Punjab-Haryana High Court
Kulbhushan Goyal vs Union Of India And Others on 16 February, 2018
Bench: S.J. Vazifdar, Avneesh Jhingan
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
Civil Writ Petition No.25 of 2017 (O&M)
DATE OF DECISION: 16.02.2018
Kulbhushan Goyal
.....Petitioner
versus
Union of India and others
.....Respondents
CORAM:- HON'BLE MR.JUSTICE S.J. VAZIFDAR, CHIEF JUSTICE
HON'BLE MR. JUSTICE AVNEESH JHINGAN
Present: Mr. Jagmohan Bansal, Advocate for the petitioner
Mr. Tajender K. Joshi, Advocate for the respondents
..
S.J. VAZIFDAR, CHIEF JUSTICE (Oral):
The petitioner seeks a writ of certiorari to quash an order dated 21.11.2016 sanctioning a refund of Rs.15 lakhs under section 27(1) of the Customs Act, 1962 (for short, "the Act"), but ordering the same to be appropriated towards the petitioner's liability arising out of an order dated 25.04.2016.
2. The petitioner manufactures and exports bicycle parts. He carried on business in the firm named and style of M/s Monte International, M/s Monte Metals and M/s M.K. International as the sole proprietor thereof. In respect of the goods exported by him, he claimed a duty drawback under sections 74 and 75 of the Act read with the Customs and Central Excise Duties Drawback Rules, 1995 (for short, "Duties Drawback Rules").
3. The Directorate of Revenue (DRI) initiated an investigation against the petitioner and concluded that he had mis- declared the value of the goods and that the goods actually 1 of 10 ::: Downloaded on - 24-02-2018 23:09:26 ::: CWP-25-2017 - 2 -
exported were spurious or junk and that the petitioner had accordingly wrongly availed the benefit of duty drawback. Based on this opinion, the DRI issued a notice dated 31.03.2015 under rule 16 of the Duties Drawback Rules, calling upon the petitioner to show cause why the declared value should not be rejected and the goods not be held liable to confiscation. The petitioner was also called upon to show cause why the drawback of about Rs.60 lakhs should not be disallowed and recovered from him. The adjudicating authority by an order dated 21.03.2007 confirmed the demand of drawback of about Rs.60 lakhs and imposed a penalty of Rs.13 lakhs. The petitioner filed an appeal before the Customs Excise & Service Tax Appellate Tribunal.
During the pendency of the appeal, the Tribunal had, by an order dated 20.05.2009, declined the petitioner's application for waiver of the requirement of pre-deposit to hear the appeal on merits. The petitioner challenged this order by filing Civil Writ Petition No.19427 of 2009. A Division Bench of this Court, by an order and judgment dated 20.01.2010, recorded that on the previous date a statement had been made on behalf of the petitioner that he was willing to deposit Rs.15 lakhs and furnish a bank guarantee for the remaining amount of pre-deposit of Rs.15 lakhs and that the petitioner had complied with the same. The petition was disposed of by directing the Tribunal to decide the appeal on merits.
On account of a difference of opinion between the members of the Tribunal, the matter had been placed before a third Member. The majority held that the officer issuing the notice was not competent and, therefore, set aside the same. The majority also held in the petitioner's favour on merits. Whether the Tribunal could have decided the merits of the matter despite the finding 2 of 10 ::: Downloaded on - 24-02-2018 23:09:27 ::: CWP-25-2017 - 3 -
that the officer who issued the show cause notice had no jurisdiction is a different matter.
The petitioner having succeeded in the appeal filed an application for refund of the said amount of Rs.15 lakhs deposited by him pursuant to the order of this Court dated 20.01.2010. The application for refund was by a letter dated 01.10.2016 under cover of which the petitioner also forwarded the proof of having deposited the amount of Rs.15 lakhs. The petitioner, by a letter dated 05.10.2016, made an application for the release of the said guarantee in the sum of Rs.15 lakhs furnished pursuant to the said order of this Court dated 20.01.2010.
4. The respondents had initiated another proceeding allegedly for an incorrect valuation of goods. The show cause notice in this regard was adjudicated by the Commissioner of Customs-respondent No.2 disallowing the drawback of Rs.13,14,357/- and imposing a penalty of about Rs.3.13 crores. The petitioner filed an appeal against this order. In this appeal, the petitioner complied with the requirements of section 129E read with a circular, we will shortly refer to, by depositing 7.5% of the duty prior to the filing of the appeal.
