Deputy/Assistant Commissioner of Central Excise, Daman,
issued a show-cause notice F.No.V/18-39/Refund/Div.III/2019-
20/R dated 27.8.2019 proposing to reject the refund claim on
the ground that the claim made by the petitioner was
premature. In response to the show-cause notice dated
27.8.2019, the petitioner filed its reply dated 2.10.2019, inter
alia, emphasising that pre-deposit made for hearing of any
appeal on merit or any amount deposited during the inquiry
and investigation had to be returned by the Revenue and there
was no jurisdiction vested in the Revenue authorities to retain
such amount when there was no confirmed liability against the
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person.
3.8 The respondent No.3, i.e. the Deputy Commissioner of
Central Excise, Daman while not considering the reply of the
petitioner, passed an Order-in-Original No.DMN-III/DC/18/19-
20/R dated 8.11.2019 rejecting the petitioner's refund claim on
the ground that the payment of Rs.50,00,000/- could not be
treated as pre-deposit considering the fact that the same was
deposited during investigation and prior to the issuance of the
show-cause notice in the year 2007. Resultantly, it is held that
the claim of the petitioner for refund was premature and that
the case remanded by the Appellate Tribunal has still not
attained finality.
3.9 Being aggrieved and dissatisfied by the said order dated
8.11.2019, the petitioner preferred an appeal before the
Commissioner of CGST & Central Excise (Appeals), Surat;
however, the appeal filed by the petitioner met the same fate.
The ground which weighed with the Commissioner of CGST &
Central Excise (Appeals), Surat to reject the claim of the
petitioner for refund was that the refund would not become
due merely on remand, more particularly, when the amount
was paid by the petitioner on his own assessment.
4. The petitioner is aggrieved by the Order-in-Original dated
8.11.2019 as well as order dated 27.2.2020 passed by the
respective authorities rejecting the claim of the petitioner
mainly on the ground that the same is premature considering
the fact that the proceedings before the Adjudicating Authority
are still pending and has not attained finality.
5. The respondent Nos.1, 2 and 3 have filed their respective
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replies. The respondent No.1 in the affidavit has, inter alia,
narrated the events which took place after the passing of the
order dated 10.7.2019 by the Appellate Tribunal till the stage
of the hearing, pending before the Adjudicating Authority. The
affidavits of the other two respondents are along similar lines,
i.e. narrating the facts from the year 2004, followed by the
issuance of the show-cause notice, further followed by the
passing of the order dated 4.9.2012 and the final order dated
10.7.2019 by the Appellate Tribunal. It has been further
averred about the status of the proceedings before the
concerned respondent.
6. Mr. Paresh M. Dave, learned advocate assisted by Mr.
Amal Dave, learned advocate for the petitioner submitted that
the investigation was initiated against M/s. Balaji Enterprises in
the month of September, 2004. The petitioner deposited
Rs.50,00,000/- in the month of October, 2004; however, the
amount was not deposited by it voluntarily, but the same was
deposited under protest, owing to the pressure, force and
coercion of the Revenue Officer. It is next submitted that the
show-cause notice was issued on 15.2.2007, which is at large
before the Adjudicating Authority for the purpose of
adjudication. It is further submitted that the amount of
Rs.50,00,000/- deposited by it under protest, during the
investigation, was liable to be refunded because the same was
a deposit and not payment for discharging any liability legally
fastened against the petitioner. Further, the Revenue had no
jurisdiction or justification in retaining such amount deposited
under protest during investigation considering the fact that
there was no confirmed or concluded liability against the
petitioner till date.
C/SCA/10195/2020 ORDER
6.1 It is next submitted that despite the fact that the amount
was deposited by the petitioner under protest and was
required to be refunded, the respondents held that the amount
was not a pre-deposit made by the petitioner under Section
35F of the Act of 1944 and hence, not liable to be returned in
the event of the decision dated 10.7.2019 of the Appellate
Tribunal. It is submitted that the respondents No.2 and 3 ought
to have appreciated that the Appellate Tribunal vide order
dated 4.9.2012 while hearing the stay application, considered
Rs.50,00,000/- to be pre-deposit for hearing of the appeal filed
by the petitioner on merits. While deciding the stay application
of the petitioner, the Appellate Tribunal has in no uncertain
terms observed that the deposit of Rs.50,00,000/- made by the
petitioner was enough deposit to hear and dispose of the
appeals. It is, therefore, submitted that in the facts of the
present case, the amount of Rs.50,00,000/- deposited by the
petitioner around October, 2004, partook the character of pre-
deposit for hearing of the petitioner's appeal on merits. It is
further contended by the learned advocate for the petitioner
that the amount deposited by the petitioner under protest
during investigation, can never be retained by the Revenue
and retention of the amount, more particularly after the order
dated 10.7.2019 of Appellate Tribunal, is without authority of
law for, the petitioner has lodged its claim for refund and
restitution of such amount.
6.2 It is further submitted that the Deputy Commissioner of
Central Excise, Daman erroneously rejected the claim of the
petitioner for refund by passing Order-in-Original dated
8.11.2019 on the ground that the payment of Rs.50,00,000/-
C/SCA/10195/2020 ORDER
could not be treated as pre-deposit because, the same was
deposited voluntarily, during investigation and prior to the
issuance of the show-cause notice in the year 2007. The
Deputy Commissioner of Central Excise, Daman committed an
error in observing that the claim of the petitioner was
premature because the case remanded by the Appellate
Tribunal, is still to be adjudicated and cannot be said to have
attained finality. The Commissioner of CGST & Central Excise
(Appeals), Surat who, committing similar error, rejected the
claim of the petitioner along similar lines. The findings of the
Commissioner of CGST & Central Excise (Appeals), Surat are
erroneous when he observes that the refund would not become
due merely on remand of the matter by the Appellate Tribunal
to the original Adjudicating Authority, as the amount was paid
by the petitioner on his own assessment.
