Conclusion: The assessee should have been put to Notice and a reasonable opportunity should have been given for representing their case. While the same was not done, jumping straight way to coercive measures was certainly uncalled for. Therefore, Interest collected being without authority of Law needs to be refunded along with applicable interest.
Section 142 empowers the Commissioner to recover sums due to government by distraining any movable or immovable property belonging to or under the control of the defaulter.
Assessee imported and cleared citric acid vide BOE dated 22.07.1992. Notice was issued based on CERA audit objection for INR 1,02,501 on 18.01.1993 and OIO was passed on 04.11.1996 confirming demand.
Assessee submitted that assessment order was passed without giving an opportunity of being heard.
Department vide letter dated 13.02.2017 and 14.02.2017 asked CBI, Fort to freeze the account of the assessee. Vide departmental letter dated 05.04.2017, assessee was asked to pay interest of INR 3,94,337. Assessee paid duty short paid of INR 1,02,501 and requested waiver of interest. However, an amount of INR 2,60,000 was debited from the drawback account of the assessee.
Assessee submitted that levy and collection of interest was introduced for the first time on 26.05.1995. Further for the recovery of interest, notice u/s 28(3) was necessary, however, no notice was issued.
Levy of interest –
It is not the intention of Law to penalize importers where the taxable event has occurred before the new legislation came in to effect. Further the assessee were not put to Notice on the requirement of paying interest and therefore the assessee is not required to pay any interest on the duty confirmed.
Freezing of bank account –
Deducting the amount due from the sums payable to the defaulter or detaining /selling the goods belonging to the defaulter and lying in the custody of customs or detaining the movable or immovable property are within the ambit of powers conferred u/s 142. However, freezing of accounts for recovery of interest which is not payable is incorrect.
FULL TEXT OF THE CESTAT JUDGEMENT
This appeal is directed against Order-in-Original No.24/2017-18 dated 14/12/2017 passed by the Commissioner of Customs (Import-II), Mumbai.
2. Briefly stated the facts of the case are as follows. M/s. Ansar & Co., the appellant have imported and cleared citric acid monohydrate BP-80 vide Bill of Entry No.4019 dated 22/07/1992. A show-cause notice – less charge demand was issued on the basis of CERA audit objection for an amount of Rs.1, 02,501 on 18/01/1993. Order-in-original dated 04/11/1996 was passed confirming the demand.
2.1. The appellant submitted that the order of assessment was confirmed without giving an opportunity to the importer for being heard. The assessment order was served on them in December, 2006 after a gap of so many years. The department served a notice dated 11/01/2017 for short levy and interest. The appellant vide letter 14/02/2017 requested the Deputy Commissioner to waive the interest and penalty. The department has written a letter dated 13/02/2017 and 14/02/2017 to Central Bank of India, Fort, Mumbai asking them to freeze the account of the appellant. The department sent a letter dated 05/04/2017 asking the appellant to pay interest of Rs.3, 94,337. The appellants have paid the duty short paid of Rs.1, 02,501, vide three different challans dated 31/01/2007, 14/02/2017 & 17/02/2017. The appellants requested vide representations dated 03/05/2017, 20/03/2017 and 12/07/2017. In view of the department letter an amount of Rs.2, 60,000/- was debited from the drawback account of the importer on 20/06/2017 and 05/07/2017.
2.2. The appellants filed an appeal No C/87040/17-Mum with CESTAT and an application dated 17/10/2017 for lifting the orders freezing the accounts. CESTAT passed an order No M/90704/17-SMB dated 03/11/2017 calling for the reply of the respondent Commissioner on 24/11/2017. CESTAT held, inter alia, that sudden freezing of the bank accounts in the year 2017 was not correct; appellants have suffered the course of natural justice and granting of any opportunity of hearing to the appellant; Not only this has caused peril to justice but also the recovery suffers from illegality which goes to the root of the matter for neither service of show-cause notice nor the adjudication order was served on the appellant. CESTAT has directed the Revenue to explain the reason why the bank account has been attached and whether there is any order against the appellant calling for such mode of recovery after hearing him.
