Recovery more than pre-deposit, based on order never served on petitioner, is illegal

Haldia Petrochemicals Limited Vs Assistant Commissioner (Calcutta High Court)

Recovery of demand more than statutory pre-deposit amount, on the basis of adjudication order, which was never served on the petitioner is declared as arbitrary and illegal

Facts-

The main legal issues involved in this Writ Petition are as to whether the respondent Central Excise Authority can recover demand relating to central excise duty, interest and penalty without service of adjudication order dated 17th October, 2012 and without establishing from any material documents about actual proof of any service of the said adjudication order upon the petitioner in compliance of the statutory formalities required under Section 37C of the Central Excise Act, 1944. It is the specific case of the petitioner that it never received the aforesaid adjudication order on the basis of which the impugned demand arises and further raises the issue as to whether the respondent CGST authority can recover amount in excess of the statutory amount which is required to be deposited in filing Appeal against the adjudication order in question and the demand arises out of the same in terms of CBDT circulars dated 29th February, 2016 and 31st July, 2017 if the petitioner has filed any appeal against the said adjudication order by making statutory deposit.

Conclusion-

Held that action of the respondents’ action of recovery of the amount of the demand in question on the basis of adjudication order dated 17th October, 2012 is concerned which was never served on the petitioner earlier and since now appeal has been filed by the petitioner by making statutory pre-deposit, action of the respondents making recovery of demand more than the statutory pre-deposit amount required to be made in filing Appeal against adjudication order, from the other refundable amount by .attachment of bank account and recovery from the bank account of the petitioner by way of demand draft is not sustainable in law in view of the facts and circumstances as appears from record and discussion made above and the same are declared as arbitrary and illegal.

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT

Heard learned Advocates appearing for the parties.

The main legal issues involved in this Writ Petition are as to whether the respondent Central Excise Authority can recover demand relating to central excise duty, interest and penalty without service of adjudication order dated 17t^h October, 2012 and without establishing from any material documents about actual proof of any service of the said adjudication order upon the petitioner in compliance of the statutory formalities required under Section 37C of the Central Excise Act, 1944. It is the specific case of the petitioner that it never received the aforesaid adjudication order on the basis of which the impugned demand arises and further raises the issue as to whether the respondent CGST authority can recover amount in excess of the statutory amount which is required to be deposited in filing Appeal against the adjudication order in question and the demand arises out of the same in terms of CBDT circulars dated 29^th February, 2016 and 31^st July, 2017 if the petitioner has filed any appeal against the said adjudication order by making statutory deposit.

It is the case of the petitioner that a show-cause notice dated 8^th April, 2011 was issued to the petitioner proposing to disallow CENVAT credit of Rs. 9,35,24,895.78/- taken by the petitioner in respect of Naphtha during the period April, 2006 to January, 2011 which was used for manufacturing of electricity and that the petitioner replied to the said notice by its letter dated 18^th April, 2011 and also appeared for personal hearing on 25^th July, 2012 before the respondent authorities concerned but thereafter petitioner did not receive any further notice or order from them.

Petitioner submits that on 28^th March, 2014 on coming to know about a decision of Mumbai Bench of the Tribunal favourable to the petitioner on the issue, wrote to the Commissioner on 28^th March, 2014 requesting him to provide opportunity of personal hearing and allow to make submission on the basis of the aforesaid decision. By a letter dated 22ⁿd May, 2014, Superintendent (Adjudication) informed the petitioner for the first time that under show-cause notice dated 8t^h April, 2011, already an adjudication order had been passed on 17t^h October, 2012. In response to the aforesaid letter petitioner wrote a letter on 30t^h May, 2014 to the respondent authorities concerned that it had not received any such order dated 17^th October, 2012 but the petitioner did not receive any response to the said letter and instead on 18^th June, 2014 Superintendent (Adjudication) wrote to the petitioner enquiring from it as to whether any appeal has been filed against the said adjudication order dated 17^th October, 2012 and whether any stay had been granted and if not then petitioner was asked to deposit the amount arising out of the aforesaid adjudication order.

