Madras High Court
G.Mohanakrishnan vs The Chairman on 23 August, 2021
W.P.No.18538 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Date : 23.08.2021
CORAM:
THE HON'BLE MR. JUSTICE S.M.SUBRAMANIAM
W.P.No.18538 of 2015
G.Mohanakrishnan ... Petitioner
Vs.
1.The Chairman,
Central Board of Excise and Customs,
North Block, New Delhi - 110 001.
2.The Member-Central Excise,
Central Board of Excise and Customs
North Block, New Delhi - 110 001.
3.The Chief Commissioner of Central Excise,
No.26/1, Mahatma Gandhi Road,
Nungambakkam, Chennai - 600 034.
4.The Director General of Central Excise
Intelligence, West Block-VII, Wing-VI,
First Floor, Section I, R.K. Puram,
New Delhi - 110 066.
5.The Commissioner of Central Excise,
Chennai - IV Commissionerate, No.26/1,
Mahatma Gandhi Road, Nungambakkam,
Chennai - 600 034.
1/20
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W.P.No.18538 of 2015
6.The Additional Director General,
Directorate General of Central Excise,
Intelligence, Chennai Zonal Unit, C3,
"C" Wing, 2nd Floor, Rajaji Bhavan,
Besant Nagar, Chennai - 600 090.
7.The Assistant Commissioner of Central
Excise, Maduravoyal Division, Chennai - IV
Commissionerate, C48, TNHB Complex,
Second Avenue, Anna Nagar,
Chennai - 600 040. ... Respondents
Prayer : Petition filed under Article 226 of Constitution of India praying for
issuance of a Writ of Mandamus directing the respondents herein to return
the seized records, materials and an amount of Rs.27,05,000/-, collected as
duty deposit along with interest at appropriate rate.
For Petitioner : Mr.B.Satish Sundar
For Respondents : Mr.A.P.Srinivas
Senior Standing Counsel
for R1 to 3, 5 and 7
For Respondents : Mr.V.Sundareswaran
Senior Panel Counsel for R4 & R6
ORDER
The writ of mandamus is instituted to direct the respondents to return
the seized records, materials and an amount of Rs.27,05,000/-, collected as
duty deposit along with interest at appropriate rate.
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W.P.No.18538 of 2015
2. The petitioner is a Proprietor of a firm viz., M/s.Industrial and
Power Solutions and provides cladding solutions to TNEB Power stations.
One such items, it deals with a liquid chemical called 'Polyguard - 999'
which is sold as a dispersant of coolant water. The petitioner purchases the
same in bulk and repacks it in a smaller container, labels the same and sells
it to TNEB. According to the petitioner, such process does not involve any
manufacturing and therefore, the activity of the petitioner could not come
within the central excise net.
3. On 24.07.2007, the officials of Deputy General of Central Excise
Intelligence (hereinafter referred to as 'DGCEI') attached to the 6th
respondent conduct search and seizure operations at the petitioner's
premises. They seized 214.31 kgs of Polyguard - 999 along with certain
documents under a mahazar. On 27.07.2007, the petitioner states that they
were forced to take a registration of the firm with the central excise
authorities. Subsequently, on 28.07.2007, the petitioner deposited an
amount of Rs.5,00,000/- as first installment towards central excise duty for
past clearances in connection with ongoing investigation by DGCEI
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W.P.No.18538 of 2015
(Chennai Zonal Unit). On 10.08.2007, statement is recorded from the
petitioner in terms of Section 14 of the Central Excise Act. The second
payment to the tune of Rs.5,00,000/- made by the petitioner on 24.08.2007,
third payment of Rs.5,00,000/- made on 03.09.2007, fourth payment of
Rs.6,00,000/- made on 23.10.2007 and the fifth payment of Rs.6,05,000/-
made by the petitioner on 01.12.2007. On 24.12.2007 the goods detained are
formally seized under a mahazar. On 07.07.2014 the petitioner submitted a
representation to the 7th respondent and demanded for return of goods,
records seized and also refund the amount deposited by him to the tune of
Rs.27.05 lakhs. The said amount was collected by the DGCEI.
