2005 (98) ECC 230 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

West Regional Bench -- Mumbai

Shri S.S. Sekhon, Member (T) and Shri T. Anjaneyulu, Member (J)

Kakda Impex (I) Pvt. Ltd.

Versus

Commissioner of Central Excise, Mumbai

Appeal No. E/2065/03

[Arising out of Order-in-Appeal No. PKA/23/Mumbai-II/2003 dated 28.4.2003 passed by the Commissioner of Central Excise (Appeals), Mumbai-II]

Order No. A/335/WZB/2004-C-II, dt. 28.5.2004, Certified on 11.6.2004

Refund (C. Excise)

Settlement Commission -- Attachment of any property belonging to the appellant by an interim order "during pendency of any proceedings before it u/s 32G, is permissible, but if pre-deposit retained by Commission even after the end of the proceedings has to be refunded with interest -- Section 32G, 32G(1) of CEA, 1944.

[Para 11]

PRESENT :

Shri S.N. Kantawala and Smt. S.N. Mani Prakash, Advs, for the appellant.

Shri K.M. Mondal, Consultant for the respondent.

Case Cited :

Nelco Limited v. Union of India, 2002 (144) ELT 56 (Bom.).................................... [Para 8]

Per : Shri T. Anjaneyulu

This appeal is filed against an order dated 28.4.2004 passed by the Commissioner of Central Excise (Appeals), Mumbai-II vide Order No. PKA/23/Mum-II/2003 by the appellant. The facts that gave rise in filing this appeal may be summed up as follows:

2. The Director of the appellant company namely Shri Govindnarayan Kedarnath Kakada was arrested in connection with an offence under Section 9 of the Central Excise Act and produced by the department of Central Excise before the Court of Additional Chief Metropolitan Magistrate, Mumbai and got remanded to judicial custody. He moved bail application (Criminal Application No. 1069/1999) before the Hon'ble High Court of Bombay, and the same has been considered by an order dated 12th April 1999 subject to his depositing Rs. 50 Lakhs in the Court of Additional Chief Metropolitan Magistrate and on furnishing solvency of Rs. 3,000 with one surety for like sum. The learned Metropolitan Magistrate also directed to deposit said sum of Rs. 50 Lakhs in a Nationalised Bank and pass a final order for disposal of the said sum at the time of conclusion of the trial. The appellant moved an application before the High Court for modification of earlier order but the same was declined. However, by an order dated 19th December 2000 on the application moved by the appellants, the Hon'ble High Court gave discretion to the learned Additional Chief Metropolitan Magistrate to dispose of refund application if moved by the appellant on its merits.

3. Accordingly, the appellant through its Director filed application before the trial court for refund of Rs. 50 Lakhs deposited by him. The court by its order dated 30.3.2001 was pleased to refund the amount. Aggrieved by the same the department obtained stay orders from the trial court and filed Criminal Writ Petition No. 515/2001 before the Hon'ble High Court of Bombay to set aside the order of refund of the amount in question. While disposing of writ petition vide its order dated 11th April 2001, the Hon'ble High Court was pleased to observe:

"In the circumstances the sum of Rs. 50,00,000 deposited by the respondent No. 2 in the trial court shall not be refunded to him until the decision of the Settlement Commission on the application that will be made by the Department before the Settlement Commission to retain the said amount of Rs. 50,00,000 under Section 32G of the Central Excise Act."

4. On filing application by the department, the Settlement Commission passed an order for retention of the said sum of Rs. 50 Lakhs as deposit with the Commissioner, Central Excise on behalf of the Commission, till the Commission issues terms of Settlement on the application filed by the appellant, as per Section 32G of Central Excise Act, 1944, It has also observed that the retention of this amount of Rs. 50 Lakhs is for purpose of protecting interest of Revenue.

5. Further, it is relevant to note that the appellants had earlier filed an application in terms of Section 32E of the Central Excise Act, 1944 before the Settlement Commission and also deposited Rs. 4,46,284 towards admitted duty liability as per the orders made in this regard. Subsequently, no proceedings went on for the alleged non co-operation of the appellant. Consequently, the commission sent back the case to the Commissioner of Central Excise for disposal. However, there was no order with regard to the final disposal of the amount in deposit, by the Commission.

6. Thereupon the appellant filed an application for refund of an amount of Rs. 54,46,284. The Deputy Commissioner of Central Excise, Powai Division, Mumbai-II dismissed the application holding that the issue is pre-mature one and the matter is pending adjudication as the Show Cause Notice issued. Aggrieved by the same the appellants preferred an appeal before the Commissioner (Appeals), who in turn confirmed the same. Hence, this appeal.

7. (1) Now the point for determination is that whether the appellant is entitled for the refund of the amount in dispute.