6.3 It is further submitted that the order dated 8.11.2019
passed by the respondent No.3 so also the order dated
27.2.2020 passed by the respondent No.2 are erroneous and in
gross violation of principles of natural justice and also without
jurisdiction. The respondent Nos.2 and 3 have lost sight of the
fact that any amount deposited by a person during inquiry,
investigation, show-cause notice proceedings, should be
refunded when the person concerned claimed its refund more
particularly, when there is no liability determined or fastened
against such person. It is submitted that the petitioner, of no
fault on its part, is deprived of its monies for more than 10
years and therefore, the unauthorised retention of money is
against the spirit of Article 265 of the Constitution of India.
6.4 It is further submitted that the petitioner had filed its
C/SCA/10195/2020 ORDER
claim for refund vide an application dated 24.7.2019; however,
even thereafter, the respondents have not refunded the same
and therefore, the respondents are obligated to pay interest to
the petitioner for the amount of Rs.50,00,000/- under Section
11BB of the Act of 1944. It is further submitted that the
respondents are obligated to discharge their statutory liability
so also the liability to pay interest for the period of more than
10 years during which, the monies of the petitioner have been
used by the respondents without any authority of law.
6.5 It is further submitted that pertinently, the Appellate
Tribunal had considered the amount of Rs.50,00,000/- as pre-
deposit for compliance of Section 35F of the Act of 1944 vide
order dated 4.9.2012. The ratio, laid down in the various
judgments of this Hon'ble Court as well as other High Courts
and Tribunals, is squarely applicable to the facts of the present
case and therefore, the petitioner is entitled to refund of
Rs.50,00,000/- with interest. It is further submitted that the
orders dated 8.11.2019 as well as 27.2.2020 has not taken into
account the Circular No.984/08/2014-CX dated 16.9.2014
which, has, in no uncertain terms, clarified that when amount
is deposited during investigation or audit, depending upon the
mandatory pre-deposit under Section 35F of the Act of 1944,
the said amount would be deemed to have been deposited as
pre-deposit while filing the appeal. Therefore, in light of the
Circular dated 16.9.2014, the petitioner is entitled to the
refund of the pre-deposit which, should have been refunded by
the authorities below along with statutory interest from the
date of filing of the appeal before the Appellate Tribunal.
6.6 Learned advocate for the petitioner in support of his
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submission as regards the refund, has placed heavy reliance
on the judgment in the case of Century Metal Recycling Pvt.
Ltd. vs. Union of India reported in 2009 (234) E.L.T. 234 (P &
H). The Hon'ble Punjab & Haryana High Court has held that
irrespective of the fact that the amount was deposited under
coercion or voluntarily, the fact remains that unless there is
assessment and demand, the amount deposited by the party
concerned cannot be appropriated. Further, in absence of any
exceptional justification shown for retaining the amount
deposited, except saying that since the amount was deposited
voluntarily, the party concerned is entitled for refund of the
amount paid.
6.7 Further reliance has been placed on the judgment in the
case of Concepts Global Impex vs. Union of India reported in
2019 (365) E.L.T. 32 (P & H). It is submitted that while
following the principle laid down in the case of Century Metal
Recycling Pvt. Ltd. (supra) and Century Knitters (India) Ltd. v.
Union of India reported in 2013 (293) E.L.T. 504 (P & H), the
Hon'ble High Court of Punjab & Haryana has directed the
refund of the partial amount deposited by the petitioner
therein. Similarly, while placing reliance on the judgment in the
case of Chitra Builders Private Limited vs. The Additional
Commissioner of Customs, Central Excise & Service Tax & Anr.
reported in 2013 (31) STR 515 (Madras), it is contended that
the Hon'ble Madras High Court directed the respondents
therein to return the sum of Rs.2 crore collected on the ground
that tax could not be collected from the assessee without an
appropriate assessment order being passed by the authority
concerned.
C/SCA/10195/2020 ORDER
6.8 Reliance is also placed on the judgment in the case of
Commissioner of Customs (Preventive) vs. Ghaziabad Ship
Breakers Ltd. reported in 2010 (259) E.L.T. 522 (Guj.).
Attention is invited to the questions (a) and (c) formulated by
the Court. It is submitted that this Hon'ble Court was dealing
with Section 129E of the Customs Act, 1962, which is in pari
materia with Section 35F of the Act of 1944. This Hon'ble Court
while interpreting the provisions of Section 129E of the
Customs Act 1962, has held that a plain reading of said section
provides that a person desirous of appealing against an order
relating to any duty or interest demanded in respect of goods
which are not under the control of the customs authorities or
any penalty levied under the Act, is required to deposit the
duty and interest demanded or penalty levied with the proper
officer. It is further held that under Section 129E of the Act of
1962, the amount has to be paid by such person on his own
and does not require any order to be passed before making
such deposit. Deposit of the said amount is a pre-condition for
entertaining the appeal and what is important to note is that
the amount to be deposited before the appeal can be
entertained on merits is nothing else but the amount of duty
and/or interest, or penalty demanded in consequence of an
order-in-original. This Court has further held that the term "pre-
deposit" is conveniently used to denote payment before
entertaining the appeal and is only a mode of payment
prescribed by legislature with an intention to protect interest of
Revenue. It is therefore, submitted that the term "pre-deposit"
is a misnomer and that there is no concept of pre- deposit
under the provisions of the Act.