It is the case of the petitioner that it again wrote a letter to the Range Superintendent that it had not received any adjudication order and requested him for furnishing it a copy of the same so that it could examine and file appeal, if required. After hearing nothing in response to the aforesaid response/request petitioner again wrote a letter on 21st July, 2014 which was also not responded by the respondent authorities. Thereafter on August 28, 2014 petitioner’s advocate made prayer before the Commissioner to furnish it the attested/certified true copy of the aforesaid adjudication order so as to enable the petitioner to prefer appeal before the Tribunal but no reply was received either by the petitioner or its advocate in spite of repeated requests for furnishing the copy of the aforesaid adjudication order dated 17t^h October, 2012, nor the respondents at any point of time sent any document in support of or in proof of service of such adjudication order on the petitioner.

In the affidavit-in-opposition dated 25^th March, 2022 to this Writ Petition, the respondent authorities concerned annexed certain documents to show that they had enquired from the postal authorities about actual delivery of the aforesaid adjudication order alleged to have been sent by them by the Speed Post. It also appears from the documents annexed to the aforesaid affidavit-in-opposition filed by the respondents that the postal authority also could not provide any document to the respondent authorities concerned in proof of actual service or delivery of the aforesaid adjudication order/consignment on the petitioner.

Petitioner submits that in spite of repeated requests made by the petitioner to the respondent authorities concerned no copy of the adjudication order in question was provided to it neither any document was served upon the petitioner to establish that the adjudication order in question was actually delivered or served upon the petitioner and the respondent authorities concerned sitting tight over the repeated requests of the petitioner for providing it the copy of the adjudication order in question since August, 2014 and all of a sudden after seven years, the Assistant Commissioner by a letter dated 2nd November, 2021, enquired from the petitioner as to whether any appeal was pending in support of the adjudication order dated 17t^h October, 2012 and in response to the same petitioner again informed the Assistant Commissioner that it had not received any order and again requested for furnishing it with a certified copy of the same to enable the petitioner to file an appeal before the Tribunal.

It is the case of the petitioner that it was surprised on receiving an order dated 18t^h November, 2021 after seven years by which petitioner was informed that while dealing with a different refund claim of the petitioner in respect of a sum of Rs. 4,75,37,789/- which was sanctioned for refund, the same has been adjusted against the demand relating to the aforesaid adjudication order dated 17^th October, 2012 which was never served upon the petitioner and in the aforesaid order dated 18^th November, 2021 it was also mentioned for the first time that the aforesaid adjudication order dated 17^th October, 2012 was dispatched to the petitioner by Speed Post with acknowledgment due (A/D).

By a letter dated 23^rd November, 2021 petitioner again requested the respondent authorities concerned for providing it a copy of the acknowledgment due relating to the alleged service or delivery of the aforesaid adjudication order dated 17t^h October, 2012 to which respondents during the pendency of the this Writ Petition which was filed on 8t^h March, 2022, on 22ⁿd March, 2022, issued a corrigendum in respect of the aforesaid adjudication order dated 18^th November, 2021 taking a different stand that the aforesaid adjudication order dated 17^th October, 2012 was sent by speed post without any acknowledgment due while earlier the authorities had taken the stand that the same was sent by speed post with A/D.

