2005 (5) TMI 84 - HC - Central Excise

Summary

Issues:
1. Declaration sought regarding recovery of alleged Central Excise dues and forceful collection of cheques.
2. Challenge against arbitrary actions of respondent No. 3 in initiating recovery.
3. Dispute over liability for alleged excise duty evasion and collection of cheques.
4. Respondent's contention of voluntary cheque deposit to avoid interest and penalty.
5. Petitioner's willingness to pay interest and penalty subject to proper adjudication.
6. Allegations of coercion during recovery process by the petitioner.
7. Lack of statutory provision empowering authorities to collect and retain cheques.
8. Requirement of statutory backing for levy and collection of taxes.
9. Direction for refund of funds collected through cheques by respondent authorities.
10. Clarification that refund does not absolve petitioner from potential liability post inquiry.
11. Decision to quash the collection of cheques and order refund to the petitioner.

Analysis:
The petition involved a partnership firm challenging the actions of respondent No. 3 in recovering alleged Central Excise dues and forceful collection of cheques. The petitioner contended that they were not liable to pay the dues and that the recovery was arbitrary. The respondent argued that the cheques were voluntarily deposited by the petitioner to avoid interest and penalty, citing Sections 11AB and 11AC of the Central Excise Act, 1944. The court noted the ongoing inquiries and emphasized the need for statutory provisions to support tax collection actions, ruling that authorities must act within the bounds of the law and refund funds collected through cheques lacking statutory backing.

The court highlighted that liability for excise duty arises upon production or removal of excisable goods, which was not demonstrated in this case. It stressed that tax collection must be supported by appropriate legal provisions, and authorities must act within the confines of statutory law. The judgment directed the respondent authorities to refund the collected funds promptly and return any unencashed cheques to the petitioner. It clarified that the refund did not absolve the petitioner from potential liability post-inquiry and allowed authorities to continue inquiries and issue show cause notices if necessary. Ultimately, the court quashed the collection of cheques and ordered the refund, emphasizing the importance of statutory compliance in tax recovery actions.