6.9 It is therefore, submitted that in view of the well
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established proposition of law laid down by this Hon'ble Court
as well as by other Hon'ble High Courts, across the country,
the act on the part of the respondent in refusing to refund the
deposit on the ground that the deposit was made voluntarily
and was not a deposit for hearing the appeal before the
Appellate Tribunal, is erroneous and deserves to be
deprecated.
6.10 It is therefore, urged that the present petition requires to
be allowed and the respondents be directed to forthwith return
and restitute the amount of Rs.50,00,000/- deposited by the
petitioner in the year 2004 together with interest.
7. Per contra, Mr. Devang Vyas, learned Additional Solicitor
General of India has vehemently opposed the petition. At the
outset, it is submitted that during the course of investigation,
the petitioner had voluntarily deposited Rs.50,00,000/- only
with a view to avoiding the amount of interest, penalty etc. It is
submitted that if the investigation was not concluded, the
petitioner could have approached the authority immediately;
however, the application has been filed by the petitioner for
the first time in the year 2019. It was very much open to the
petitioner to have filed an application before 2007 or could
have approached the Court for the purpose of refund more
particularly, when according to the petitioner, there was no
liability fastened upon it.
7.1 It is submitted that as per the order dated 30.3.2011
passed by the Commissioner, Central Excise, the liability of
Rs.8 crore was fixed and as is evident from the record that the
petitioner had preferred appeal solely on the ground that the
said order has been passed without affording opportunity to
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the petitioner. While inviting the attention of this Court to the
order dated 10.7.2019 passed by the Appellate Tribunal, it is
submitted that the case of the petitioner before the Appellate
Tribunal was that since the petitioner had gathered voluminous
documents; vital for making defence reply and for which
purpose the petitioner prayed for an opportunity to present the
case before the Adjudicating Authority, for de novo
adjudication.
7.2 It is next submitted that it is incorrect on the part of
the petitioner to contend that the amount of Rs.50,00,000/-
was considered as pre-deposit by the Appellate Tribunal. In
fact, reading of paragraph 7 of the order dated 4.9.2012
passed by the Appellate Tribunal on the stay application,
clearly suggests that the deposit was not waived on the ground
of hardship, but the same was done in good faith. However, the
fact remains that Rs.50,00,000/- was not considered as a pre-
deposit for hearing the stay application as required under
Section 35F of the Act of 1944. It is submitted that considering
the conduct of the petitioner, it disentitles the petitioner to
claim equity. Moreover, after the order dated 10.7.2019 passed
by the Appellate Tribunal, the petitioner had not bothered to
reply to the show-cause notice. Further, for 15 years, not a
single communication has been issued by the petitioner
requesting for expediting the adjudication. It is next submitted
that clearly, the payment of Rs.50,00,000/- paid by the
petitioner in the year 2004 was a voluntary payment before
issuance of the show-cause notice and the same being a
voluntary deposit, the petitioner cannot take recourse of the
refund and both the authorities have therefore, rightly held
that the payment having been made in the year 2004 under
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protest during the course of the investigation and before
issuance of the show-cause notice in the year 2007, the same
cannot be treated as pre-deposit as it was not a deposit of
certain percentage of duty demanded or penalty imposed
before filing of appeal as per Section 35F of the Act of 1944.
7.3 It is further submitted that it has been rightly
concluded by the respondent Nos.2 and 3 that the refund claim
of the amount of Rs.50,00,000/- is to be rejected as premature
on the basis that the case has been remanded by the Appellate
Tribunal and that the case has still not attained finality. So far
as the contents of the Circular dated 16.9.2014 are concerned,
it is submitted that the Circulars are issued keeping in mind
the larger interest and would govern the bona fide payments
made under the routine manner. It is therefore, submitted that
the Circular dated 16.9.2014 cannot be made applicable to the
facts of the present case. It is submitted that the Circular dated
16.9.2014 only corroborates that pre-deposit under Section
35F of the Act of 1944 does not have to be separately made, if
deposit under self-assessment is equal or more than the pre-
deposit amount.
7.4 While reiterating, it is submitted that the amount
deposited by the petitioner during the course of investigation
was on his own, against the self-assessment. In fact, the
petitioner would also be liable to pay differential amount, if the
determined liabilities were more than the voluntary deposit
under self-assessment. It is submitted that as a result of the
adjudication proceeding, vide order dated 30.3.2011, a penalty
under Section 11AC of the Act of 1944 read with Rule 13 of the
CENVAT Credit Rules, 2002 was imposed upon the petitioner
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who, thereafter preferred an appeal before the Appellate
Tribunal along with stay application for stay and waiver of pre-
deposit. The Appellate Tribunal, while hearing the stay
application was of the opinion that the petitioner had deposited
an amount of Rs.50,00,000/- during the investigation i.e.
before issuance of the show-cause notice and considered the
same as enough pre-deposit to hear the appeal and under the
circumstances, it granted stay against the recovery vide order
dated 4.9.2012. It is next submitted that the Appellate Tribunal
vide order dated 10.7.2019 remanded the matter to the
Adjudicating Authority for de novo adjudication and it is only
consequent to the remand order, that the petitioner has filed
the refund claim of Rs.50,00,000/- which the petitioner is not
otherwise eligible and entitled, for, the same being a deposit
during the investigation and prior to the issuance of the show-
cause notice in the year 2007. It is submitted that therefore,
such payment was not a pre-deposit and the authorities below
have rightly rejected the claim of the petitioner, inter alia, on
the ground that the claim for refund of the petitioner is
premature and that the case has not attained finality.