Petitioner submits that petitioner again by its letter dated 22ⁿd February, 2022 requested the respondent authorities concerned for providing it a certified copy of the aforesaid adjudication order dated 17^th October, 2012 so that it could seek suitable legal remedy against the same and instead of complying with the aforesaid request of the petitioner for providing it a copy of the adjudication order dated 17^th October, 2012 out of which the respondents are claiming the demand in question, on 5^th March, 2022, the respondent authorities concerned proceeded to attach the petitioner’s bank account with the State Bank of India. Thereafter on 8^th March, 2022 this Writ Petition was filed by sending the copies of the Writ Petition to the respondents by speed post on 8^th March, 2022 and in spite of such service the respondent authorities concerned collected demand draft for the amount of Rs. 13,92,79,904.56/-from the petitioner’s bank against which by an interim order of this Court dated 10^th March, 2022 status quo is being maintained. Petitioner submits that apart from the said demand draft provided at the instance of the respondent authorities, the State Bank of India kept a further sum of Rs. 15,51,15,350.78/- under attachment.

Petitioner has challenged the aforesaid action of recovery of demand by the respondent authorities concerned alleged to be arising out of the aforesaid adjudication order dated 17^th October, 2012 which according to the petitioner was never served upon it in spite of repeated requests and sitting over the same and not taking any step for recovery of the alleged demand from 2014 till middle of November, 2021 that is almost for more than 7 years.

Petitioner challenges the impugned action of adjusting of another refund with the demand in question arising out of the aforesaid adjudication order dated 17^th October, 2012 in excess of 20 per cent of the demand which is the maximum amount of pre-deposit to be made by the petitioner for filing of any appeal against demand in an adjudication order and which petitioner has filed by making statutory pre-deposit as required under the law for filing statutory Appeal after receiving the adjudication order in question during the hearing of this Writ Petition. Petitioner also challenges impugned action of recovery of the demand in question without serving a copy of the order upon the petitioner to avail its statutory right of filing an appeal against the same and according to the petitioner the maximum amount which petitioner was required to make payment by way of pre-deposit for filing such appeal is 20 per cent which has been deposited by the petitioner and for the first time in course of hearing of this Writ Petition adjudication order in question was served upon the petitioner and against which Appeal is pending and petitioner submits that during the pendency of the said appeal the respondent authorities concerned cannot recover from the petitioner’s from its another refund more than 20 per cent of the demand in question.

Petitioner submitted that relevant provisions of Section 37C of the Central Excise Act, 1944 provides, inter alia, that an order shall be deemed to have been passed on the date on which it is delivered by post. At the material period, the aforesaid section provided for sending the order by registered post with acknowledgement due. It is the case of the petitioner that the order in question alleged to have been sent by speed post was not sent with A/D as proof of delivery according to the respondents and that in any event the petitioner did not receive it nor is there any proof of delivery of the same to the petitioner.

Petitioner has relied on the following decisions on the proposition of law that limitation for the purpose of preferring appeal commences only upon actual delivery of the order and it is incumbent upon the authorities to show proof of delivery:-

(i) Premier Garment Processing V. CESTAT, Chennai, 2015 (39) STR 812 (Mad), Paragraphs 9, 10 and 11;

(ii) Regent Overseas Pvt. Ltd. V. Union of India, 2017 (3) TMI 557 (Guj) – Paragraph 8;

(iii) Ram Pyare Yadav V. Union of India, 2014 (36) STR 63 (All) – Paragraphs 3, 4, 6 and 7;

(iv) Triveni Glass Ltd. V. Commissioner of C. Ex., Allahabad, 2011 (272) ELT 187 (All) – Paragraphs 3,4,5,7 and 10;

(v) Rao and Khan Motors (P) Ltd. V. Commissioner of Central Excise & Service Tax, 2018 (12) TMI 1240- Madras High Court – Paragraphs 2,6,12 and 13;

(vi) P. Casting Pvt. Ltd. V. CESTAT, New Delhi, 2016 (344) ELT 168 (Raj) – Paragraphs 8,9 and 10;

(vii) Vinod Choudhury V. Union of India, 2016 (336) ELT 388 (Raj) – Paragraphs 4,5 and 6.

It is well settled principle of law that if a statute provides for something to be done in a particular manner, then it has to be done in that manner and in no other manner [Chandra Kishore Jha v Mahavir Prasad, (1999) 8 SCC at 273]. The provisions of Section 27 of the General Clauses Act, 1897 will not apply in this case having regard to the precise language of Section 37C of the aforesaid Act at the relevant period.