4. The learned counsel for the petitioner made a submission that no
show cause notice has been issued or any order has been passed for
appropriation of the said amount deposited by following the procedure as
contemplated. The contention of the petitioner is that there is no
manufacturing process involved and therefore, that amount deposited by the
petitioner cannot be treated as 'central excise duty' and thus, the petitioner is
entitled for the refund of the entire deposited amount with interest.
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W.P.No.18538 of 2015
5. The petitioner sent various communications and the 7th respondent
on 22.09.2014 asking the petitioner to file a refund claim petition in terms
of Section 11B of the Central Excise Act, 1944 (hereinafter referred to as
'the Act'). The petitioner, in response, contended that the amount deposited
is not the duty and therefore, Section 11B of the Act would not apply in the
case of the petitioner. When the dispute stood as at that stage, the petitioner
has chosen to file the present writ petition seeking refund of the entire
amount deposited with reasonable interest.
6. The learned counsel for the petitioner mainly contended that the
procedure as contemplated under the provisions of the Central Excise Act
has not been followed, no show cause notice has been issued nor an order
appropriating the said amount was passed by the competent authority and
therefore, the collection of money is illegal and in violation of the
provisions of the Act and more so, it would offend Article 265 of the
Constitution of India.
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W.P.No.18538 of 2015
7. In support of the said contention, the learned counsel for the
petitioner relied on the judgment of the Hon'ble Supreme Court of India in
the case of Dabur India Limited Vs. State of Uttar Pradesh reported in
1990 (49) E.L.T. (S.C.) wherein the following observations are made.
"There was the allegation of the petitioner that in order to
compel the petitioners to pay the duties which the petitioners
contended that they were not liable to pay, the licence was not
being renewed for a period and the petitioners were
constantly kept under threat of closing down their business in
order to coerce them to make the payment. This is
unfortunate. We would not like to hear from a litigant in this
country that the government is coercing citizens of this
country to make payment of duties which the litigant is
contending not to be leviable. Government, of course, is
entitled to enforce payment and for that purpose to take all
legal steps but the government, Central or State, cannot be
permitted to play dirty games with the citizens of this country
to coerce them in making payments which the citizens were
not legally obliged to make. If any money is due to the
government, the government should take steps but not take
extra-legal steps or manoeuvre. Therefore, we direct that the
right of renewal of the petitioner of licence must be judged
and attended to in accordance with law and the occasion not
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W.P.No.18538 of 2015
utilised to coerce the petitioners to a course of action not
warranted by law and procedure"
8. In the case of Sanmar Foundaries Limited Vs. Commissioner of
Central Excise and Customs, Tiruchirappalli reported in 2015 (325)
E.L.T. 854 (Mad.), the Hon'ble Division Bench of this Court held as
follows:
"20. In the case on hand, there was nothing except an
inspection and verification. It was never the case of the
respondents that they found out duty evasion in the course of
investigation and that when they were ready to serve a notice
under sub-section (5), the appellant made payment in terms
of sub-section (6). Had this been their contention, the
respondents ought to have shown the break-up of the amount
of Rs. 7.53 crores into (i) duty; (2) interest; and (iii) penalty.
In the absence of any of these details, the respondents cannot
contend that the payment was in terms of sub-section (6). As
a matter of fact, sub-section (7) is somewhat similar to sub-
section (2) and it prohibits the Central Excise Officer from
serving any notice in respect of the amount paid. But, in the
case on hand, a notice has been served after the learned
Single Judge disposed of the writ petition, with liberty to the
respondents. Therefore, it is clear that the amount of Rs. 7.53
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W.P.No.18538 of 2015
crores paid by the appellant, will not fall either under Section
11A(1)(b) or under Section 11A(6). If it will not fall under
any of these two provisions, it cannot be taken to be a
payment made in relation to any statutory provision.