7.5 It is therefore, urged that the orders dated 8.11.2019
and 27.2.2020 passed by the respondent Nos.3 and 2
respectively, do not require to be interfered with and the
petition being bereft of any merits, deserves to be dismissed.
8. In a brief rejoinder, Mr. Paresh Dave, learned advocate
for the petitioner submitted that it is well-settled proposition of
law that the Circulars issued under the Act are binding on the
authorities. Further, in absence of any provisions under the Act
to withhold the amount, the same would be without any
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authority of law and would be against the spirit of Article 265
of the Constitution of India. It is further submitted that the
usage of the term "deposit" and "pre-deposit" is only a
misnomer. In fact, in view of the judgment of this Court in the
case of Ghaziabad Ship Breakers Ltd. (supra), the said
difference has been washed out and therefore, there is no
distinction between the term "deposit" and "pre-deposit". It is
therefore, urged that the submissions made by the
respondents may not be accepted and the petition be allowed
in terms of the prayers prayed for.
9. Heard Mr. Paresh M. Dave, learned advocate assisted by
Mr. Amal Dave, learned advocate for the petitioner and Mr.
Devang Vyas, learned Additional Solicitor General of India on
behalf of the respondents.
10. At this juncture, the judgments relied upon by the
petitioner need a brief mention. In the case of Century Metal
Recycling Pvt. Ltd. (supra), the Punjab & Haryana High Court
while allowing the claim of refund has observed in paragraph
13 to the effect that unless there is assessment and demand,
the amount deposited by the party concerned cannot be
appropriated.
11. In another decision of this Court, in the case of
Commissioner of Central Excise & Customs vs. J.M. Baxi & Co.
reported in 2011 (271) E.L.T. 19 (Guj.), it reiterated the
principle propounded in the Ghaziabad Ship Breakers Ltd.
(supra) to the effect that any amount deposited during the
pendency of an appeal would be by way of pre-deposit under
Section 129E of the Customs Act, 1962 and has to be treated
accordingly. This Court has held and observed that the
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controversy in issue has already been concluded against the
Revenue by the decision rendered in the case of Ghaziabad
Ship Breakers Ltd. (supra).
12. In another judgment in the case of NELCO Limited Vs.
Union of India reported in 2002 (144) E.L.T. 56 (Bom.), the
Bombay High Court, while relying on the earlier decision in the
case of Suvidhe Ltd. vs. Union of India reported in 1996 (82)
E.L.T. 177 (Bom.), has held that the amount deposited under
Section 35F of the Act of 1944 is a condition precedent for
hearing an appeal and it does not bear the character of duty,
but has the character only of security deposit and the same
ought to have been returned the day the appeal was disposed
of by the authorities. The Bombay High Court, in paragraph 6
has observed that on remand of the matter for re-adjudication
by the Adjudicating Authority, the parties were put back to the
situation of a show-cause notice against the assessee being
adjudicated by the authority and that there is no provision in
the Act which requires deposit of any amount at the stage of
adjudication. Except the provision which requires deposit is
Section 35F of the Act of 1944 after the adjudication has
quantified the liability towards duty.
13. The said judgment was carried in appeal before the
Supreme Court and the Supreme Court on 26.11.2001, after
condoning the delay, dismissed the petition for Special Leave
to Appeal filed by the Union of India.
14. There is no quarrel to the proposition that if any payment
is made by the assessee, as a condition precedent for hearing
an appeal, the same does not bear the character of duty, but
has the character only of security deposit and the same is
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required to be refunded the day appeal is disposed of by the
authorities inasmuch as, the parties are put back to the
situation of a show cause notice against the assessee being
adjudicated by the authority. Therefore, in all the judgments
discussed herein above, it has been held that the deposit made
during the course of investigation and before the issuance of
the show-cause notice or for hearing of the appeal, the
assessee is entitled for the refund in the event of the appeal
being allowed and remanded to the Adjudicating Authority for
de novo consideration.
15. It is well settled proposition of law that there is always
peril in treating words of a judgment as though they are words
in a legislative enactment; it is to be remembered that judicial
pronouncements are made only stating all facts of a particular
case. It has been settled in catena of decisions of the Apex
Court that circumstantial flexibility, one additional or different
fact may make a difference between conclusion in two cases.
Disposal of cases by merely placing reliance on a decision is
not desirable. Precedent should be followed only so far as it
marks path of justice. The Apex Court, in the case of Haryana
Financial Corporation and Another vs. Jagdamba Oil Mills
reported in (2002) 3 SCC 496 has held that placing reliance
blindly on the judgment is not proper. Factual situation
between the decided cases and the case at hand are required
to be gone into. The Apex Court in paragraphs 20, 21 and 22
observed thus:-
"20. In Home Office v. Dorset Yacht Co. (1970) 2 All ER 294
Lord Reid said, "Lord Atkin's speech...is not to be treated as if
it was a statute definition. It will require qualification in new
circumstances." Megarry, J. in (1971) 1 WLR 1062 observed:
"One must not, of course, construe even a reserved judgment
of even Russell L.J. as if it were an Act of Parliament." And, in
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Herrington v. British Railways Board, (1972) 2 WLR 537 Lord
Morris said:
"There is always peril in treating the words of a speech
or judgment as though they are words in a legislative
enactment, and it is to be remembered that judicial
utterances made in the setting of the facts of a particular
case."
21. Circumstantial flexibility, one additional or different
fact may make a world of difference between conclusions in
two cases. Disposal of cases by blindly placing reliance on a
decision is not proper.