Petitioner emphasises on the specific mention in the supplementary affidavit dated April 19, 2022, of the respondent authorities where they have made allegations which relates to another adjudication order dated September 21, 2012 and on such basis further alleged that the petitioner’s stand as regards non-receipt of adjudication order dated October 17, 2012, was not tenable. The said supplementary affidavit has been duly dealt with by the petitioner by an affidavit dated April 20, 2022. The fact of the matter is that just like the adjudication order dated October 17, 2012, the petitioner did not also receive the other adjudication order dated September 21, 2012. When settling the matter, dealt with in the order dated September 21, 2012 under the Sabka Vishwas (Legacy Dispute Resolution) Scheme, in the settlement from the petitioner, mentioned the date of the letter of the Range Superintendent, namely, July 25, 2014, by which the petitioner was informed of the passing of the order dated September 21, 2012, as the date of its receipt. Petitioner submitted that the respondents cannot be absolved of their statutory obligation to show proof of delivery of adjudication order dated October 17, 2012 by making allegations against the petitioner in respect of a different adjudication order which also was not received by the petitioner.

Petitioner submitted that without service of the adjudication order, it was not possible for the petitioner to prefer an appeal. It was also not permissible for the respondent authorities to take any step for recovery on the basis of adjudication order in question which was not served upon the petitioner. An order which has not been served cannot have any consequences.

Petitioner submitted that in respect of the same issue, for the subsequent period, petitioner has either finally succeeded before the Commissioner (Appeals) or is enjoying unconditional stay or stay upon pre-deposit of 7.5 per cent of the duty demanded. In the instant case, in spite of the illegal recovery of Rs. 4,75,37,789/- on November 18, 2021 by adjustment of the refund due to the petitioner, before preferring the appeal on April 19, 2022, petitioner made a pre-deposit of 7.5 per cent of the disputed duty amounting to Rs. 70,15,000/-. That apart, the petitioner’s annual revenue payment is in the range of Rs. 700 to Rs. 1000 crore. There is no jeopardy to the revenue at all.

In terms of circular dated September 16, 2014 issued by the Central Board of Excise and Customs, if 7.5 per cent of the disputed duty has been deposited and appeal has been preferred, no coercive measure for recovery of the balance amount shall be taken during the pendency of the appeal. In the instant case, the order dated October 17, 2012 was served on March 25, 2022 as annexure to the affidavit-in-opposition, pre-deposit of 7.5 per cent was made on April 13, 2022 and the appeal was filed on April 19, 2022 against the adjudication order.

In H.M. Leisure V State of West Bengal, 2020 (37) GSTL 403 (Cal), it was held by this Court that within the period allowed for preferring appeal, the authorities can recover only the pre-deposit amount and excess recovery has to be refunded.

In Graphite India Ltd. V Deputy Commissioner of Income Tax, (WPO 113 of 2018 decided on February 15, 2022), refund was directed by this Court of the amount recovered in excess of 20 per cent of the demand required to be deposited in terms of CBDT Circulars dated February 29, 2016 and July 31, 2017.

Learned advocate appearing for the respondents opposes this Writ Petition and the prayer made therein mainly on the ground that there is inordinate delay in filing the Writ Petition and the adjudication order in question out of which demand in question arises is an appealable order and petitioner should exhaust the alternative remedy by way of Appeal and submits that law relating to service of adjudication order by speed post is settled and he relies on several decisions in support of his contention but facts in none of those cases are similar to the present case i.e., that during the relevant period as per law prevailing either there was actual service or there was proof of service with acknowledgment due and those judgments are mainly on the amended provisions of Section 37C of the Act now prevailing and not relating to pre-amended period. On the main ground of challenge by the petitioner that the action of recovery of demand arising out of adjudication order in question was never served at the relevant point of time. When the adjudication order in question was passed, as per Section 37C of the Central Excise Act, 1944, prevailing during the relevant period under which it was statutory obligation on the part of the respondent authority to dispatch the adjudication order with acknowledgement due in proof of service of the same which could not be established by Mr. Banerjee, learned Advocate appearing for the respondent authority by producing acknowledgement due in proof of service of the same. He failed to produce any document to establish that either adjudication order was actually served or the adjudication order was sent by speed post with A/D.

