SCA/4422/2008 1/18 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No.4422 of 2008 For Approval and Signature: HONOURABLE MR.JUSTICE D.A.MEHTA Sd/- HONOURABLE MS.JUSTICE H.N.DEVANI Sd/- =================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? YES 2 To be referred to the Reporter or not ? YES 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? NO 5 Whether it is to be circulated to the civil judge ? NO =================================================== MESSRS OMKAR EXPORTS & 1 - Petitioner(s) Versus UNION OF INDIA & 2 - Respondent(s) =================================================== Appearance : MR PARESH M DAVE for Petitioner(s) : 1 - 2. MR RM CHHAYA for Respondent(s) : 1 - 3. MR HARIN P RAVAL for Respondent(s) : 1, =================================================== CORAM : HONOURABLE MR.JUSTICE D.A.MEHTA and HONOURABLE MS.JUSTICE H.N.DEVANI Date : 23/07/2008 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE D.A.MEHTA) SCA/4422/2008 2/18 JUDGMENT (1) Considering scope of controversy the petition is taken up for final hearing and disposal. RULE. Learned counsel for the respondents is directed to waive service. (2) The petitioner has preferred this petition praying for following reliefs: “13. In the above premises, the petitioners most respectfully pray as under:- A) That Your Lordships may be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate writ, direction or order, quashing and setting aside decision of the second respondent conveyed to the petitioners vide letter F.No.V/Misc- 4/2003-R dated 29.2.2008 (Annexure-'H') thereby directing the second respondent to forthwith return amount of Rs.7.50 lakhs to the petitioners; B) That Your Lordships may be pleased to issue a Writ of Mandamus or a writ in the nature of Mandamus or any other appropriate writ, direction or order, directing respondent No.2 to pay compensation by way of interest at the rate of 12% p.a. on the amount of SCA/4422/2008 3/18 JUDGMENT Rs.7.50 lakhs for the period from August-October, 2001 till actual restitution of this amount, or for the period that may be deemed fit by this Hon'ble Court; C) Pending hearing and final disposal of the present petition, Your Lordships may be pleased to direct the respondents, their servants and agents to forthwith return the amount of Rs.7.50 lakhs to the petitioners with interest that may be deemed fit by this Hon'ble Court; D) An ex-parte ad-interim relief in terms of Para 13 (C) above may kindly be granted; E) Any other further relief that may be deemed fit in the facts and circumstances of the case may also please be granted.” (3) The facts, which are not in dispute, are that on 10.08.2001 officers of the Directorate General of Central Excise Intelligence, Vadodara visited premises of – (i) M/s. Gopi Synthetics, Ahmedabad; (ii) M/s. Omkar Exports (the petitioner herein) and (iii) M/s. Omkar Textile Limited for making certain inquiries. SCA/4422/2008 4/18 JUDGMENT It appears that the said authority prima facie opined that the petitioner had made a wrong claim for duty drawback amounting to Rs.25,57,386/-. It is the say of the petitioner that a sum of Rs.7,50,000/- was recovered by the officers of the said authority for the period between 18.06.2001 to 15.09.2001 towards such a claim of duty drawback. The case of the respondent authority is that it was the petitioner who had accepted having made a wrong claim and voluntarily deposited the amount of Rs.7,50,000/-. (4) It is the say of the petitioner that on 11.03.2005, in absence of any further proceedings as a follow up to the action taken on 10.08.2001, the petitioner preferred a refund claim. Till 19.04.2007 respondent No.2 (hereinafter referred to as “the respondent”) did not take any action on the refund claim nor was any other action initiated in accordance with law, but on 19.04.2007 the SCA/4422/2008 5/18 JUDGMENT papers relating to refund claim of Rs.7,50,000/- were returned to the petitioner as, according to the respondent, the refund claim was related to recovery of drawback and not towards any duty of Excise or Customs. (5) Against the letter dated 19.04.2007 the petitioner preferred appeal before the Commissioner (Appeals) who, after hearing, made an order on 31.05.2007. The operative portion of the order reads as under: “16. In view of the foregoing, the appeals of the appellant is hereby allowed. The amount of Rs.7.5 lakhs got illegally paid by the DGCEI officers to the credit of the Central Govt. is held to be illegal and improper. The Asstt. Commissioner should pay back the amount of Rs.7.5 lakhs to the appellant by endorsing appropriately on the body of TR-6 challans without further loss of time. 17. However, when sum so paid is not being considered as central excise duty or customs duty or inadmissible drawback amount, then in such a case, there is no scope for paying any interest to the appellant. The provisions of Section 11 BB of the Act and SCA/4422/2008 6/18 JUDGMENT Section 27(A) of the Customs Act etc. are not attracted in the facts and circumstances of the case. The appeal is accordingly hereby allowed in full, in above terms.” (6) The respondent authority carried the matter in appeal before Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Ahmedabad (the Tribunal) against the order made by the Commissioner (Appeals). The Tribunal upheld the order made by the Commissioner (Appeals) by observing as under: “ Admittedly, the amount in question was deposited in 2001 and for more than a period of 4 years, even the proceedings to confirm the said amount deposited by the assessee at the time of investigation, had not been initiated by the Revenue. As rightly observed by the Commissioner (Appeals), Revenue has no authority or jurisdiction to keep the said deposit amount with them for