2013 (7) TMI 720 - HC - Customs

Validity of notice - recovery - circular dated 1.1.2013 - refund of amount with interest encaching bank guarantees - Assessee filed a petition for quashing of notices dated 21.05.2013 issued by department to its bankers - to refund the amounts recovered by enforcing the notices and encashing the bank guarantees along with interest thereon - Held that - Revenue required to be directed to remit the proceeds of the Bank Guarantees so recovered and collected to the respective bank accounts of the petitioner court relied upon MAHINDRA & MAHINDRA LTD vs. UNION OF INDIA reported in (1992 (4) TMI 42 - HIGH COURT OF JUDICATURE AT BOMBAY ) - the assessee shall furnish Bank Guarantees - Bank Guarantees shall be kept current and alive for such period as may be called-upon by the department. Initiating recovery proceeding - circular dated 1.1.2013 - to refrain them from initiating any recovery proceedings based on impugned notice till the expiry of statutory period of appeal and thereafter, till the disposal of stay application to be filed before the Appellate Authority - the department would be at liberty to initiate recovery proceedings in accordance with the circular - It was not proper on the part of the respondents to encash the Bank Guarantees even before the period of appeal was over or the conditions stipulated in circular was not attracted department s action in invoking the Bank Guarantees was contrary to their own declared policy petition decided partly in favour of assessee

Summary

Issues Involved:
1. Quashing of notices dated 21.05.2013 issued by respondent No.4 to the petitioner's bankers.
2. Mandamus to respondent No.4 to refrain from initiating recovery proceedings until the statutory appeal period expires and the stay application is disposed of.
3. Refund of amounts recovered by enforcing the impugned notices and encashing the bank guarantees.

Issue-wise Detailed Analysis:

1. Quashing of Notices Dated 21.05.2013:
The petitioner sought to quash the notices issued by respondent No.4 to its bankers on the grounds that the notices violated principles of natural justice. The petitioner argued that the Order-in-Original dated 20.05.2013 was passed without intimation and without providing an opportunity for a hearing, which is contrary to Articles 14 and 21 of the Constitution of India. The petitioner cited the case of Collector of Central Excise, Patna vs. I.T.C. Limited, which mandates that notice must be issued before finalizing provisional assessments. The court noted that the notices were issued even before the order was communicated to the petitioner, thereby nullifying the petitioner's right to appeal and seek a stay. The court quashed the notices, holding that the respondents' actions were contrary to the principles of natural justice and the circular dated 01.01.2013 issued by the Central Board of Excise and Customs.

2. Mandamus to Refrain from Initiating Recovery Proceedings:
The petitioner contended that recovery proceedings should not be initiated until the statutory period for filing an appeal expires and the stay application is disposed of. The court examined the relevant provisions of the Customs Act, 1962, and the circular dated 01.01.2013, which stipulate that recovery proceedings should not be initiated during the appeal period. The court held that the respondents acted prematurely by invoking the bank guarantees before the appeal period expired. The court directed the respondents to refrain from initiating recovery proceedings until the statutory period for filing an appeal and the stay application is disposed of, thereby upholding the petitioner's right to appeal and seek a stay.

3. Refund of Amounts Recovered by Enforcing the Impugned Notices:
The petitioner sought a refund of the amounts recovered by enforcing the impugned notices and encashing the bank guarantees. The court observed that the bank guarantees were invoked even before the order dated 20.05.2013 was communicated to the petitioner, which was contrary to the circular dated 01.01.2013 and the principles of natural justice. The court directed the respondents to refund the amounts recovered by enforcing the notices and encashing the bank guarantees. The petitioner was also directed to furnish fresh bank guarantees for the same amount within seven days to secure the interest of the revenue.

Conclusion:
The court allowed the writ petition in part, quashing the notices dated 21.05.2013 and directing the respondents to refund the amounts recovered by enforcing the notices. The court also directed the petitioner to furnish fresh bank guarantees and allowed the petitioner to file an appeal against the Order-in-Original dated 20.05.2013. The court emphasized that the respondents' actions were contrary to the principles of natural justice and the circular dated 01.01.2013, thereby upholding the petitioner's right to appeal and seek a stay.