2.3. The appellant vide letter dated 17/11/2017 have addressed a letter to the Chief Commissioner of Customs enclosing a copy of the CESTAT order and requesting for compliance thereon. The Commissioner of Customs vide report dated 22/11/2017 addressed to the Commissioner (AR) CESTAT, Mumbai has submitted the compliance report in respect of order dated 03/11/2017 by CESTAT. It was submitted that the demand notice dated 08/11/1993 was issued to the importer by post to the addressed intimated and on record and the same did not come undelivered. The importer did not respond to the demand notice. Therefore, another notice dated 24/01/1994 was issued not only by sending by post to the importer but a copy has been given to CHA who duly acknowledged the receipt of the same. The importer did not attend the PH within 10 days. Another letter dated 28/08/1996 was sent by Registered Post which also did not come back undelivered. Therefore, the case was adjudicated. Order-in-Original dated 04/11/1996 was sent by registered post and a copy was also given to CHA. Theses also did not return undelivered. Various reminders were issued and were not complied. Proceedings were initiated under Section142 (1) (e) (ii) read with Rule 4 of Customs (Attachment of Property of Defaulters for Recovery of Government Dues) Rules 1995 on 25/11/2009. The importer neither paid the dues not made any correspondence. Therefore, the issue was taken up with the Indian Bank Association vide letter dated 11/01/2017. Only after that the importer came forward and paid the duty amount vide three challans. The Commissioner contended that Section 28 of the Customs Act, provides for adjudication of duty only the provisions of interest under Section 28AA are attracted automatically. At the time of adjudication, the provisions of Section 28AA were very much in existence. Had the appellant deposited the duty before 03/02/1997 there would have been no interest to be paid as the payment of duty was delayed from 03/02/1997 to 17/02/2017, interest was calculated. As the importer did not even respond to letters, orders were issued for freezing the bank account maintained with SBI, CBI and ICICI banks. As there was insufficient balance accounts in CBI and SBI have been defreezed and the department reserves the right to recover the balance interest amount of Rs.1, 34,337.
2.4. Tribunal Vide order dated 24/11/2017 has observed that the Revenue authority below has defied the order of the Tribunal in without complying to the grounds of the order had disclosed to the appellants as there is any reason to defreeze the ICICI accounts when they have filed the letter stating that the accounts in CBI and SBI have been defreezed; neither the Commissioner nor the Chief Commissioner took pain to reduce the litigation.The Tribunal also issued notice to the learned Commissioner to show-cause the reason as to why contempt shall not be drawn against him for defying the order of the Tribunal passed on 03/11/2017. It was also directed that the appellant shall be heard on 27/11/2017 by 16 hours. Accordingly, after hearing the appellants, the Commissioner of Customs, Import-II, has passed an order dated 14/12/2017. Hence this appeal.
3. Learned Counsel for the appellant submits that the levy and collection of interest was introduced for the first time with effect from 26/05/1995 and it was prospective only; for recovery of interest, a notice in terms of Section 28 (3) of the Customs Act, 1962 was necessary; in the instant case no such notice was issued. The appellant was never called on to defend himself as to whether interests were payable for an import made in July 1992 and alleged short levy was pointed out in January 1993. Interest is not automatic but is by operation of law. The amount of interest was worked out pertaining to the period May 1995 to February 2017 for 22 years for the import made quite earlier. In view of the ratio of the Hon’ble Supreme Court decisions in the following cases in the absence of either “express words” or “necessary implications”, law could not be applied retrospectively; the provisions created for charging interest was a provision creating a new liability on the assessee. Therefore, the same cannot be retrospective.
i) Pratibha Processors vs. UOI – 1996 (88) ELT 12 (SC)
ii) CC (Chennai) Vs. Jayathi Krisha & Co. – 2000 (119) ELT 4 (SC)
iii) See Binani Industries Vs. CCT – 2007 (15) SCC 435
iv) L. Srinivasa Jute Mills (P) Ltd. – Vs. UOI – 2006 (2) SCC 740
3.1. Ld. Counsel further submitted that the order of the Commissioner dated 14/12/2017 may be set aside and the duty and interest be ordered to be refunded granting award interest @ 6% in view of the high handed action on the part of Revenue. Hon’ble Bench may also like to consider and draw an appropriate case of contempt against the concerned Commissioner and be referred to the Hon’ble High Court of Bombay, as notice has already been issued.
3.2. The learned Authorised Representative during the course of hearing on 22/11/2018 submitted that less charge demand, adjudication order, etc have been posted by RPAD to the appellants and a copy was also given to the CHA. The Bench then directed that Learned Authorised Representative to state the authority for freezing the bank account and to give submissions on issue of applicability on interest. The case was adjourned to 18/12/2018.
