No Recovery of Central Excise Duty, Interest, and Penalty without serving of Adjudication Order

[CA Bimal Jain]

The Hon’ble Calcutta High Court in the matter of  HALDIA PETROCHEMICALS LIMITED VERSUS ASSISTANT COMMISSIONER, CGST & CX, HALDIA-II DIVISION, HALDIA COMMISSIONERATE AND ORS.  [2022 (7) TMI 47 - CALCUTTA HIGH COURT] held that no recovery of Central Excise Duty, interest, and penalty can be made without service of adjudication order and directed the Revenue Department to refund the amount recovered from the assessee to the extent of more than 20% of the demand based on the adjudication order.

Facts:

M/s Haldia Petrochemicals Limited, (“the Petitioner”) has filed an appeal against the  recovery of demand relating to Central Excise Duty, interest, and penalty without service of Adjudication Order dated October 17, 2012 (“the Impugned Order”) passed by the Revenue Department (“the Respondent”) without serving any material documents about actual proof of any service of the adjudication order upon the Petitioner in compliance of the statutory formalities as required under Section 37C of the Central Excise Act, 1944 (“the Central Excise Act”).

The Petitioner contended that a Show Cause Notice (“SCN”) was issued by the Respondent proposing to disallow CENVAT credit taken by the Petitioner for the period of April, 2006 to January, 2011 for which the Petitioner replied and also appeared for a personal hearing before the Respondent concerned but thereafter Petitioner did not receive any further notice or order.

Further, after seven years while dealing with a different refund claim of the Petitioner which was sanctioned for refund, the same has been adjusted against the demand relating to the impugned order which was never served upon the Petitioner. The Respondent also proceeded to attach the Petitioner’s bank account.

Issue:

• Whether the Revenue Department can recover demand relating to Central Excise Duty, interest and penalty without service of Adjudication Order?

Held:

The Hon’ble Calcutta High Court in HALDIA PETROCHEMICALS LIMITED VERSUS ASSISTANT COMMISSIONER, CGST & CX, HALDIA-II DIVISION, HALDIA COMMISSIONERATE AND ORS.  [2022 (7) TMI 47 - CALCUTTA HIGH COURT] held as under:

• The Respondent’s action of making recovery of demand more than the statutory pre-deposit amount required to be made in filing an appeal against Adjudication Order, from the other refundable amount and by attachment of bank account and recovery from the bank account of the petitioner by way of demand draft is not sustainable in law.
• Noted that, the statutory pre-deposit amount for filing Appeal against the impugned order has already been made by the  Petitioner.
• Directed that, the Respondent to refund the amount recovered more than 20% of the demand from the Petitioner based on the impugned order and pass necessary order for withdrawal of the order of attachment of bank account of the Petitioner within seven days from date since the statutory pre-deposit amount for filing Appeal against the impugned order has already been made by the Petitioner.
• Held that, Respondents cannot take advantage of its own wrong of latches and failure to establish by any document in support of proof of actual service of adjudication order in question on the Petitioner and for not taking step for recovery of demand in question and sleeping over it for more than seven years.

(Author can be reached at [email protected]).