Bombay High Court
Abdulla Gani And Another vs Union Of India And Others on 19 June, 2013
Author: D.Y.Chandrachud
Bench: D.Y. Chandrachud, A.A. Sayed
1 of 8 AP.1523.2013
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.1523 OF 2013
Abdulla Gani and another Petitioners
versus
Union of India and others Respondents
Mr.Prashant Mishra i/by Yogesh M. Rohire for Petitioners.
Mr.Pradeep S. Jetly with Mr.S.D.Bhosale for Respondents.
CORAM : DR.D.Y.CHANDRACHUD AND
A.A.SAYED, JJ.
DATE ig : 19 June 2013 JUDGMENT - (PER : DR.D.Y.CHANDRACHUD, J.) :
1. Rule. Learned counsel for the Respondents waives service. By consent, the Rule is made returnable forthwith. The writ petition is taken up for hearing and final disposal, by consent and on the request of learned counsel.
2. The issue which falls for determination in this case is whether interest can in law be directed to be paid on a delayed refund of a pre-
deposit made before the CESTAT during the pendency of an appeal, when the appeal results in the action of the Department being set aside.
3. The Petitioners were the Appellants before the Customs, Excise and Service Tax Appellate Tribunal against an order of adjudication passed on 25 February 2008 by the Commissioner of Customs, Mumbai imposing penalties of Rs.7.50 crores and Rs.50.00 lakhs respectively under Clauses
(a) and (b) of Section 112 of the Customs Act, 1962. Initially, an order of adjudication had been passed in pursuance of a notice to show cause dated ::: Downloaded on - 27/08/2013 20:58:59 ::: 2 of 8 AP.1523.2013 9 May 1989. The order of adjudication dated 8 August 1989 had resulted in the imposition of penalties under Section 112 against which statutory appeals were filed before the then CEGAT, Mumbai. On 20 December 1990, in compliance with a direction of pre-deposit, the petitioners deposited amounts of Rs.20.00 lakhs and Rs.5.00 lakhs respectively. The Tribunal by its order dated 18 March 1989 remanded the proceedings back to the adjudicating authority upon which an order was passed on 25 February 2008, as noted above, imposing penalties of Rs.7.50 crores and Rs.50.00 lakhs respectively. The CESTAT by its judgment dated 29 May 2012 set aside the penalties imposed on the Petitioners. Before this Court it is not in dispute that the order of the CESTAT was accepted by the Revenue and no further challenge was made.
4. These proceedings under Article 226 of the Constitution were instituted on 11 January 2013 for enforcement of the order of the Tribunal and for grant of a consequential refund with interest from 20 December 1990 when the amounts of Rs.20.00 lakhs and Rs.5.00 lakhs respectively were paid. During the pendency of the proceedings, two orders of refund have been passed on 13 March 2013 by the Commissioner of Customs (Airport), Mumbai. The orders of refund record that the Petitioners submitted refund applications on 13 August 2012 which were received in the refund section on 16 August 2012 for refund respectively of Rs.20.00 lakhs and Rs.5.00 lakhs which amounts had been deposited on 20 December 1990 vide duty receipts bearing nos.002468 and 002469. These deposits were effected in compliance with the order of the Tribunal dated 1 October 1990. The Petitioners annexed to the refund applications copies of the order of the Tribunal dated 29 May 2012 and TR-6 challans dated 20 December 1990. A deficiency memo was issued to the Petitioners on 30 August 2012 to submit : (i) the original of the order of adjudication passed ::: Downloaded on - 27/08/2013 20:58:59 ::: 3 of 8 AP.1523.2013 by the Commissioner of Customs; (ii) the original of the order of the CESTAT dated 29 May 2012; (iii) the original of the DDR dated 20 December 1990 in respect of the payments of pre-deposit of Rs.20.00 lakhs and Rs.5.00 lakhs; and (iv) attested copies of the passport.
5. By a communication dated 18 October 2012, the Petitioners stated that the original copy of the order of adjudication had been filed before the Tribunal and therefore, was not in their possession. However, the order of the CESTAT dated 29 May 2012 as well as the originals of the deposit receipts dated 20 December 1990 were submitted. As regards the passport, it was stated that it had been taken over during the course of investigation of criminal complaint no.2214-S-03 pending before the Metropolitan Magistrate, 16th Court, Mumbai.