(2) To what relief?

8. The learned advocate for the appellant has raised several Contentions both on factual and legal principle, and submits that both the adjudicating authority and Commissioner in appeal erred in construing the orders passed by the Hon'ble High Court of Bombay as well as the Settlement Commission. According to him the appellant had deposited, a sum of Rs. 4,46,284 as per the direction of the Settlement Commission for settling terms and the deposit of Rs. 50 Lakhs, which has been retained by the commission by virtue of High Court order and both the amounts would come under the purview of 'pre-deposit,' as such, the whole amount is refundable once the proceedings were terminated by the Settlement Commission. He has also placed reliance on the Circular No. 275/37/2K-CX.8A dated 2.1.2002 issued by the Central Board of Excise & Customs, New Delhi and the decision rendered in a case between Nelco Limited v. Union of India by Bombay High Court, reported in 2002 (144) ELT 56 (Bom.) The Circular referred above relates to the refund of pre-deposit-made during the pendency of the appeal and insist upon that there need not be a formal application for refund under Section 11B (1) of the Central Excise Act, 1944 or under Section 27(1) of the Customs Act, 1962 and that the simple letter from the person who deposited the amount and on-showing the evidence of payment is entitled for the refund of the amount. Further, the learned counsel for the appellant contended that the appellant has already filed affidavit showing all his property before the Settlement Commission. Therefore, according to him retention of the amount in question is unwarranted and causes undue hardship to the appellant.

9. Shri K.M. Mondal, learned consultant appearing for the department contends that the amount in question is not a pre-deposit so as to comply the guidelines of Circular of the Board and the decision referred above. On the other hand his contention is that the adjudicating authority and Commissioner (Appeals) are justified in withholdings the amount and the same is to protest the interest of the Revenue.

10. At the outset it may be mentioned that sum of Rs. 50 Lakhs was deposited by the appellant as a security for granting bail, by the High Court of Bombay. Subsequently, the Settlement Commission has been authorised to deal with the said amount as proceedings were initiated before it by the appellant. Accordingly, the Settlement Commission by interim order retained the amount as deposit before the Commissioner, Central Excise on behalf of the Commission till it issues terms of settlement on the application filed by the appellant. Further, it is noted that retention of this amount is for the purpose of protecting the interest of Revenue. Though the Hon'ble High Court of Bombay as well as Settlement Commission were of the view that as per Section 32 G of the Central Excise Act, 1944 "during pendency of any proceedings before it." There can be an order of provisional attachment of any property belonging to the appellant, such attachment was not effected on this amount. It is significant to note that the Settlement Commission before making order of retention has observed that the appellant has given the details of the property on 10.5.2001. From the above observation it is implied that an attachment of the property can be effected in future if necessity arise. Therefore, the commission simply ordered retention of amount of Rs. 50 Lakhs as deposit only without attachment. While sending the case back to the Central Excise officer as per Section 32L, the Settlement Commission did not make final order in respect of Rs. 50 Lakhs retained as deposit. In absence of any proceedings pending before the Settlement Commission, it is obvious that it has no power to make any further order in respect of the same. Therefore, the appellant is not expected to seek any clarification as contented by Shri K.M. Mandal.

11. As it stands the matter is pending adjudication before the Central Excise officer. It is at the stage of Show Cause Notice. The duty payable has not been quantified or determined yet. There is no specific provision in the Central Excise Act or Rules framed thereunder to deal with the situation of the sort. In absence of the same the Bord's Circular which gives guidance for refund of certain deposits made by the assessee in accordance with the provision of the Act can be relied upon. Even otherwise an unquantified and undetermined duty cannot be protected with the kind of such deposits. Admittedly no proceedings are pending before the Settlement Commission, as such, Section 32G (1) cannot be made applicable any longer. The interim order made by the Settlement Commission with regard to the deposit of the amount became extinct in absence of final order. Therefore, the lower authorities cannot hinge on the same observations made by the Settlement Commission and retain the amount. They are erred in their views. The position became status-quo-ante, therefore, the appellant is entitled for the refund of sum of Rs. 50 Lakhs with interest accrued on the FDR.

12. Insofar as the refund of Rs. 4,46,284 is concerned, the amount had been deposited towards admitted liability of duty. Whether this is made in pursuance of the order of the Settlement Commission or the voluntary deposit, the same is towards duty payable. The appellant cannot ask for refund of the same.

13. In our considered view, the appellant is entitled for refund of Rs. 50 Lakhs with interest thereon as held Supra but not sum of Rs. 4,46,284 which is deposited towards duty. Accordingly, we set aside the orders passed by the adjudicating authority and Commission (Appeals).

14. In the result, the appeal is partly allowed.

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