5. As we noticed earlier, in respect of the earlier proceedings initiated by the DRI demanding the drawback to the extent of Rs.60 lakhs and imposing a penalty of Rs.13 lakhs, the petitioner succeeded before the Tribunal. However, the Deputy Commissioner of Customs without issuing any notice or granting the petitioner an opportunity of being heard passed the impugned order dated 21.11.2016 appropriating the refund of Rs.15 lakhs against the demand under the other proceedings demanding an amount of Rs.13 3 of 10 ::: Downloaded on - 24-02-2018 23:09:27 ::: CWP-25-2017 - 4 -
lakhs towards drawback and imposing a penalty of Rs.3.13 crores in respect whereof the petitioner's appeal was pending before the Tribunal. The respondents also invoked the bank guarantee in the sum of Rs.15 lakhs towards this demand.
6. Mr. Jagmohan Bansal, the learned counsel appearing on behalf of the petitioner, submitted that the respondents are not entitled to adjust the refund of Rs.15 lakhs and/or to invoke the guarantee in the sum of Rs.15 lakhs in respect of the separate claim of Rs.13 lakhs towards duty drawback and Rs.3.13 crores towards penalty. In this regard, he relied upon a notification dated 16.09.2014 issued by the Central Board of Excise and Customs which inter alia provides as under:-
"4. Recovery of the Amounts during the Pendency of Appeal:
4.1 Vide Circular No.967/1/2013 dated 1st January, 2013, Board has issued detailed instructions with regard to recovery of the amounts due to the Government during the pendency of stay applications or appeals with the appellate authority. This Circular would not apply to cases where appeal is filed after the enactment of the amended Section 35F of the Central Excise Act, 1944 or Section 129E of the Customs Act, 1962.
4.2 No coercive measures for the recovery of balance amount i.e., the amount in excess of 7.5% or 10% deposited in terms of Section 35F of Central Excise Act, 1944 or Section 129E of Customs Act, 1962, shall be taken during the pendency of appeal where the party/assessee shows to the jurisdictional authorities:
(i) proof of payment of stipulated amount as pre-deposit of 7.5%/10%, subject to a limit of Rs.10 crores, as the case may be; and
(ii) the copy of appeal memo filed with the appellate authority.
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4.3 Recovery action, if any, can be initiated only after the disposal of the case by the Commissioner (Appeal)/Tribunal in favour of the Department. For example, if the Tribunal decides a case in favour of the Department, recovery action for the amount over and above the amount deposited under the provisions of Section 35F/129E may be initiated unless the order of the Tribunal is stayed by the High Court/Supreme court. The recovery, in such cases, would include the interest, at the specified rate, from the date duty became payable, till the date of payment."
Mr. Bansal, in particular, placed reliance on clause 4.2. He contended that the petitioner had deposited the requisite amount as stipulated by the circular. He contended that the adjustment of the refund sanctioned in favour of the petitioner constitutes a coercive measure for the recovery of the balance amount, i.e., the amount in excess of the amount deposited as per the circular.
7. The first question is whether the adjustment of a refund granted amounts to a coercive step. It does. Merely because an amount is lying with the respondents the adjustment thereof by the respondents, makes no difference. The unilateral action of adjustment constitutes a coercive measure as much as any step or action to recover an amount lying with the petitioner or with any other party on behalf of the petitioner.
8. The next question is whether the circular places an absolute bar of prohibition against the respondents' recovering an amount in excess of the amount deposited as per the said circular. It does not. The word "shall" in clause 4.2 must be read as "may" for more than one reason. Firstly, if it is read as "shall" and not as "may", the circular would be contrary to section 142 of the Customs Act, 1962. Section 142 of the Customs Act reads as under:-
"SECTION 142. Recovery of sums due to Government. -
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(1) Where any sum payable by any person under this Act including the amount required to be paid to the credit of the Central Government under section 28B is not paid, -
(a) the proper officer may deduct or may require any other officer of customs to deduct the amount so payable from any money owing to such person which may be under the control of the proper officer or such other officer of customs; or
(b) the Assistant Commissioner of Customs or Deputy Commissioner of Customs may recover or may require any other officer of customs to recover the amount so payable by detaining and selling any goods belonging to such person which are under the control of the Assistant Commissioner of Customs or Deputy Commissioner of Customs or such other officer of customs;
or
(c) if the amount cannot be recovered from such person in the manner provided in clause (a) or clause (b) -
(i) the Assistant Commissioner of Customs or Deputy Commissioner of Customs may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business and the said Collector on receipt of such certificate shall proceed to recover from such person the amount specified there under as if it were an arrear of land revenue; or
(ii) the proper officer may, on an authorisation by Commissioner of Customs and in accordance with the rules made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any 6 of 10 ::: Downloaded on - 24-02-2018 23:09:27 ::: CWP-25-2017 - 7 -
such distress, may cause the said property to be sold and with the proceeds of such sale, may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus, if any, to such person.