unlimited time in absence of any determination of the duty due from the assessee or even initiation of the same, the Revenue has no justification for keeping the said amount with them. As such, appellate authority rightly held the amount to be refunded to the respondent.” SCA/4422/2008 7/18 JUDGMENT (7) Armed with the two orders made by both Commissioner (Appeals) and the Tribunal the petitioner approached the respondent authority vide communication dated 25.02.2008 by stating that the refund claim made by the petitioner on 11.03.2005 was required to be sanctioned with interest from 10.08.2001. The said letter carried an endorsement which reads as under: “The Commissioner, Central Excise, Ahmedabad- I, this is just to show you how the assessee falling under your jurisdiction is being treated. What would happen if the officers of the law take law in their hands and try to dictate their terms instead of law. Kindly look into the matter personally and redress the grievance in the interest of justice. 4. The Chief Commissioner, Central Excise, Ahmedabad, with a request to look into the matter for furtherance of justice.” (8) The respondent authority replied vide communication dated 29.02.2008 (Annexure-H) which reads as under: “OFFICE OF THE ASSISTANT COMMISSIONER OF SCA/4422/2008 8/18 JUDGMENT CENTRAL EXCISE DIVISION-IV, AHMEDABAD-I, By R.P.A.D. F.No.V/Misc-4/2003-R/2238 DT.29-02-2008 To M/s.Omkar Exports (A unit of Omkar Overseas Ltd.) Gopi Compound, Survey no.302, Isanpur Vatva Road, Narol, Ahmedabad-382405. Sir, Sub.: Refund claim of Rs.7.5 lacs of M/s.Omkar Exports, Ahmedabad. Please refer to refund claim filed by you with this office in light of Hon'ble Cestat Order No.A/2912/Ahd/WZB/07 dated 30- 11-2007. In this context, it is observed that the said refund is pertains to refund of drawback and not of excise duty as it can be seen from Challan by which the amount of Rs.7.5 lacs were deposited in the government account clearly showing that the said amount deposited towards “payment towards irregular availment of Drawback as pointed out by DGCEI and accounts head mentioned in challan towards the said payment is 00370016 (Recovery of drawback). Thus it is opined that this office is not a proper office to process the same, therefore, you are requested to approach the concerned customs authorities for refund of the said amount. Yours Sincerely, SCA/4422/2008 9/18 JUDGMENT Sd/- (J.S. Dongre) Assistant Commissioner, Central Excise Division-IV, Ahmedabad-I. Copy to: Joint Commissioner (Audit) Central Excise, Ahmedabad-I. With reference to their letter F.No.VI/10- 94/IA/Pre-2007 dated 28-02-2008, for information please. (9) Hence, the petition. Upon notice having been issued on 14.03.2008 making the same returnable on 08.04.2008, the respondent has filed affidavit-in-reply dated 07.04.2008 and annexed thereto one final order sanctioning refund which bears the date of order as 29.01.2008 and date of issue as 31.03.2008. (10) Learned advocate for the petitioner has submitted that in the facts and circumstances of the case the petitioner is entitled to interest as prayed for right from 10.08.2001. Alternatively, it was submitted that at least from the date of order of the Commissioner (Appeals) viz. 31.05.2007 the petitioner should be granted interest as the funds have SCA/4422/2008 10/18 JUDGMENT been retained and utilized by the respondents without authority of law. (11) On behalf of the respondent, learned counsel submitted that the facts narrated in the affidavit-in-reply would indicate that there was some confusion in light of the amount having been credited under a particular head over which the respondent authority had no direct control and hence, by virtue of administrative exigences, time has been consumed in sanctioning the refund and thus, no case was made out for refund. Alternatively, it was contended that even under normal circumstances statute stipulates payment of interest only if a period of 90 days has elapsed within which the refund claim is not sanctioned and the interest has to be computed from the ninety first day in such circumstances. Therefore, if one considers the fact that after order of CESTAT dated 30.11.2007 the petitioner had filed a fresh refund claim on 07.12.2007 and that the order SCA/4422/2008 11/18 JUDGMENT of refund is made on 31.03.2008 no interest would become payable as the balance period i.e. after deducting 90 days, would be a period of 22 days which is less than a completed month. (12) There is no dispute as to the fact about a sum of Rs.7,50,000/- having been paid by the petitioner. It is not necessary to go into the aspect as to whether the said amount was paid voluntarily or otherwise considering the respective stands of both the sides. Suffice it to state that after the said amount was recovered on 31.08.2001 and 12.10.2001 no further action was initiated by any authority in accordance with law. The action which was taken on 10.08.2001 by the Directorate General for Central Excise Intelligence was only by a department of Union of India and directly related with ensuring compliance with the law of Central Excise. Therefore, it was respondent No.2 who was directly concerned SCA/4422/2008 12/18 JUDGMENT with retention of the amount in accordance with the provisions of law but as the record reveals in fact no steps for retaining the amount as provided in law were initiated. The period during which no steps were taken is not a small period as observed by the Commissioner (Appeals) : it is a period of nearly four years. (13) The second thing that strikes one and stares in face is the fact that after the petitioner made an application for refund on 11.03.2005 for two years no steps were taken by the respondent authority. It was only on 19.04.2007 that the papers of refund