Small things show the larger picture likely to emerge. The state has been liberalizing the economy for the last more than a decade. Rules have been simplified, and more trust has been imposed in the assessee. Such measures have resulted into tremendous growth of the economy to an extent that our country is seen as emerging superpower. Even on revenue front, unprecedented revenue buyoncy has been witnessed, which could never been achieved in the so-called controlled economy. Small comforts of life- like sugar, kerosene, telephone connection etc. is available to the citizens without any reference of VIP. However, such development has resulted into curtailment of power of the state, particularly politicians and bureaucrats. And we are witnessing a reaction from that class. Overtly and covertly efforts are being made to introduce measures to regain that control, which License, Quota, Permit Raj provided to them. Thus you can see the Government trying to control the prices of Cement and Steel, allegations being leveled against the industry in generalized form, stringent measures capable of being abused being introduced in the taxation laws, return of FERA in the form of anti money laundering Act, and the list is never ending.
The judiciary is seen as a bulwark against such misappropriation of power by the state. However, when such power is misappropriated by government as during emergency, citizen’s experience has not been very heart-warming in this regard. Indian judiciary could not satisfy the aspirations of the people at the time of emergency when it delivered the judgment in “Heabus Corpus” case. The court held in this case that Right to life doesn’t exist in India beyond Article 21 of the Constitution of India. Once the Article is suspended, there is no Right to Life of Liberty in India. Jayaprakash Narayan said that the decision has put out the last flickering candle of individual freedom. Mrs. Gandhi’s dictatorship both in its personalized and institutionalized forms is now complete. When I was reading the Hon’ble Tribunal’s Judgment in case of Radhakrishna Synthetics, I felt as if I am reading the same judgment as delivered in Heabus Corpus case. This paper is the author’s personal reaction to the judgment in the case, as the author have developed a fear that whether the quasi-judicial body is also being affected by development in executive.
Rights are to guarded against every organ of the state, including the Judiciary. In India, there is a little scrutiny of judgments delivered by the judicial organ of the state. Such scrutiny is required in order to promote transparency and efficiency and act as a guarantee against usurpation of liberty. There is little or no scrutiny of judges in India and people are wary of commenting on judgments. The social attitudes and orientation of judges of the Supreme Court must be conveyed to the public to create awareness of what individual judges stand for. Judges must realize that what they write will not be lost in a labyrinth of law journals.
FACTS OF THE CASE:
There was a demand against the company. The duty demand was confirmed against which the assessee filed appeal before the Commissioner (Appeal). In the meantime, the assessee deposited the amount vide debit entry in RG23A part-II. When the appeal was decided in the favour of the assessee, the assessee informed to the department and took credit of the amount it deposited earlier. Demand was raised, and the tribunal held that such re-credit of amount is recoverable and imposed penalty on the assessee.
In the present case the total duty demand is 91,607/- and penalty imposed is 5000/-. A very small sum in Central Excise parlance. However the observations of the Hon’ble Tribunal and its approach to the issue is not only erroneous and contradictory- it is draconian. Further, the tribunal has shown the approach that fault of the revenue can be overlooked and assessee can be penalized without any fault.
CONTRADICTION IN JUDGMENT:
On the face of it, the judgment is contradictory. The judgment syas in para 6.1,
“When the original authority by his order dated 08.10.1995 confirmed the demand of 91,609/- the same become payable unless otherwise stayed by the Commissioner (Appeals). They have paid the amount on 19.09.1997. This payment was due to any order of pre-deposit made by the Commissioners (Appeals). In other words, what has been paid was the duty amount duly confirmed by the original authority.”
Thus the tribunal reached to the conclusion that this was a payment of duty, and not a pre deposit of duty. However, the tribunal forgot that even the department is not pleading that it is a payment of duty- the department itself is saying that it is a pre deposit of duty. The tribunal further forgot that if duty was paid in 1997, refund can not be taken be taken in 1999, after the limitation period. Even the department was not pleading the limitation. Not to mention that the tribunal also forgot plethora of its own judgments, which says that amount paid after adjudication is pre deposit of duty.
Further it says in para 6.2
“The assessee is entitled to take credit in their RG 23A accounts based on specified duty paying documents. While the assessee is authorized to debit PLA account, RG23A account on their own for payment of duty, the question of taking suo motu credit of any alleged sum due from the department does not arise. In other words self assessment and self payment is envisaged. The system of taking self refund is not authorized by law.”