Therefore, irrespective of whether the amount was paid
under coercion or voluntarily, the respondents have no
business to retain the same. Hence the contention of the
learned Standing Counsel for the respondents that the
payment was authorised by law has to be stated only to be
rejected."
9. Yet another judgment in the case of M/s.Shri NandhiDhall Mills
India Private Limited Vs. Senior Intelligence Officer in W.P.No.5192 of
2020 dated 07.04.2021, refund was granted and the writ petition was
allowed based on the following observations made in paragraph 22 of the
order, which reads as under:
"22.According to the revenue, the above decisions have
been rendered in the context of the erstwhile Central Excise
and Service Tax Enactments where there was no express
statutory provision for collection of an amount during
investigation whereas the present remittances have been
made in line with Section 74(5) and are hence permitted
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W.P.No.18538 of 2015
statutorily. Prior to the inception of the GST Act, instances
were rife when officials of DRI and Customs Department
were infamous for collecting advance payments of tax from
assesses, many a time under coercion, and in the course of
investigation itself. There are several decisions of Courts
wherein such acts have been frowned upon, with Courts
consistently holding that 17 W.P. No.5192 of 2020 no
amounts may be collected prior to an actual determination of
an amount payable by an assessee. With the inception of
Section 74(5), it is the case of the revenue that the collection
of amounts in advance has attained statutory sanction,
provided the same are voluntary in Form GST-DR03."
10. Relying on the above judgments, the learned counsel for the
petitioner reiterated that the amount collected was an illegal collection and
cannot be construed as 'duty amount' and therefore, the writ petition is to be
allowed as prayed for.
11. Mr.A.P.Srinivas, learned Senior Standing Counsel appearing on
behalf of the respondents 1 to 3, 5 and 7 disputed the contentions raised on
behalf of the writ petitioner by stating that, an adjudication is required for
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W.P.No.18538 of 2015
the purpose of any refund in respect of the duty amount collected. In the
present case, the allegation of coercive collection is far beyond the truth. It
is a self assessment made by the petitioner under the provisions of the Act
and therefore, the petitioner has to file an application in a prescribed format
under Section 11B of the Act. Even at the first instance, the respondents
have asked the petitioner to submit an application in a prescribed format
enabling them to conduct an enquiry and take a decision regarding the
entitlement of the writ petitioner for getting refund. In view of the fact that
the petitioner had repeatedly sent representations to the Assistant
Commissioner of Central Excise, Maduravoyal Division vide in his letter
C.No.V/18/28/2014-Refund dated 09.10.2014 categorically stated that the
payment of Central Excise duty for the past clearances in connection with
ongoing investigation by DGCEI, Chennai Zonal Unit, Chennai-90, which
indicates that amount has been paid towards Central Excise duty. Therefore,
the claim is undoubtedly covered under Rule 11B of the Central Excise Act,
1944 and accordingly, the petitioner was asked to submit an application in
the prescribed proforma for taking further necessary action in this regard.
Instead of filing an application in the prescribed proforma, the petitioner has
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W.P.No.18538 of 2015
chosen to file the present writ petition seeking direction to refund the
amount of Central Excise duty paid.
12. The learned Senior Standing Counsel is of the opinion that
amount deposited based on the self assessment made by the petitioner. If at
all the petitioner is of an opinion that he is not liable to pay such an amount,
then, an enquiry is required for the purpose of making refund and therefore,
submission of an application in a prescribed format is mandatory under the
provisions of the Central Excise Act. Thus, the course adopted by the
petitioner by submitting mere representation, in fact, is improper and based
on such representation, the case of the petitioner cannot be considered by
the respondents.
13. In support of the contention, the learned Senior Standing counsel
relied on the judgment of the Hon'ble 9 Judges Bench of the Hon'ble
Supreme Court in the case of Mafatlal Industries Limited Vs. Union of
India, 1997 (89) E.L.T. 247 (S.C.) wherein the larger Bench of the Hon'ble
Apex Court held that 'All claims for refund except where levy is held to be
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W.P.No.18538 of 2015
unconstitutional, to be preferred and adjudicated upon under Section 11B
of the Central Excise Act, 1944 or under Section 27 of the Customs Act,
1962 and subject to claimant establishing that burden of duty has not been
passed on to third party'. The Hon'ble Supreme Court held that 'though the
writ petition is entertainable, Writ Court to have due regard to the
provisions of Central Excises and Customs Act and to refuse grant of relief
where burden of duty passed on to third party, therefore, there is no
automatic refund of the amount deposited and an adjudication is required in
respect of the disputed facts.