claim were returned to the petitioner. (14) Thereafter, when the matter was carried before the Tribunal it was the respondent authority who was the appellant through the Commissioner of Central Excise, Ahmedabad-I. In these circumstances, the stand of the respondent authority as noted in communication dated SCA/4422/2008 13/18 JUDGMENT 29.02.2008 is not only incorrect but downright dishonest. There was no question of the respondent authority asking the petitioner that the petitioner should approach the concerned customs authority for refund of the amount. If the respondent authority had a bona fide belief the petitioner ought to have been informed immediately on receipt of the refund application in March 2005 that the respondent was not the proper authority for entertaining the claim of refund. Instead of that even on 19.04.2007 the petitioner was only informed that the claim being premature the original claim papers were being returned. At the same time it was the Central Excise Department which filed the appeal before CESTAT challenging order of the Commissioner (Appeals). (15) The aforesaid facts are narrated only for the limited purpose of showing that the averments made in the affidavit-in-reply for explaining the delay in dealing with the refund claim do SCA/4422/2008 14/18 JUDGMENT not merit acceptance considering the conduct of the respondent authority. (16) In so far as the reliefs prayed for by the petitioner are concerned, in relation to the refund itself, the said prayer would not survive in light of the order dated 29.01.2008 issuing refund. The only question that would then survive is as to whether the petitioner is entitled to any interest, and if yes, at what rate and for what period. (17) As can be noted from the extracted portion of the order made by the Commissioner (Appeals) in Paragraph No.17 of the order the Commissioner (Appeals) had recorded a finding that the petitioner was not entitled to interest in terms of the provisions of either the Central Excise Act or the Customs Act and hence, there was no scope for paying any interest to the petitioner. In the circumstances, the petitioner not having challenged the aforesaid finding, despite SCA/4422/2008 15/18 JUDGMENT revenue having preferred an appeal before the Tribunal, cannot claim interest at least up to the date of order made by the Commissioner (Appeals). (18) Thereafter, considering the fact that the respondent authority had carried the matter in appeal before the Tribunal one may exclude the period till the point of time the Tribunal dismissed the appeal of revenue viz. 30.11.2007. One more month for complying with the procedural requirement may also be considered as reasonable period and hence, at least till 31.12.2007 the respondent would not be required to bear any interest. (19) However, on and from 01.01.2008 there is no reason as to why the amount which was originally collected without authority of law should not bear interest till the point of time the same is actually paid to the petitioner. The contention on behalf of the respondent authority that the refund claim was SCA/4422/2008 16/18 JUDGMENT made only on 07.12.2007 and hence, till that point of time there was no question of granting interest and interest, if any, may be computed after a period of 90 days from the end of the said month also does not merit acceptance. It is an accepted position between the parties that at no point of time have the provisions of either the Central Excise or the Customs Act been invoked by any of the authorities including the respondent herein. Therefore, at this stage, the respondent authority cannot be permitted to take recourse to the statutory period of limitation prescribed for payment of interest on a refund that is granted. (20) In the facts and circumstances of the case the sum of Rs.7,50,000/- shall bear interest @ 5% p.a. with interest being calculated at daily rests on and from 01.01.2008 till the point of time the same is actually paid. Accordingly, the respondent is directed to make payment of interest calculated in the aforesaid manner SCA/4422/2008 17/18 JUDGMENT for the period 01.01.2008 upto 12.04.2008 and such payment shall be made on or before 31.07.2008, failing which the interest shall continue to run for the balance period viz. from 13.04.2008 till the point of time interest payment is actually made at the same rate as specified hereinbefore. (21) In light of the facts which have come on record it is apparent that there is a serious lapse on the part of the respondent herein and the said lapse is sought to be covered up by suggesting to the petitioner to approach a different authority only on the basis of the amount having been credited under a different head of account at New Delhi. The respondent authority should not forget that in so far as the petitioner is concerned, Directorate General of Central Excise Intelligence is merely a limb of the Central Excise Department of Union of India and the attempt to shift the entire burden on the customs department was not only not warranted, but as observed SCA/4422/2008 18/18 JUDGMENT hereinbefore, dishonest. The petitioner cannot be denied legitimate relief only on the basis of accounting entries, which is an internal matter of the respondents. Hence, the interest payment, which is made as directed hereinbefore, shall in the first instance be made by the respondent department and thereafter the Chief Commissioner of Central Excise shall ensure that the said amount is recovered from the respondent herein so as to ensure that the exchequer is not put to loss. (22) The petition is allowed accordingly in the aforesaid terms. Rule made absolute to the aforesaid extent. There shall be no order as to costs. Sd/- [D.A. MEHTA, J] Sd/- [H.N.DEVANI, J] *** Bhavesh*