He also could not explain the latches on the part of the respondent authority concerned in taking any steps for recovery of the demand in question arising out of the adjudication order dated 17t^h October, 2012 till November, 2021 and neither he could produce any document before this Court to explain such conduct of the respondent authority or show that any effective steps were taken for recovery of demand in question after 2014 and also on the conduct of the respondents sitting over the repeated representations of the petitioner making repeated request for furnishing it the copy of the adjudication order in question to enable it to file appeal by challenging the same. Respondents cannot take advantage of its own wrong of latches and failure to establish by any document in support of proof of actual service of adjudication order in question on the petitioner and also for not taking step for recovery of demand in question and sleeping over it for more than 7 years after 2014.

Defence of the respondents shifting its latches on the shoulder of the petitioner is not tenable since petitioner after coming to its knowledge about passing of the adjudication order in question dated 17^th October, 2012, made repeated requests to the respondent authorities concerned till 2014 which are matters of record and hearing nothing from them on their repeated representations making request for furnishing the order of adjudication in question, petitioner is not duty bound to chase the respondents for furnishing it the copy of the adjudication order in question and cause of action arose for the petitioner for filing this Writ Petition only after receiving the order of the Assistant Commissioner dated 18^th November, 2021 by which the petitioner was informed that its claim of refund in some other cases has been adjusted with the demand in question arising out of the adjudication order dated 17^th October, 2012.

So far as question of filing of appeal and payment of demand against the aforesaid adjudication order dated 17t^h October, 2012 which was never served upon the petitioner and which was disclosed for the first time by the respondents in their affidavit-in-opposition on 25t^h March, 2022 in course of hearing of this Writ Petition, petitioner has already filed Appeal before the Appellate authority concerned by making statutory pre-deposit by treating the date of receipt of the said order annexed the affidavit-in-opposition to this Writ Petition for the first time as the date of order which was served upon the petitioner in course of hearing of this Writ Petition and as such respondents’ allegation of latches on the part of the petitioner in filing Appeal is not sustainable in law and it is nothing but an attempt to cover up respondent’s own latches.

So far as action of the respondents’ action of recovery of the amount of the demand in question on the basis of adjudication order dated 17^th October, 2012 is concerned which was never served on the petitioner earlier and since now appeal has been filed by the petitioner by making statutory pre-deposit, action of the respondents making recovery of demand more than the statutory pre-deposit amount required to be made in filing Appeal against adjudication order, from the other refundable amount by attachment of bank account and recovery from the bank account of the petitioner by way of demand draft is not sustainable in law in view of the facts and circumstances as appears from record and discussion made above and the same are declared as arbitrary and illegal and respondents authority considered are directed to take immediate steps for refund of the amount recovered in excess of 20 per cent of the demand from the petitioner on the basis of adjudication order dated 17t^h October, 2012, from its bank and pass necessary order for withdrawal of impugned order of attachment of bank account in question of the petitioner within seven days from date since the statutory pre-deposit amount for filing Appeal against the adjudication order dated 17^th October, 2012 has already been made by the petitioner which is matter of record. Appellate authority is requested to dispose the Appeal in question expeditiously and preferably within three months from the date of communication of this order.

In view of discussion, observation and direction made above this Writ Petition being WPA No. 4249 of 2022 stands disposed of accordingly. No order as to costs.

Urgent certified photocopy of this judgment, if applied for, be supplied to the parties upon compliance with all requisite formalities.