4. The learned AR has produced the copies of the less charge demand and the adjudication order though the copies were very faint and submitted that it could be inferred from the same that they have been sent by post and copies of the same have also been handed over to the CHA under acknowledgement. He has also submitted that freezing of the accounts was in terms of the provisions of Section 142 of the Customs, Act, 1962. He also submitted that as regards the applicability of interest that the same is discussed in the order of the learned Commissioner dated 14/12/2017.
5. Heard both sides and perused the records.
5.1. There are three issues involved in the case:
a) Whether principles of natural justice have been violated vis-à-vis less charge demand and adjudication order issued to the appellants.
b) Whether the provisions of interest which came into effect in 1996 can be made applicable to the imports made in 1992.
c) Whether the Revenue was within their right to freeze the accounts of the appellant.
d) Whether there is a case for contempt proceedings against the Commissioner.
5.2. Going by the facts of the case as discussed earlier, the Bill of Entry was filed in July 1992 less charge demand was issued on 18/01/1993 which I find is within the limitation. As per the compliance report given by Commissioner a notice for attending the Personal Hearing was issued on 24.1.1994 and a copy was served on CHA also. Another letter dated 28.08.1996 was issued informing about the Personal Hearing. These notices were not returned undelivered. The OIO dated 04.11.1996 was passed. It was the appellant’s contention that they have not received such notice and therefore, they were denied of an opportunity to defend themselves. I find that the department has issued less charge demand and adjudication order. The same were sent by post. Also, the copies of the same were handed over to the CHA. It was the department’s contention that the orders did not return back undelivered. However, in view of the above, it is seen that only two notices for hearing were given in a span of about 3 years. It is not explained why it needed 3 years for 2 notices. I find that the department has issued the letters on their part and as much as the provisions of Law contained in Section 153 of the Customs Act, 1962 are complied with. Though, there is no impropriety or not following the due procedure as far as the service of less charge demand, Notices for personal Hearing and OIO are concerned, the appellant’s contention that the principles of natural justice are not followed and they were not given an opportunity stands. The appellant submitted that the department which could trace back the importer and his bank accounts after an expiry of two decades could have ensured that the demand notice, Hearing Notices have reached them and an opportunity of being heard was given to the appellants in the interest of Natural Justice. The way 2 notices for hearing were given in 3 years shows a lackadaisical approach and lacks professionalism. On the other hand, I find that during the relevant period copies of the letters were also given to the CHA while they were sent by post to the appellants. The letters or orders did not come undelivered as per the averment of the department. It is also not the appellant’s contention that they have changed their address during the relevant period. Therefore, there appears to be no cogent reason to suspect that the letters/orders were not delivered to/ received by the appellants. The appellants being regular importers/ exporters at that time, the CHA could have also handed over them the letters. In the result, I find that both the sides have contributed to the condition where principles of Natural Justice have been violated in spirit, if not in Letter. Normally, the issue may have to go back to the However, thus the Original adjudicating authority for a fresh consideration. However, looking in to the fact that the issue is quite old, the facts of the case and submissions of the Learned Counsel that they have paid the duty, I find that no purpose would be solved, in remanding the matter back, than further procrastination of the litigation which is already 3 decades old. I find that such a decision would not be in the interest of justice and the Government revenue cannot be put in a jeopardy due to the commissions or omissions of some officers.
5.3. I will examine the provisions of interest which came into effect in 1996 and as to whether they can be made applicable to the imports made in 1992. Learned Counsel for the appellant submits that the levy and collection of interest was introduced for the first time with effect from 26/05/1995 and it was prospective only; for recovery of interest, a notice in terms of Section 28 (3) of the Customs Act, 1962 was necessary; in the instant case no such notice was issued. The appellant was never called on to defend himself as to whether interests were payable for an import made in July 1992 and alleged short levy was pointed out in January 1993. Interest is not automatic but is by operation of law. I find that the Commissioner has opined that the relevant date for accrual of interest is not the date of short levy. The relevant date for provisions of interest come in to force after three months of the determination of duty by the proper officer. The Learned representative for the department submitted that Section 28AA reads ‘’ where a person, chargeable with the duty determined under Sub section (2) of Section 28, fails to pay such duty within three months from the date of such determination, he shall pay, in addition to the duty, interest at such rate not below ten percent and not exceeding thirty six percent per annum, as is for the time being fixed by the Board, on such duty from the date immediately after the expiry of three months till the payment of such duty”. He further submitted that, in the instant case, the appellants became person chargeable to duty on 04.11.1996, therefore as per Revenue the Interest was chargeable from 03.02.1997 as the duty thus determined remained to be unpaid. The appellants submit that they have imported in 1993 and at that time there were no provision for payment of interest. I find that the
importer has become chargeable to duty at the time of importation. For that reason, I find that relevant date should be the date of occurrence of taxable event. I find that it is not the intention of Law to penalize importers where the taxable event has occurred before the new legislation came in to effect. Moreover, I find that the appellants were not put to Notice on the requirement of paying interest vide the adjudicating order. Therefore, I find that the appellants are not required to pay any interest on the duty confirmed. I find that Tribunal in the case of Soumag Electronics Vs CC, Chennai 2018(364) ELT (Tri-Chennai), held that ‘as the goods were imported in 1989 and the legal statutory provision for enabling charging of interest was introduced only w.e.f. 26-5-1995 by the Finance Act, 1995, hence there is merit in appellants contention that no interest can be demanded in respect of imports which was done in 1989’
Further I find that similar view was taken in the following cases.
