2016 (5) TMI 564 - HC - Central Excise

Recovery proceedings - Invokation of Section 11(2) of the Central Excise Act, 1944 - Purchase of excisable goods from the shipping broker and cleared during the period from 2 April 2015 to 30 April 2015 - Petitioners claimed that they have made full payment towards value of scrap and central excise duty involved in the purchases from the second Respondent and made payment. Held that - 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. Therefore, we can not assist the Revenue and the impugned notice is quashed and set aside. - Decided in favour of appellant

Summary

Issues involved: Challenge to demand raised on petitioners by notice invoking Central Excise Act, erroneous assumption in notice, clarification of payments made, reliance on letter accepting default, legality of notice for recovery without adjudication, preascertainment of sum due, quashing of notice, clarification on court's opinion, preservation of Revenue's recovery remedies.

Detailed Analysis:

1. The petitioners challenged a demand raised on them through a notice referring to default in payment of Central Excise Duty by the second respondent. The notice directed the petitioners to pay the duty along with interest and penalty. The petitioners claimed to have made full payment towards the value of scrap and central excise duty involved in the purchases, providing proofs of payments made directly to the second respondent.

2. Despite the petitioners' claims and evidence of payment, the Department insisted on the petitioners making the payment. The petitioners clarified that some amount had been remitted by the second respondent and not by them, emphasizing the erroneous assumption in the notice issued to them.

3. A letter from the second respondent accepted default in duty payment and mentioned making a partial payment towards the defaulted dues. The court, after perusing the petition and relevant sections of the Central Excise Act, disagreed with the legality of the notice for direct recovery from the petitioners without prior adjudication.

4. The court held that if the Revenue had material to proceed against both the petitioners and the second respondent, appropriate proceedings must be adopted. The court emphasized that the sum due to the government must be preascertained before invoking section 11(2) of the Central Excise Act for recovery.

5. Consequently, the court quashed and set aside the impugned notice, allowing the writ petition in favor of the petitioners. The court clarified that it had not expressed any opinion on the rival contentions and preserved the Revenue's remedies to recover sums in accordance with the law, irrespective of the order passed in the writ petition.

6. The judgment highlighted the importance of due process and preascertainment of dues before seeking recovery, ensuring that coercive measures are not threatened without proper adjudication. The court's decision aimed to protect the petitioners' rights while acknowledging the Revenue's authority to recover dues through appropriate legal procedures.