22. The following words of Lord Denning in the matter of
applying precedents have become locus classicus:
"Each case depends on its own facts and a close
similarity between one case and another is not enough
because even a single significant detail may alter the entire
aspect. In deciding such cases, one should avoid the
temptation to decide cases (as said by Cordozo) by matching
the colour of one case against the colour of another. To
decide, therefore, on which side of the line a case falls, the
broad resemblance to another case is not at all decisive."
* * *
"Precedent should be followed only so far as it marks
the path of justice, but you must cut the dead wood and trim
off the side branches else you will find yourself lost in thickets
and branches. My plea is to keep the path to justice clear of
obstructions which could impede it."
16. Adverting to the nature of deposit made by the
petitioner, perceptibly, the petitioner during the course of
investigation in the year 2004, has deposited an amount of
Rs.50,00,000/- and the same was considered by the Appellate
Tribunal, while hearing the stay application, enough deposit to
hear and dispose of the appeal. The department also accepted
the deposit of an amount of Rs.50,00,000/- as enough deposit
for hearing and disposal of the appeal. At this stage, the
provisions of the Circular No.984/08/2014-CX dated 16.9.2014
issued by the Government of India, Ministry of Finance,
Department of Revenue (Central Board of Excise and Customs)
deserves a brief mention. Paragraph 3.1 of the Circular
provides that the payment made during the course of
C/SCA/10195/2020 ORDER
investigation or audit, prior to the date on which the appeal is
filed, to the extent of 7.5% or 10%, subject to the limit of Rs.10
crore can be considered to be a deposit made towards
fulfillment of stipulation under Section 35F of the Act of 1944
or Section 129E of the Customs Act, 1962. Further, paragraph
5 deals with "refund of pre-deposit". Paragraph 5.4 deals with
the aspect that in the event of a remand, refund of the pre-
deposit shall be payable along with interest. Therefore, the
amount deposited by the petitioner having been treated by the
Appellate Tribunal as enough deposit to hear and dispose of
the appeal, in the normal circumstances, in view of the
provisions of Circular, the respondents were obligated to
refund the same together with interest. However, in view of the
peculiar facts obtaining in the present case and discussed in
the succeeding paragraphs, plea of the petitioner for refund
cannot be acceded to.
17. Pertinently, as the record reveals, M/s. Balaji Enterprises
appears to have exported 221 consignments of the goods
manufactured by it during November, 2003 to September,
2004 and has claimed rebate of excise duties paid by it on the
exported goods. The Central Excise authorities, after
scrutinizing the rebate claims, sanctioned the same as well as
paid the rebate for all the 221 exported consignments. Regular
orders, sanctioning the rebate to the tune of Rs.7,06,66,186/-
(Rupees seven crore six lac sixty six thousand one hundred &
eighty six only) have been passed by the officer concerned
having jurisdiction. This led to the inquiries against M/s. Balaji
Enterprises on the basis that rebate claims were erroneously
paid to it inasmuch as, it is alleged that M/s. Balaji Enterprises
had not received any duty paid inputs and materials from its
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suppliers, including the petitioner. The said
inquiry/investigation led to issuance of the show cause notice
dated 15.2.2007 by Directorate General of Central Excise
Intelligence (hereinafter referred to as the 'DGCEI') to M/s.
Balaji Enterprises as well as others, including the petitioner,
inter alia, proposing imposition of penalty.
18. One of the issues which arose before the Adjudicating
Authority was as to whether the amount of Rs.7,06,66,186/-
(Rupees seven crore six lac sixty six thousand one hundred &
eighty six only) erroneously refunded as rebate of central
excise duty should be recovered from M/s. Balaji Enterprises
and the petitioner, jointly and severally under Section 11A(1)
of the Act of 1944 by invoking extended time period as per the
proviso of sub-section (1) of Section 11A. Another issue
pertained to balance of inadmissible credit available in the
respective CENVAT credit account of M/s. Balaji Enterprises,
Daman and M/s. MSN Enterprises, Udaipur i.e. the petitioner, to
be treated as non-est. The Adjudicating Authority, in paragraph
4.3.5, 4.3.5.1 and 4.3.5.2 has observed thus:-
"4.3.5 I find that Balaji had purchased its raw-materials
& components from MSN and as such, the instant case
investigation was extended to the latter. During the course of
the said investigations, it was revealed that the said MSN was
registered with the CE Department for the manufacture of
wrist watches, clocks, parts/components of watches etc. Shri
Ved Prakash Wadhwani was the power of attorney holder and
his wife and daughter were the partners in the said firm. They
had show the export of their finished goods i.e. wrist watches
& clocks, through a merchant-exporter viz., Krishna,
Ahmedabad, during the period April, 03 - Sep. - 03, without
the payment of CE duty, under bond. In the subsequent
period, they had shown the clearances of their finished goods
i.e., parts/components of wrist watches and clocks to Balaji
on the payment of CE duty from their CENVAT account. For
the manufacture of the said goods, it had shown the
purchase of raw-materials from M/s.S.K. Times Industries,
M/s. Aditya Metals, M/s. Shiv Industries etc. and had availed
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CENVAT credit on the basis of the invoices of such suppliers.
4.3.5.1 The instant case investigation was also conducted
at the end of the purported raw-materials suppliers of MSN,
Udaipur. During the course of the said investigation it was
revealed that the said suppliers were not registered with the
CE Department and no goods were supplied by them to MSN,
Udaipur. The invoices of the said suppliers were fake and no
payment of CE duty was made by the said suppliers in
respect of the goods purported to have been received by
MSN, thereby making CENVAT credit availed by MSN, as
irregular. Thus, irregular/fake CENVAT credit was
accumulated by MSN and the same was subsequently passed
on to Balaji, Daman, by showing fictitious manufacture and
clearance of goods on the payment of CE duty.