6. Thereafter, a personal hearing was fixed on 29 January 2013 and since the Petitioners did not remain present, a deficiency memo was issued on 5 February 2013 directing the Petitioners to submit their original passports. A further personal hearing was held on 13 March 2013 at which the Petitioners reiterated the submission in regard to the passport being lodged with the investigating agency. Eventually the personal hearing was treated as a reply to the deficiency memo and a refund has been ordered of Rs.20.00 lakhs and Rs.5.00 lakhs to the First and Second Petitioners by orders dated 13 March 2013.
7. Since a refund has been ordered and has now been granted to the Petitioners, that part of the order of the Tribunal has been complied with. The only subsisting issue relates to the payment of interest. Section 27-A of the Customs Act, 1962 was introduced by Amending Act No.XXII of 1995 to provide for interest on delayed refunds. Under Section 27, a ::: Downloaded on - 27/08/2013 20:58:59 ::: 4 of 8 AP.1523.2013 person claiming refund of duty and/or interest paid or borne by him is permitted to make an application to the Assistant or Deputy Commissioner of Customs before the expiry of one year from the date of payment of duty and/or interest. Clause (b) of sub-section 1-A of Section 27 provides that where duty becomes refundable as a consequence of a judgment, order or direction of the appellate authority, Tribunal or the Court, the limitation of one year shall be computed from the date of such judgment, order or direction. Under sub-section 2 of Section 27, on receipt of an application, the Assistant or the Deputy Commissioner is required to make an order of refund if he is satisfied that the whole or any part of the duty and interest, if any, paid by the applicant is refundable. Section 27-A, which deals with the payment of interest on delayed refunds, requires interest to be paid at a stipulated rate if any duty which is ordered to be refunded under sub-
section 2 of Section 27 is not refunded within three months of receipt of an application under sub-section 1.
8. In Union of India Vs. Orient Enterprises1, a Bench of two learned Judges of the Supreme Court held that a writ petition seeking relief of payment of interest on delayed refunds could not be maintained. The Supreme Court held that till the insertion of Section 27-A by Act XXII of 1995, there was no right entitling the payment of interest on delayed refunds under the Customs Act, 1962 and such a right was conferred for the first time by the insertion of that provision. The Supreme Court, however, held that cases where a direction for the payment of interest was by way of consequential relief along with the main relief of setting aside the impugned order of tax or duty, stood on a different footing.
9. Strictly speaking, Section 27-A applies to a claim of refund of duty or interest and does not specifically refer to the payment of interest on a 1 1998(99)-E.L.T.-193 (S.C.) ::: Downloaded on - 27/08/2013 20:58:59 ::: 5 of 8 AP.1523.2013 refund of penalty or on pre-deposit effected before the Appellate Tribunal or, for that matter, before the appellate authority. In Commissioner of Central Excise, Hyderabad Vs. I.T.C. Limited 2, the issue before a Bench of three learned Judges of the Supreme Court in a batch of appeals was whether a pre-deposit made as a pre-condition for the hearing of an appeal under the Central Excise Act, 1985 was, on the assessee being ultimately successful, refundable to the assessee with interest. The Tribunal had in diverse orders issued directions for the payment of interest on refunds of pre-deposit. Before the Supreme Court, the Solicitor General stated that the Central Board of Excise and Customs proposed to issue a circular in connection with the payment of interest on all such pre-deposits, a draft of which was placed on the record of the Supreme Court. The Supreme Court directed the payment of interest in terms of the draft circular. A circular was issued by the CBEC on 8 December 2004 reiterating that in terms of the directions of the Supreme Court, pre-deposits must be returned within three months from the date of the order passed by the Appellate Tribunal or court unless there was a stay on the order by a superior court and that the Board had decided to implement CESTAT orders already passed for payment of interest in compliance of which interest payable would be paid forthwith.
