1993 (8) TMI 168 - HC - Central Excise

Summary

Issues:
1. Enforcement of Bank guarantee and payment of interest accrued.
2. Entitlement of Government of India to recover arrears of excise duty.
3. Payment of interest on deferred amount and Bank guarantee.

Analysis:
The High Court of Bombay heard a Motion filed by the Union of India seeking direction to encash a Bank guarantee with accrued interest to the respondents. The Court expressed surprise at the delay in enforcing the Bank guarantee despite previous orders. Referring to a Supreme Court judgment, the Court highlighted the Government's right to recover arrears of excise duty and enforce Bank guarantees promptly. The Court noted that Bank guarantees were furnished by processors in compliance with Supreme Court orders, and the Union of India sought to encash them. The Division Bench had previously directed the Registry to encash the Bank guarantees, which was done, leading to the present Motion arising from a Writ Petition filed on the Original Side of the Court.

In the present case, the Court considered the submissions made by the parties. The Counsel for the Department argued that the Prothonotary must enforce the Bank guarantee and make payment as directed by the Supreme Court. It was contended that the Government of India is entitled to interest on the deferred payment by processors who had furnished Bank guarantees. The Court found merit in this argument, noting that the processors had benefited from interim relief granted by the Supreme Court, depriving the Government of immediate payment of duty and justifying the award of interest on the outstanding balance.

On the other hand, the petitioners argued that a previous order restricted the Government's entitlement to payment pending clarification from the Supreme Court. However, the Court disagreed, emphasizing the clear direction given by the Supreme Court regarding the payment of duty and interest. The Court held that there was no justification for withholding the duty payment, directing the Prothonotary to encash the Bank guarantees and pay the principal amount due to the Government of India. However, the Court deferred the payment of interest pending clarification from the Supreme Court.

In conclusion, the Court made the Motion absolute, directing the Prothonotary to encash the Bank guarantee and pay the duty amount to the Government of India. The Prothonotary was instructed to withhold the interest accrued until clarification was obtained from the Supreme Court. The Court also directed the Prothonotary to implement this order in all relevant matters arising from the Supreme Court judgment. Additionally, the Court refused the application for a stay on the order and ordered the petitioners to pay the costs of the Motion.