4.3.5.2 Balaji accumulated such illicit CENVAT credit in its
CENVAT account and utilized the same for the payment of CE
duty in respect of the goods shown to be exported through
Krishna. The said illicit CENVAT credit was encashed by it by
claiming the rebate of the said amount."
19. The Adjudicating Authority decided the issue by passing
common order and has fixed individual liabilities. It has been
further observed that amount of rebate was erroneously
refunded to M/s. Balaji Enterprises although the said amount of
rebate was distributed among the owners of M/s. Balaji
Enterprises, M/s. MSN Enterprises, i.e. the petitioner and M/s.
Krishna Impex and Om Prakash Punjabi, owner of Krishna
Impex was mastermind, whereas, Shri Vijay Ajmera, proprietor
of M/s. Balaji Enterprises and Shri Ved Prakash Wadhwani,
authorized signatory of M/s. MSN Enterprises, i.e. the petitioner
were his puppets. Paragraphs 4.3.8 and 4.3.9 read thus:-
"4.3.8. I find that in the instant case SCN, the said
amount of rebate claim erroneously refunded has been
proposed to be recovered from Balaji, MSN & Krishna, jointly
and severally. I see that in the past such types of Orders-in-
Original (OIOs) have been passed and the appellate authority
concerned i.e., the Central Excise, Customs & Service Tax
Appellate Tribunal (CESTAT) has remanded such cases to the
original adjudicating authority for determining individual
liabilities. As such, instead of determining joint responsibility,
I would fix individual liability. I find that in the case at hand,
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the amount of rebate was erroneously refunded to Balaji,
MSN & Krishna, Shri Om Prakash Punjabi, Owner, Krishna,
was the mastermind of this scam, whereas Shri Vijay Ajmera,
Proprietor, Balaji & Shri Vedprakash, Authorised Signatory,
MSN, were his puppets. Although the said Shri Vijay Ajmera
would have got a minimum share out of those three persons
being an employee of the said Omprakash Punjabi, yet being
the Proprietor of Balaji, I proceed to discuss the said recovery
from him as Balji had received the payment of the said
rebate claim from the CE Department.
4.3.9. Balaji had utilized the said irregular CENVAT
credit, passed on to it by MSN, by showing fictitious
manufacture of goods and export thereof through Krishna on
the payment of CE duty out of the said irregular/illicit CENVAT
credit. Further, the duty, for which CENVAT credit was taken,
was never paid in the said entire chain and was shown only
on paper. Such amounts were taken by Balaji as rebate of CE
duty for the exports made through Krishna. The instant case
investigations proved that no goods were received by MSN
and by Balaji, no goods were manufactured by them and no
goods were supplied by them to Krishna and no CE duty was
paid by the suppliers of the raw-materials of MSN, Krishna got
watches assembled in and around Ahmedabad from the non-
duty paid components procured locally or from Rajkot and
subsequently exported the said watches of inferior quality.
Thus, it appears that Balaji was not entitled to any rebate of
the duty which was not actually paid to the Govt. exchequer
at any stage."
20. Moreover, the order, inter alia, records that the amount
of rebate claim erroneously refunded has been proposed to be
recovered from M/s. Balaji Enterprises, M/s. MSN Enterprises
and Krishna Impex, jointly and severally. It has also been
observed that the amount of rebate was erroneously refunded
to M/s. Balaji Enterprises, although the said amount of rebate
was distributed among the owners of M/s. Balaji Enterprises,
M/s. MSN Enterprises i.e. the petitioner and Krishna Impex. The
Adjudicating Authority, after giving its discussion and findings
on the basis of the material available on record, passed the
order, confirming the demand of Rs.7,06,66,186/- (Rupees
seven crore six lac sixty six thousand one hundred & eighty six
only) being the rebate claim erroneously refunded to M/s.
Balaji Enterprises and the same was directed to be paid by it
C/SCA/10195/2020 ORDER
forthwith. Incrementally, interest was also directed to be paid
by M/s. Balaji Enterprises. Moreover, the Adjudicating Authority
imposed a penalty to the tune of Rs.7,06,66,186/- (Rupees
seven crore six lac sixty six thousand one hundred & eighty six
only) on M/s. Balaji Enterprises. The extracts, relevant for the
present purpose, of the Order-in-Original dated 30.3.2011,
read thus:-
"5. ORDER:
5.1 I hereby confirm the said demand of
Rs.7,06,66,186/- (Rupees seven crore six lac sixty six
thousand one hundred & eighty six only) being the
rebate claim erroneously refund to M/s. Balaji
Enterprises, Gala No.105, Jaynath Industrial Estate,
Survey No.53/3A, Ringanwada, Daman, as detailed in
the Annexure-C attached to the instant case SCN, under
the proviso of Section 11A(1) of the CEA, 1944, which
shall be payable by it, forthwith.
5.2 I, incrementally, confirm the said demand of an
interest payable, at an appropriate rate, on the said amount
of rebate claim erroneously refunded to M/s. Balaji
Enterprises, Gala No.105, Jaynath Industrial Estate, Survey
No.53/3A, Ringanwada, Daman, hereinbefore determined to
be payable by the said noticee, as per the preceding para no.
5.1, under Section 11 AB of the CEA, 1944, from the date that
the said CE duty payment was due from the said
assessee/noticee and till the date that the latter discharges
the same.