10. Hence, after the decision in Orient Enterprises which was rendered by two learned Judges, the issue as regards payment of interest on pre-
deposits which became refundable to assessees upon the final orders of the Tribunal was revisited by a Bench of three learned Judges of the Supreme Court in Commissioner of Central Excise, Hyderabad Vs. I.T.C. Ltd. (supra). During the pendency of the proceedings, a draft circular was issued by the CBEC accepting that a refund would have to be made of pre- deposits which became refundable following the final order of the Tribunal 2 2005(179)-E.L.T.-15 (S.C.) ::: Downloaded on - 27/08/2013 20:58:59 ::: 6 of 8 AP.1523.2013 or Court within a period of three months of the date of the order. The CBEC accepted that the liability to pay interest beyond a period of three months would stand attracted. The subject of the circular relates both to the return of deposits made in terms of Section 75 of the Central Excise Act, 1944 as well as Section 129E of the Customs Act, 1962. The Board has accepted in principle the entitlement of an assessee to refund of amounts due, of payments made towards pre-deposit, in compliance with the orders of the Tribunal. These proceedings are hence maintainable because they seek in substance a compliance with an enforceable obligation correctly assumed by the Revenue of returning pre-deposits within a reasonable period (three months being what the statute has prescribed) and of allowing interest where this obligation is breached for a reason not bearing on the conduct of the assessee. Looked at from another perspective, this subserves the requirement of fairness which every statute must observe to be in accord with Article 14 of the Constitution. If the rule of law is to be observed, the State can never assert that it will hold on to monies paid towards pre-deposits for interminably long periods. If that were to be allowed, pre-deposits could be held up for refund for years together despite the success of an assessee in appeal. Such a consequence would be unacceptable.
11. It was necessary for the Revenue in the present case to dispose of the refund application within a period of three months from the date of its receipt. As the record before the Court indicates, the Petitioners submitted a refund application on 13 August 2012 which was received on 16 August 2012. A deficiency memo was issued to the Petitioners on 30 August 2012. On 18 October 2012 the Petitioners forwarded a copy of the CESTAT order, in original, as well as receipts evidencing payment of pre-deposit. The Petitioners explained that they were unable to produce the original of ::: Downloaded on - 27/08/2013 20:58:59 ::: 7 of 8 AP.1523.2013 the order of adjudication since it had been filed with the Tribunal when the appeal was preferred, and the passport had been taken over during the course of investigation of the criminal complaint. The Commissioner of Customs was in any event provided with all necessary documentation namely - (i) the order of the Tribunal under which the refunds became payable; and (ii) the original receipts showing a pre-deposit of the duty of Rs.25.00 lakhs (comprising of Rs.20.00 lakhs in one case and Rs.5.00 lakhs in the other). Thereafter, there was no occasion for the Commissioner of Customs to once again issue a deficiency memo on 5 February 2013. As a matter of fact, subsequently the Commissioner treated the personal hearing as a reply to the deficiency memo and even accepted the case of the assessee to the effect that a refund was due and payable. Hence, there is no justifiable reason why payment of refund was delayed beyond the period of three months from 18 October 2012. Consequently interest would be payable with effect from 18 January 2013 at the rates stipulated in the relevant notifications under Section 27-A. We have not accepted the wider contention that interest on the pre-deposit should be paid with effect from the date of deposit (20 December 1990). There is neither a statutory nor administrative basis for such a claim. Besides, the pre-deposit is towards the amount due under the order which is in appeal before the Tribunal. The pre-deposit becomes refundable as a consequence of the order of the Tribunal. Hence, the claim for interest during the pendency of the appeal cannot be allowed.
12. We accordingly make rule absolute and allow the petition by directing the Respondents to pay interest to the Petitioners on the refund of the amounts of pre-deposit with effect from 18 January 2013 until payment of pre-deposit was effected at the rate stipulated ::: Downloaded on - 27/08/2013 20:58:59 ::: 8 of 8 AP.1523.2013 in the relevant notification issued under Section 27-A of the Customs Act, 1962. In the circumstances of the case, there shall be no order as to costs.
(DR.D.Y.CHANDRACHUD, J.) (A.A.SAYED, J.) MST ::: Downloaded on - 27/08/2013 20:58:59 :::