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Judgment
The petitioners challenge the demand raised on them by a notice, copy of which is at Annexure G.
A notice dated 20-1-2016 (Page 124 of the Paper Book) addressed to the petitioners refers to default of payment of Central Excise Duty/arrears of Revenue in the sum of Rs. 68,24,763/ from the Respondent No. 2 to this Writ Petition.
It relates to purchase of excisable goods from the shipping broker and cleared during the period from 2 April, 2015 to 30 April, 2015 and issue of certain invoices referred in this notice. It is stated that the respondent No. 2 has sold goods worth Rs. 5,45,97,991/ involving above Central Excise Duty and the petitioners are required to pay Rs. 2,14,74,163/ to respondent No. 2. However, there is a default in payment of Central Excise Duty to the tune of Rs. 68,24,763/ by the second respondent and therefore invoking Section 11(2) of the Central Excise Act the petitioners have been directed to pay the duty along with interest @ 18% from 6 May, 2015 and penalty.
The petitioners promptly replied to this notice and pointed out that there is erroneous assumption on which a notice has been issued to the petitioners. The petitioners claim that they have made full payment towards value of scrap and central excise duty involved in the purchases from the second respondent. In support of that claim that they made payment to the second respondent pertaining to the purchases made during April, 2015, several proofs of payments and from the bank directly to the second respondent have been referred and produced.
It is urged that contrary to the stand of the petitioners and as reflected even in the arbitration proceedings and part of an order passed by this Court on 1 April, 2015, the Department insisted on the petitioner making the payment.
The issue has been repeatedly clarified and it has also been pointed out by the Petitioners that some amount has been remitted by the second respondent and not by them.
Reliance is also placed upon the letter at AnnexureM (Page 137 of the Paper Book) and it reads as under :
I.B. COMMERCIAL PVT. LTD.
February 19, 2016
To :
The Assistant Commissioner (Preventive),
Central Excise, MumbaiI,
Churchgate,
Mumbai
Respected Sir,
Sub : Due of default in payment of duty of Rs. 68,24,763/
Further to my statement dated 8-2-2016 wherein I have accepted that M/s. I.B. Commercial Pvt. Ltd. have defaulted in duty payment of Rs. 68,24,763/. As already stated my company is going through a financial crisis because of the reasons mentioned therein.
However, as I have assured you, I have made payment of Rs. 5,00,000/ vide epayment Challan No. 00001, dated 19-2-2016 towards the defaulted dues of Rs. 68,24,763/.
I request you to kindly bear with me and I shall be making full duty payment along with interest within minimum possible time.
Thanking you,
Yours faithfully,
For I.B. Commercial Pvt. Ltd.
Director
Copy to :
The Assistant Commissioner, Div. EF
The Superintendent, Range.... Div. EF.
We have perused the Writ Petition and all Annexures thereto so also Section 11 of the Central Excise Act and subsection (2) of the same. We are not in agreement with Mr. Jetly that dispatch of this notice and insistence on payment by the petitioners of the aforesaid sum was a mode of recovery and permissible in law in this case.
If the Revenue has some material in its possession, which enables it to proceed against both the petitioners and respondent No. 2, particularly in the light of the above reproduced communication, then, the Revenue must adopt appropriate proceedings. It cannot threaten coercive measures and directly seek to recover money from petitioners without any prior adjudication. The sum has to be preascertained and prejudged. In the present case, reliance on the order passed by this Court and which is also an interim order in arbitration proceedings, as between the petitioners and respondent No. 2, will not enable the Revenue to issue such notice to recover the amount straightway. What are the sums due to the Government would have to be ascertained and thereafter subsection (2) of Section 11 will come into play.
In the above circumstances, we cannot assist the Revenue. The impugned notice is quashed and set aside.
The Writ Petition is allowed in the above terms. No order as to costs.
We clarify that we have not expressed any opinion on the rival contentions. We have also not foreclosed the remedies of the Revenue to recover the sums and in accordance with law. All such powers as are vested in the Revenue can be exercised irrespective of the order passed in this Writ Petition.