14. Mr.V.Sundareswaran, learned Senior Panel Counsel appearing on
behalf of the respondents 4 and 6 relying on the counter statement made a
submission that the petitioner himself calculated the duty liability on self
assessment for clearances made during the year 2006-2007 and had remitted
a sum of Rs.27,05,000/- in five installments on various states. The 7th
respondent who is the jurisdictional Deputy Commissioner informed the
petitioner that the application for refund must be submitted in a prescribed
format under Section 11B of the Act. The petitioner instead of complying
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W.P.No.18538 of 2015
with the said direction rushed to the High Court by filing the present writ
petition regarding the allegations that no show cause notice was issued to
the writ petitioner.
15. The learned Senior Panel Counsel relied on ground (E) of the
counter statement and contended that such a show cause notice is not
required. The relevant ground (E) stands extracted hereunder:
"As regards petitioner's contention in para 8, it is submitted
that the petitioner has quantified the duty liability and paid the
duty on various dates without any direction / compulsion from
this Respondent and that the petitioner's allegation has no
basis.
As per Section 11A 2(B), "Where any duty of excise has not
been levied or paid or has been short-levied or short-paid, or
erroneously refunded, the person, chargeable with the duty,
may pay the amount of duty [on the basis of his own
ascertainment of such duty or on the basis of duty ascertained
by a Central Excise Officer] before service of notice on him
under sub-section (1) in respect of duty, and inform the
Central Excise Officer of such payment in writing, who on
receipt of such information shall not serve any notice under
sub-section (1) in respect of the duty so paid-"
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"Provided that the Central Excise Officer, may determine the
amount of short payment of duty, if any which in his opinion
has not been paid by such person and, then, the Central Excise
Officer shall proceed to recover such amount in the manner
specified in this section, and the period of "one year" referred
to in sub-section (1) shall be counted from the date of receipt
of such information of payment."
Since, the duty liability had been quantified and paid by the
petitioner, no show cause notice was necessary to be issued for
appropriation of the duty paid in terms of the above
provisions. The petitioner has never alleged that the payments
were made under duress / compulsion but on the other hand
are voluntarily made on various dates subsequent to the search
conducted on24/7/2007."
16. The learned Senior Panel Counsel relied on the judgment of the
Hon'ble 3 Judges Bench of the Hon'ble Supreme Court of India in the case
of Assistant Collector of Central Excise Vs. Kashyap Engineering &
Metallurgicals Private Limited, 2002 (142) E.L.T. 518 (S.C.) wherein the
Hon'ble Supreme Court held as follows:
"2. The assessee-respondent made a claim for refund of
excise duty under the provisions of the Excise Act which was
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beyond the permissible period thereunder. The refund claim
having been rejected by the authorities, a writ petition was
moved and allowed. The Revenue preferred a writ appeal,
which was dismissed. The point now is covered by the
decision of this Court in Mafatlal Industries Ltd. v. Union of
India [(1997) 5 SCC 536 : (1997) 89 ELT 247] where it has
been held that the court, in a writ petition, has to take note of
the provisions of the Act and must exercise its discretion
consistent with those provisions. Much the same view was
earlier taken in the judgment of this Court in CCE v. Doaba
Coop. Sugar Mills Ltd. [1988 Supp SCC 683 : 1989 SCC
(Tax) 23 : (1988) 37 ELT 478]"
17. Considering the arguments as advanced by the respective learned
counsels appearing on behalf of the parties to the lis on hand, this Court is
bound to consider the provisions of the Act in the matter of refund and
Section 3 of the Central Excise Act is a charging provision and Section 4
contemplates 'Valuation of excisable goods for purposes of charging of duty
of excise'. Section 11B enumerates 'Claim for refund of [duty and interest, if
any, paid on such duty]'. Therefore, claim for refund is to be made under
Section 11B of the Central Excise Act. The Central Excise Rules, 2002
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more specifically Rule 6 provides 'Assessment of duty'. Accordingly, the
assessee shall himself assess the duty payable on any excisable goods;
provided that in case of cigarettes, the Superintendent or Inspector of
Central Excise shall assess the duty payable before removal by the assessee.