The logic, on face of it, looks very convincing but self-contradictory. There is no provision in Central Excise to pre deposit duty through RG23A part-II. If we go by words of the statute (positivist interpretation of law), the very first act of payment of pre-deposit by debiting RG23A part-II is irregular, and in that case the assessee has every right to erase that irregularity by taking credit. What the Tribunal is saying that you can pay duty in an irregular manner, but cannot take refund irregularly. That means, positive interpretation of law when it favours the department, but otherwise when it is against the department.
Say for example the assessee was penalized for taking credit of pre deposit made, however it has never been explained as to which provision of the Act, the assessee has violated. An assessee can always be penalized without first explaining which provision of law has been violated by him.
In para 6.4 the judgment says,
“If the refund was due in pursuance of the Commissioner (Appeals) order, the assessee should have sought the refund to enable the competent authority to consider the same and sanction as per law and if there was any delay in the sanction of refund, the law provides for payment of interest as per law. The question of assessee taking a suo motu refund of duty paid by them is highly objectionable and is not permitted by the law.”
The para is equally convincing but very dangerous. The tribunal conveniently forgot that the assessee did inform to the department, and the department has not taken any action (neither accepted nor rejected) on the assessee application for approximately 8 years. Is it legally permitted? And silence of judgment on the issue says much more. Further, the assessee is not required to seek permission of law for every act, there is no law which permit you to breathe. All that is required to not to do anything prohibited by law- and there is no law which prohibits self credit of pre deposit made by debiting RG23A. The judgment has also not thrown any light on any provision, which prohibits such act.
GAP IN LAW:
No law is complete. There are always situations for which there is no clear cut provision in law. In those situations, authorities, more so judicial & quasi judicial, are required to understand the situation and fill in the gaps in law.
There is a provision of pre-deposit of duty in Central Excise, but there is no procedure as to how the deposit is made. Refund of pre deposit is not governed by Section 11B, and there is no other provision of refund in Central Excise, thus no provision of refund of pre deposit. Without explaining such things as what the assessee should have done, the tribunal has penalized the assessee. Such penalty is cavalier and draconian.
See other side of it, the judgment is saying that credit in RG 23A can be taken only on the basis of certain documents. Order of the department is not enumerated as one of the documents. Thus even if the department orders that such credit can be taken, then also such credit will be illegal. And the department will not refund the amount in cash, as duty duty paid through Cenvat can be refunded in cash only in limited situations.
What the assessee did is perfectly legal and and supported by numerous judgments. Pre deposit can be made by debit in RG 23 register as held by lerger bench of Tribunal in Birla Yamaha Ltd. v. CCE [1996 (83) ELT 396], Shriram Steel v. CCE [1997 (92) ELT 71], Morarjee v. CCE [2003 (157) ELT 657] and Kopran Ltd. v. CCE [2005 (188) ELT 431]. Thus the pre deposit was perfectly legal.
The assessee was not required to file any refund claim as explained in CBEC circular No. 275/37/2k-CX-8A dated 2-1-2002.
Further the assessee can take the self credit not only in RG23 register, but even in PLA if pre deposit was made through PLA. In Ambica Hydraulics v. CCE [2003 (158) ELT 299], the Tribunal held,
“I have heard both sides. It is well settled that for claiming the refund of the pre-deposited amount, no formal application for the refund of the same in terms of Section 11B of the Act is required to be made by the assessee. In this context reference may be made to Nestle India Ltd. v. Asstt. Commissioner of C. Ex, Mysore-II, 2003 (154) E.L.T. 567 (Kar.). The Tribunal also in a number of cases has taken this very view. In the case of Karam Chand Thapar & Bros. (CS) Ltd. v. CCE, Jamshedpur, 2003 (151) E.L.T. 342 (T), the Tribunal has observed that the credit of the pre-deposited amount after the passing of the order in favour of the assessee by the appellate authority in their PLA can be taken without filing the refund application. To the same effect is the law laid down in the case of Vimal Alloys v. CCE, Chandigarh, 2002 (48) RLT 550 (T). In face of this position of the law, the appellants had rightly taken the credit of the amount of Rs. 59,000/- in their PLA after the passing of the favourable order in their favour by the Commissioner (Appeals) under whose orders they initially made the deposit when they challenged the order-in-original of the adjudicating authority, before him.
The case was relied upon in JCT electronics v. CCE [2004 (172) ELT 197], wherein it was held that self credit in RG 23A part-II register can be taken.
In view of this, this author is of the opinion that judgment is erroneous and needs to be reviewed at the earliest. Eternal vigilance is the price of liberty, and such vigilance is required not only against executive fiats but also against erroneous adjudication.
Written by:- Advocate Rajesh Kumar. The author can be contacted on The author can be contacted on firstname.lastname@example.org , Web: www.rajeshkumar.co.in