(i) CCE, Madurai Vs Vasu Chemicals 2018(361) ELT 167 (Mad)
(ii) Bhagyanagar Metals Ltd Vs CCE-Hyderabad-II 2016(333) ELT 395 (Tri-LB)
(iii) CCE, Coimbatore Vs Elgi Equipment Ltd 2001(128) ELT 52 (SC)
(iv) Sterlite Industries (India) Ltd Vs CC Trichy 2014(311) ELT 91(Tri-Chennai).
In view of the above, I find that the appellant is not required to pay any interest. It was not correct for the department to collect Interest. Moreover, the manner in which the department proceeded to collect interest also sounds high handed. The appellant should have been put to Notice and a reasonable opportunity should have been given to appellants for representing their case. While the same was not done, jumping straight way to coercive measures was certainly uncalled for. Therefore, Interest collected being without authority of Law needs to be refunded along with applicable interest.
5.4. Coming to the issue of whether the Revenue was right in freezing the accounts of the Appellants to recover the duty and interest, the Learned authorised representative for the department submitted that the action was taken under the provisions of Section 142 of the Customs Act, 1962. I find that 142(1) (c) provides that if the amount cannot be recovered from such person in the manner provided in Clause (a) or Clause (b)
ii) the proper officer may, on an authorization by a (principal Commissioner of Customs or 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 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 cst of sale remaining unpaid and shall render he surplus, if any, to such person.
Further we find that in terms of Section 142 (1) (d) (ii)
(ii) every person to whom the notice is issued under this section shall be bound to comply with such notice, and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before the payment is made, notwithstanding any rule, practice or requirement to the contrary.
Going by the above provisions of Section 142, it is seen that the Commissioner of Customs is empowered to recover sums due to government by distraining any movable or immovable property belonging to or under the control of the defaulter. Therefore deducting the amount due from the ums payable to the defaulter or detaining / selling the goods belonging to the defaulter and lying in the custody of customs or detaining the movable or immovable property are within the ambit of powers conferred under Section 142.
Therefore, I find that there if no infirmity in the said orders issued by the Commissioner in freezing the bank accounts of the Appellants. However, freezing of accounts for recovery of interest which is not payable is incorrect.
5.5. Coming to the last issue of whether or not there is a case for contempt against the Commissioner, I find that CESTAT vide order dated 03.11.2017 has directed the Learned Chief Commissioner to examine the facts of the case and to issue appropriate guidelines to the field officer so that the litigation does not perpetuate but comes to an end. Vide order dated 24.11.2017 CESTAT has directed that the Learned Commissioner is expected to bring an end to the litigation. Commissioner was asked to appear in person on 08.12.2017. On going through the records of the case that Commissioner of Customs (Imp-II) has passed an order dated 14.12.2017 after hearing the Learned Counsel for the Appellants. It was also reported that the Department has defreezed the accounts of the Appellants in Central Bank of India and State Bank of India. Much water has flown since then and we are in 2019. Contempt proceedings at this stage would not solve any purpose rather than to further increase the litigation which in no way was the intention of the above cited orders of the Tribunals. As the accounts have been defreezed and a speaking order has been passed by the Learned Commissioner, no further justice could be achieved by pursuing the contempt proceedings. Therefore, at this juncture when the final order is ready to be issued I am not inclined to pursue the contempt proceedings. However, the concerned officers are advised to be judicious in dealing with the importers/exporters and to ensure that the provisions of law are followed in letter and spirit.
6. In view of the above, I allow the appeal to the extent of setting aside the interest. I hold that the duty of Rs.1,02,501/- is payable by the Appellants. Interest paid by the Appellants shall be refunded along with Applicable interest within 4 weeks of receipt of this order.