5.3 Besides, I impose a penalty amount to Rs.7,06,66,186/-
(Rupees seven crore six lac sixty six thousand one hundred &
eighty six only), on M/s. Balaji Enterprises (noticee no.1),
Gala No.105, Jaynath Industrial Estate, Survey No.53/3A,
Ringanwada, Daman, under Section 11 AC of the CEA, 1944.
5.4 In terms of the first proviso of Section 11 AC of the
CEA, 1944, if M/s. Balaji Enterprises, Gala No.105, Jaynath
Industrial Estate, Survey No.53/3A, Ringanwada, Daman, pays
in full the said amount of rebate claim erroneously refunded
and interest determined hereinabove, as at para nos. 5.1 &
5.2 of this order, without 30 (thirty) days of the datew of the
communication of this order, the amount of penalty liable to
be paid by it under Section 11 AC ibid, w.r.t. para no.5.3,
herein-before, shall be 25% thereof, which is also 25% of the
said CE duty determined, subject to the further stipulation
that even the latter has been paid within 30 (thirty) days of
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the communication of the instant order.
5.5 Besides, I impose a penalty amounting to
Rs.1,76,66,446/- (Rupees one crore seventy six lakh sixty
thousand five hundred & forty six only) on M/s. MSN
Enterprises (noticee no.3), 95, Hiran Magri, Sector-11,
Udaipur, under Section 11 AC of the CEA, 1944. I find that
during the course of the instant case investigations it had
paid Rs.50,00,000/- (Rupees fifty lakh only) against the said
erroneous rebate claim and hence, I order the appropriation
of the same against the instant penalty imposed upon it as
per the explanation given in Section 11 AC supra.
5.6 Besides, I impose a penalty amounting to
Rs.1,76,66,446/- (Rupees one crore seventy six lakh sixty
thousand five hundred & forty six only) on M/s. Shree Krishna
Impex (noticee no.5), 1st Floor, Om Complex, Near Swastik
Cross Road, C.G. Road, Ahmedabad, under Section 11AC of
the CEA, 1944.
5.7 I hereby disallow the inadmissible CENVAT credit lying
in the CENVAT credit account of M/s. Balaji Enterprises, Gala
No.105, Jaynath Industrial Estate, Survey No.53/3A,
Ringanwada, Daman and the same should be treated as non-
est and struck off.
5.8 I hereby disallow the inadmissible CENVAT credit lying
in the CENVAT credit account of M/s. MSN Enterprises, 95,
Hiran Magri, Sector-11, Upaipur and the same should be
treated as non-est and struck off.
5.9 Incrementally, I impose penalty of Rs.7,86,33,200/-
(Rupees seven crore eighty six lakh thirty three thousand &
two hundred only) on M/s. Balaji Enterprises, Gala No.105,
Jaynath Industrial Estate, Survey No.53/3A, Ringanwada,
Daman, under Section 11AC of the CEA, 1944, read with Rule
13 of the CCR, 2002.
5.10 Incrementally, I impose penalty of Rs.7,10,43,201/-
(Rupees seven crore ten lakh forty three thousand two
hundred & one only) on M/s. MSN Enterprises, 95, Hiran
Magri, Sector-11, Upaipur, under Section 11AC of the CEA,
1944, read with Rule 13 of the CCR, 2002."
21. It is against the said order that the appeals were filed by
all the parties, including the petitioner and the Appellate
Tribunal, vide order dated 4.9.2012, has directed the petitioner
and others to deposit the amount for the purpose of hearing
the appeal as required under the Act. The Appellate Tribunal
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passed a common order dated 4.9.2012 granting stay
considering the deposit of an amount of Rs.50,00,000/- by the
petitioner as enough deposit to hear and dispose of the
appeals. So far as M/s. Balaji Enterprises is concerned, the
Appellate Tribunal directed it to deposit an amount of Rs.1.50
crore (Rupees One crore and fifty lac only) as a condition to
hear the appeal. Paragraphs 6 to 11 read thus:-
"6. Accordingly, in order to hear and dispose all the
appeals, M/s. Balaji Enterprises, a proprietorship firm needs
to be put to some condition. We direct M/s. Balaji Enterprises
to deposit an amount of Rs.1.50 Crores (Rupees One Crore
and Fifty lakhs only) within a period of twelve weeks from
today and report compliance on 04.12.2012.
7. In the case of M/s. MSN Enterprises, we find that
against the penalty imposed, there s a deposit of an amount
of Rs.50 lakhs, which we consider as enough deposit to hear
and dispose the appeals.
9. As regards the penalty imposed on Shri Venkat R.
Chari, we find that it would be appropriate to direct him to
deposit an amount of Rs.7 lakhs (Rupees Seven lakhs only)
within a period of twelves weeks from today and report
compliance on 04.12.2012.
10. As regards the penalty imposed on Shri Jignesh R
Shah, we find that the proprietor of M/s. Shree Krishna Impex
Shri Vijay Punjabi was directed by us to deposit an amount of
Rs.10 lakhs and report compliance on 04.12.2012, we do not
intend to direct Shri Jignesh R Shah, an employee of M/s.
Fanny Impex, to make any pre-deposit in order to hear and
dispose the appeal.
11. We dispose of all the Stay Petitions as indicated herein
above."