Rule 7 denotes 'Provisional assessment'.
18. Perusal of the provisions stated above, it is apparently clear that
self assessment is permissible under Rule 6 of the Central Excise Rules,
2002. In the event of self assessment, if any duty is paid excessively or
erroneously, then, the assessee is entitled to claim for refund and such
refund is to be made on receipt of any proper application under Section 11B
of the Central Excise Act. In the present case, on 24.07.2007 the officers
attached to the 6th respondent conducted search operations in the
petitioner's premises and seized goods 'Polyguard - 999' material.
Thereafter, the petitioner deposited Rs.27.05 lakhs on five installments on
various dates. Therefore, such payments made are to be construed as 'self
assessment made by the petitioner'. In the event of any such excess payment
of excise duty, as rightly pointed out by the learned Senior Standing
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Counsel, an application in a prescribed format is to be submitted for
consideration. In the present case, the respondents have directed the
petitioner to submit an application in a prescribed format enabling them to
consider the claim in an appropriate manner. However, the petitioner has not
chosen to do so, instead the present writ petition is filed.
19. This Court is of the considered opinion that any payment of excise
duty made excessively, erroneously or otherwise, undoubtedly the person,
who deposited, is entitled to claim refund. However, such refund is to be
made only after conducting an enquiry in the manner known to law. In other
words, any funds deposited in the Government account, the refund is to be
made by following the procedures as contemplated in the statute and rules.
In the present case, Section 11B of the Central Excise Act provides
procedures for claim of refund. Therefore, the petitioner is bound to file an
application in a prescribed proforma for the purpose of claiming refund and
admittedly, no such application in a prescribed proforma has already been
filed by the petitioner and thus, the petitioner is at liberty to file such an
application in a prescribed proforma for refund of the deposited amount. In
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the event of filing any such application, the authorities are bound to
consider the same by following the procedures as contemplated and by
conducting an enquiry and by affording an opportunity to the petitioner and
dispose of the same as expeditiously as possible.
20. With these directions, this Writ Petition is disposed of. No costs.
23.08.2021
Index : Yes
Speaking Order : Yes
Sgl
To
1.The Chairman,
Central Board of Excise and Customs,
North Block, New Delhi - 110 001.
2.The Member-Central Excise,
Central Board of Excise and Customs
North Block, New Delhi - 110 001.
3.The Chief Commissioner of Central Excise,
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W.P.No.18538 of 2015
No.26/1, Mahatma Gandhi Road,
Nungambakkam, Chennai - 600 034.
4.The Director General of Central Excise
Intelligence, West Block-VII, Wing-VI,
First Floor, Section I, R.K. Puram,
New Delhi - 110 066.
5.The Commissioner of Central Excise,
Chennai - IV Commissionerate, No.26/1,
Mahatma Gandhi Road, Nungambakkam,
Chennai - 600 034.
6.The Additional Director General,
Directorate General of Central Excise,
Intelligence, Chennai Zonal Unit, C3,
"C" Wing, 2nd Floor, Rajaji Bhavan,
Besant Nagar, Chennai - 600 090.
7.The Assistant Commissioner of Central
Excise, Maduravoyal Division, Chennai - IV
Commissionerate, C48, TNHB Complex,
Second Avenue, Anna Nagar,
Chennai - 600 040.
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W.P.No.18538 of 2015
S.M.SUBRAMANIAM, J.
Sgl
W.P.No.18538 of 2015
23.08.2021
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