Provided that where the person (hereinafter referred to as predecessor), by whom any sum payable under this Act including the amount required to be paid to the credit of the Central Government under section 28B is not paid, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other person, all goods, materials, preparations, plants, machineries, vessels, utensils, implements and articles in the custody or possession of the person so succeeding may also be attached and sold by the proper officer, after obtaining written approval from the Commissioner of Customs, for the purposes of recovering the amount so payable by such predecessor at the time of such transfer or otherwise disposal or change.
(2) Where the terms of any bond or other instrument executed under this Act or any rules or regulations made thereunder provide that any amount due under such instrument may be recovered in the manner laid down in sub-section (1), the amount may, without prejudice to any other mode of recovery, be recovered in accordance with the provisions of that sub-section."
9. We are concerned essentially with sub-section (1) of section 142. It permits the proper officer to deduct or require any other officer of the customs to deduct the amount payable under the Act from any money owing to such person which may be under the control of the officer. The refund is an amount under the control of an officer of the customs. Section 142, therefore, clearly entitles the proper officer to deduct or require any other officer of the customs to deduct the refund due to the petitioner towards the claims of Rs.13 lakhs plus Rs.3.13 crores which are the subject matter of the other proceedings. The appeal is pending in respect 7 of 10 ::: Downloaded on - 24-02-2018 23:09:27 ::: CWP-25-2017 - 8 -
thereof but the amount has, as on date, been adjudicated to be payable by the petitioner. This statutory right cannot be negated or diluted by the Board. If the word "shall" in paragraph 4.4 of the circular is not read as "may" and paragraph 4 of the circular is construed to be a mandatory provision barring absolutely the right of recovery/adjustment, it would be contrary to section 142. Had we not construed the word "shall" as "may", we would have readily struck down paragraph 4.2 of the circular as being contrary to section 142 and, therefore, illegal. In our view, however, the word "shall" must be read as "may". The validity of the circular is accordingly upheld subject, however, to the word "shall" therein being read as "may".
10. If paragraph 4 of the circular is construed as a total or an absolute bar against the authorities recovering any amount in excess of the amount deposited as required by paragraph 4.2(a), it would lead to the most alarming result, unjust to the revenue in the extreme. For instance, if it can be established that upon filing an appeal and the deposit of the amount as per clause 4 of the circular, the person concerned is attempting to part with all his assets movable or immovable with a view to defeating the recovery by the Government of any amount that may be adjudicated, the authorities would be rendered helpless in protecting the revenue against the same if the circular is read as an absolute bar against taking any coercive measures. In such circumstances, surely, the authorities must be not only held to be entitled but bound to protect the revenue inter-alia by attaching the assets.
11. The officer exercising powers under section 142, however, must, in view of the said circular, consider whether or 8 of 10 ::: Downloaded on - 24-02-2018 23:09:27 ::: CWP-25-2017 - 9 -
not an amount in excess of the amount deposited pursuant to paragraph 4.2 of the circular ought to be recovered or deducted. He must take into consideration all the relevant facts in this regard.
12. In the present case, one of the reasons for passing the order is that an appeal had not been filed in the name of one of the proprietary firms. That is irrelevant. These are not firms established under the Partnership Act, 1932, or incorporated under the Companies Act, 1956. They are merely the names in which the petitioner carries on business as the sole proprietor thereof. The name in which the petitioner carries on business is not relevant. Proceedings cannot be filed in such name or names. The petitioner having filed the appeal, therefore, serves the purpose of challenging the demand.
13. In the circumstances, the impugned order is quashed and set aside with a direction to the officer to pass a fresh order after considering all the facts and circumstances of the case. The respondents shall be entitled to encash the bank guarantee. The respondents shall be entitled to retain the amount deposited and the amount recovered under the bank guarantee but subject to the fresh orders and the result of the challenge thereto, if any.
14. The petition is accordingly disposed of.
(S.J. VAZIFDAR)
CHIEF JUSTICE
16.02.2018 (AVNEESH JHINGAN)
parkash* JUDGE
NOTE:
Whether speaking/non-speaking: Speaking Whether reportable: Yes 9 of 10 ::: Downloaded on - 24-02-2018 23:09:27 ::: CWP-25-2017 - 10 -
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