Gujarat High Court
Jayant Agro Organics Limited vs Union Of India on 25 April, 2018
Author: Akil Kureshi
Bench: Akil Kureshi, B.N. Karia
C/SCA/3434/2018 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 3434 of 2018
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JAYANT AGRO ORGANICS LIMITED
Versus
UNION OF INDIA
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Appearance:
MR PRAKASH SHAH WITH MR DHAVAL SHAH(2354) for the
PETITIONER(s) No. 1
MR NIKUNT RAVAL ADVOCATE for the RESPONDENT(s) No. 1
NOTICE SERVED BY DS(5) for the RESPONDENT(s) No. 2
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE B.N. KARIA
Date : 25/04/2018
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The petitioner has challenged an orderin original dated 29.01.2018 under which the adjudicating authority, i.e. the Development Commissioner, Kandla Special Economic Zone, directed the petitioner to deposit a sum of Rs.6,19,160/ in the Government account. He also imposed a penalty of Rs.1,00,000/ on the petitioner.
2. The brief facts are as under;
The petitioner is a Company registered under the Companies Act and is engaged in manufacture and export of goods. The petitioner's unit is Page 1 of 6 C/SCA/3434/2018 ORDER constituted in Kandla Free Trade Zone. The petitioner is registered as an Export Oriented Unit ("EOU", for short). For its manufacturing activities, the petitioner purchased goods from units which are constituted as EOU as well as those which are constituted in Domestic Tariff Area ("DTA" for short). In terms of the Import Export policy, the petitioner is granted certain benefits, being an EOU. Such benefits include refund of Central Salestax ("CST" for short) on goods purchased by the petitioner. The policy also permits the petitioner, subject to approval by the competent authority, to sell certain percentage of its production in domestic market.
3. In case of another similar EOU, a question came up before this Court in the case of Asahi Songwon Colors Ltd. v. U.O.I. reported in 2017 (356) ELT 532 (Guj) whether in respect of purchases made by the Unit not from a Unit constituted as an EOU but from a DTA, sales tax refund benefit would be available ? In such case, the assessee was granted refund of CST. However, many years later, the authorities sought to recover the same, which action, the petitioner had challenged before the High Court. The High Court had come to two conclusions, firstly, that the CST refund benefit would be available to an EOU even if the production was made from a DTA Page 2 of 6 C/SCA/3434/2018 ORDER Unit and secondly, that after having processed and paid the refund of such tax, the same could not have been recovered after an unreasonably long period of time. In the context of the latter issue, the Court held and observed as under;
"24. There is yet another angle why we would not permit the respondents to make recoveries. As noted, the claim pertained to period between 2006 and 2008. They were made at the relevant time and granted by the respondents without any dispute. Such reimbursements are now sought to be recovered for which show cause notice came to be issued on 10.07.2015. It is not the case of the respondents that the petitioner was responsible for any misrepresentation or misstatement of facts which resulted into such erroneous reimbursement being granted and which came to the notice later on. That being the position, it was not possible for the respondents to make recoveries after unduly long period of time which in the present case happens to be more than seven years, that too, without any explanation for such delayed action."
4. In the present case, the facts would suggest that for the quarters of January to March 2006 and October to December 2006, the petitioner had made purchases from a DTA Unit and was granted refund of CST. The petitioner, thereafter, had made export sales as well as domestic sales, as permitted under the policy. The respondent authorities, however, held that the refund of CST Page 3 of 6 C/SCA/3434/2018 ORDER was not available in relation to the goods sold by the petitioner in the local market. A communication was, therefore, sent to the petitioner on 30.10.2013 conveying to the petitioner that the audit party pointed out that the CST amount was granted incorrectly and that the petitioner should deposit the same with the Government revenue. The petitioner replied to such communication under letter dated 12.11.2013 opposing any such payment for return of CST refund, contending interalia that the production was made by an EOU, the goods were manufactured for export and such export obligation was carried out and that only a small portion of the goods was sold in local market as per the policy itself. Therefore, there cannot be dis entitlement of the CST waiver benefit in relation to such clearances.
5. Eventually, the competent authority issued a Notice on 08.02.2017 calling upon the petitioner why such refund amount of Rs.6,19,160/ granted under order dated 06.10.2007 should not be recovered with penalty. After hearing the petitioner, the authority passed the impugned order.
6. In the facts of the present case, we would examine only the question of delay and latches in Page 4 of 6 C/SCA/3434/2018 ORDER the action of the respondents in initiating and completing the process of recovery, leaving the larger question raised by the petitioner open and to be judged in appropriate case. In this context, as recorded, the petitioner was paid the refund of CST of Rs.6,19,160/ way back in October 2007. For more than six years, there was no communication from the Department. Only on 30.10.2013, the first communication, in the form of a request to the petitioner to return the amount, was made. There was no clarity in such communication why the petitioner should refund such amount. The petitioner made a representation opposing any such payment for return of the CST refund. Several years thereafter, in February 2017, the showcause Notice came to be issued, which is the first formal step initiated by the competent authority to put the adjudicatory mechanism into motion. Thus, more than nine years after refund was paid, the authority issued the showcause Notice calling upon the petitioner why the same should not be recovered with penalty. Only on the ground of delay and latches, therefore, we would not permit such an action.
7. As noted, looking to the amount involved and the extent of delay, we have decided the issue only on this ground keeping the main issue of validity of the stand of the Department open. The Page 5 of 6 C/SCA/3434/2018 ORDER impugned order dated 06.10.2007 is set aside. The petition stands disposed of accordingly.
(AKIL KURESHI, J) (B.N. KARIA, J) PRAVIN KARUNAN Page 6 of 6