2006 (1) TMI 38 - HC - Central Excise

Central Excise - Availment of fraudulent credit on the basis of fake invoices - In absence of any statutory support the funds recovered by the respondent authorities by way of various cheques collected by them cannot be allowed to be retained and are required to be refunded immediately

Summary

Issues involved:
Forcible collection of cheques without issuance of show cause notice under Section 11A of the Central Excise Act, 1944.

Detailed Analysis:
The petitioner, a company engaged in job work, was subjected to the forcible collection of 13 cheques by the respondent on 15th April 2005, alleging involvement in fraudulent Cenvat credit. The petitioner sought quashing of this collection and return of the dishonored cheques, along with a refund of Rs. 2,00,000. The respondent had issued summons to the petitioner in relation to inquiries against other firms, compelling the petitioner to deliver the cheques without a show cause notice under Section 11A of the Act.

The Court noted that no recovery had been initiated against the petitioner by the department, and the cheques were voluntarily deposited in advance to avoid penal provisions. The respondent argued that the petitioner voluntarily gave the cheques and that the department was not bypassing Section 11A of the Act. Investigations were ongoing, and no show cause notice had been issued regarding the invoices in question.

The Court observed that the liability ascribed to other firms could not be immediately imposed on the petitioner, as the investigation was still ongoing. It emphasized that any tax or duty must be levied in accordance with the law, supported by appropriate statutory provisions. The authorities were reminded that they must act within the bounds of statutory law and could not retain funds without legal sanction. The Court directed the respondent to refund the amount collected through encashment of two cheques and return the remaining 11 unencashed cheques.

The judgment concluded by quashing the collection of various cheques by the respondent, directing the refund of the recovered amount, and allowing the petitioner to be subject to further inquiry and adjudication processes. The respondent was instructed to refund the sum without delay and return the unencashed cheques, with no costs imposed on the petitioner.