22. The appeal filed by the petitioner and others came to be
finally disposed of by the Appellate Tribunal vide order dated
10.7.2019. The Appellate Tribunal, while setting aside the
order dated 30.3.2011, qua the petitioner, and other two
remanded the matter back to the Adjudicating Authority for
passing order afresh subject to the payment of cost of
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Rs.50,000/-. While disposing of the matter, the Appellate
Tribunal also directed the Adjudicating Authority to complete
the de novo adjudication process within a period of four
months from the date of the order. The relevant paragraph
reads thus:-
"4. Accordingly, the impugned order is set aside only
related to the present appellants and matter is remanded to
the adjudicating authority for passing afresh order subject to
payment of cost of Rs.50,000/-. Since, the matter is very old,
and we direct the adjudicating authority to complete de-novo
adjudication process within a period of 4 months from the
date of this order. The appellant is also directed to co-operate
in the proceeding. The payment of cost of Rs. 50,000/- to be
made within 2 weeks and compliance to be reported on
05.08.2019."
23. This Court, for the sake of completeness, inquired from
the learned advocate for the petitioner as regards the status of
the appeals filed by M/s. Balaji Enterprises and others against
whom the Adjudicating Authority has passed the order holding
them jointly and severally liable. To which, the learned
advocate for the petitioner informed the Court that since M/s.
Balaji Enterprises failed to deposit the amount as directed by
the Appellate Tribunal, in paragraph 6 of the order dated
4.9.2012, the appeal filed by M/s. Balaji Enterprises stood
rejected. Further, one of the partners, i.e. Mr.Om Prakash
Punjabi, proprietor, Krishna Impex is since then absconding.
This Court further inquired about the status of the petitioner
firm, to which it has been informed that it had stopped
manufacturing activities since 2004; it is only paper company,
not engaged in any manufacturing activities.
24. Pertinently, the show cause notice dated 5.2.2007 was
issued by the DGCEI to M/s. Balaji Enterprises and other ten
C/SCA/10195/2020 ORDER
noticees, including the petitioner, which was adjudicated by
the Adjudicating Authority and M/s. Balaji Enterprises, M/s.
MSN Enterprises and M/s. Krishna Impex were jointly and
severally held liable. This Court is conscious of the fact that
vide order dated 10.7.2019, the appeal filed by the petitioner
has been allowed quashing the order dated 30.3.2011 qua the
petitioner and two others, however, the fact remains that the
order dated 30.3.2011 of the Adjudicating Authority cannot be
said to have been quashed in its entirety. Owing to the failure
on the part of M/s. Balaji Enterprises in depositing the amount
and consequent rejection of appeal, the order dated 30.3.2011
passed by the Adjudicating Authority, attained finality so far as
M/s. Balaji Enterprises and M/s. Krishna Impex are concerned.
Further, as emerges from the order, common findings have
been recorded by the Adjudicating Authority of holding, M/s.
Balaji Enterprises, M/s. MSN Enterprises and Krishna Impex,
jointly and severally liable for taking the benefit of rebate.
Therefore, it cannot be said that it is clear case of remand. Had
it been a clear case of remand with the quashing of order
whole hog, this Court would have perhaps considered and
followed the principle laid down in the judgments discussed
herein above. However, under the peculiar circumstances
prevailing in the present case, the request of the petitioner
claiming refund cannot be acceded to.
25. In view of the afore-mentioned discussion, the Order-in-
Appeal No.OCESA-SRT (APPEALS)/PS-636/2019-20 dated
27.2.2020 does not deserve to be interfered with and petition
deserves to be dismissed and is hereby, dismissed.
26. Before concluding, it may not be out of place to mention
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that considering the pendency of issue, the Court desired of
the learned advocate for the petitioner to issue necessary
directions for completion of the proceeding pending before the
Adjudicating Authority at the earliest, to which the learned
advocate for the petitioner has expressed his reservation on
the ground that the petition is filed solely for the purpose of
claiming refund and not for seeking any direction to the
Adjudicating Authority to decide the proceeding as
expeditiously.
27. However, this Court, cannot turn a blind eye to the fact
that the amount involved in the case, is huge. Vide order dated
18.1.2021, the learned Additional Solicitor General of India was
requested to take instructions on two counts; firstly, the
possible time to be taken for expeditious disposal of the case
before the Adjudicating Authority; and secondly, the interest
earned on the amount of Rs.50,00,000/- for the entire period of
time. In compliance of the order dated 18.1.2021, Mr. Devang
Vyas, learned counsel has submitted a brief submission
wherein, tentative schedule for cross-examination of the
witnesses has been provided and the likely completion of the
proceedings within a period of 30 days from the completion of
final personal hearing.
28. In view of the aforesaid time schedule provided by the
learned counsel for the respondents, this Court is of the
opinion that in the interest of all the concerned, directions are
necessitated for early decision in the adjudication proceeding.
Accordingly, the petitioner is directed to fully co-operate with
the proceedings before the Adjudicating Authority. It is also
directed that the Adjudicating Authority shall complete the
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proceedings as expeditiously as possible; without any further
loss of time and preferably within a period of six months from
the date of receipt of the copy of this order.
29. This Court could not be oblivious of protracted period of
litigation and possibilities of further delay. Therefore, the
directions to employ the technological advancement in the
present period of pandemic due to Covid-19 virus would also
be inevitable. Instead of insisting for the personal presence of
learned counsels for the parties, permission to conduct the
matters including cross-examination through video-
conferencing, shall be considered by the officer concerned
while adjudicating the show cause notice as that would in
many respects, save time, resources and hardship of all
concerned.
30. It is clarified that the Adjudicating Authority, shall decide
the proceedings independently and without being influenced
by the findings and observations made in the preceding
paragraphs, dealing with the plea of the refund of the
petitioner.
31. Accordingly, as aforesaid, the petition is dismissed. No
order as to costs.
(SONIA GOKANI, J)
(SANGEETA K. VISHEN,J)
BINOY B PILLAI
