Inadvertent mentioning of wrong assessee code does not invalidate payment: HC

Urvashi Porwal

Brief of the Case

In the case of Devang Paper Mills Pvt Ltd Vs UOI, it was held that merely mentioning wrong code in the process, cannot result into such harsh consequence of the entire payment not being recognized as valid, incurring further liability of repayment of the basic duty with interest and penalties.

Brief facts of the Case

The petitioner is a Private Limited company and is engaged in the manufacture of excisable goods for which the petitioner enjoys central excise registration. Petitioner has been allotted Code No.AADCD7232REM002. It is under this code that the petitioner regularly files its returns. In the month of August 2014, the petitioner has incurred duty liability of Rs.22,15,000/­, which liability the petitioner discharged in cash through personal ledger account. While paying such duty, the ‘challan’ under which the amount is deposited in the bank, the petitioner, due to oversight, mentioned the assessee Code No.AADCD7232REM001 instead of Code No.AADCD7232REM002. The petitioner immediately thereupon pointed out this issue to the Audit Officer under letter dated 19.03.2015 in detail explaining the background leading to such mistake. On 05.05.2015, the Department wrote to the petitioner that the assessee code now cannot be changed and only remedy available to the petitioner would be to seek refund. It was conveyed to the petitioner that the duty paid in the wrong assessee code cannot be treated as payment of excise duty for the month of July 2014 and the assessee should therefore make payment of the said amount again. Any delay would invite interest and penalty.

It is this letter dated 05.05.2015 the petitioner has challenged in the present petition. Pending the petition, the petitioner also received notice dated 21.07.2015 pointing out to the petitioner that for the month of August 2014, the petitioner had to deposit the basic duty of Rs.20.25 lacs, which would further invite education cess, higher education cess and payer cess (sic ­paper cess). The petitioner did deposit amount of Rs.22.15 in the wrong code, which would be treated as non­payment of duty. Under the circumstances, the petitioner would invite penalty under Rule 8(3A) of the Central Excise Rules, 2002. The petitioner was thereupon called upon to show cause why action should not be taken for recovery of the unpaid duty with penalty and interest.

Held by Hon’ble High Court of Gujarat

The Hon’ble High Court stated that it is undisputed that the petitioner did deposit a sum of Rs.22.15 lacs for the duty liability for the month of August 2014. It is equally undisputed that the assessee code indicated by the petitioner along with the challan was wrong one. The Department does not dispute that the amount of Rs.22.15 lacs was received by way of duty for the assessee’s excise liability and the correct excise code of the assessee is AADCD7232REM002. The department however submitted that the Accounting Division would not reverse the amount and credit into the account of the assessee. It was therefore treated as non­payment of the duty and issued notice for recovery with penalty.

Whatever be the accounting difficulty, when undisputed fact is that the petitioner did pay a certain excise duty, merely mentioning wrong code in the process, cannot result into such harsh consequence of the entire payment not being recognized as valid, incurring further liability of repayment of the basic duty with interest and penalties. Such amount was deposited by the petitioner with the Government of India and it was duly credited in the Government account. It is not even the case of the respondents that the petitioner had any other code by the number AADCD7232REM001 and for which there was separate manufacturing activity inviting separate duty liability. Indisputably, thus, the petitioner had singular duty liability for which the actual payment was also made. Under the circumstances, the impugned communication dated 05.05.2015 and notice dated 21.07.2015 are quashed. The respondents are directed to give credit of the duty paid by the petitioner for a sum of Rs.22.15 lacs by making necessary accounting entries on the basis that the same was paid at the relevant time. If thereafter any sum remains unpaid, it would be open for the Department to take further action in accordance with law.

The petition is disposed of in the above terms.