2022 (7) TMI 47 - HC - Central Excise

Violation of principles of natural justice - Recovery of central excise duty, interest and penalty without service of adjudication order - absence of actual proof of any service of the adjudication order upon the petitioner - Section 37C of the Central Excise Act, 1944 - HELD THAT - So far as question of filing of appeal and payment of demand against the aforesaid adjudication order dated 17th October, 2012 which was never served upon the petitioner and which was disclosed for the first time by the respondents in their affidavit-in-opposition on 25th March, 2022 in course of hearing of this Writ Petition, petitioner has already filed Appeal before the Appellate authority concerned by making statutory pre-deposit by treating the date of receipt of the said order annexed the affidavit-in-opposition to this Writ Petition for the first time as the date of order which was served upon the petitioner in course of hearing of this Writ Petition and as such respondents allegation of latches on the part of the petitioner in filing Appeal is not sustainable in law and it is nothing but an attempt to cover up respondent s own latches. So far as action of the respondents action of recovery of the amount of the demand in question on the basis of adjudication order dated 17th October, 2012 is concerned which was never served on the petitioner earlier and since now appeal has been filed by the petitioner by making statutory pre-deposit, action of the respondents making recovery of demand more than the statutory pre-deposit amount required to be made in filing Appeal against adjudication order, from the other refundable amount by attachment of bank account and recovery from the bank account of the petitioner by way of demand draft is not sustainable in law in view of the facts and circumstances as appears from record. The respondents authority considered are directed to take immediate steps for refund of the amount recovered in excess of 20 per cent of the demand from the petitioner on the basis of adjudication order dated 17th October, 2012, from its bank and pass necessary order for withdrawal of impugned order of attachment of bank account in question of the petitioner within seven days from date since the statutory pre-deposit amount for filing Appeal against the adjudication order dated 17th October, 2012 has already been made by the petitioner which is matter of record - petition disposed off.

Issues Involved:
1. Whether the respondent Central Excise Authority can recover demand relating to central excise duty, interest, and penalty without service of the adjudication order and without proof of such service in compliance with Section 37C of the Central Excise Act, 1944.
2. Whether the respondent CGST authority can recover amounts in excess of the statutory amount required to be deposited when filing an appeal against the adjudication order.
3. Whether the respondent authorities' actions of adjusting another refund with the demand in question and attaching the petitioner's bank account were lawful.

Detailed Analysis:

Issue 1: Recovery without Service of Adjudication Order
The petitioner argued that the adjudication order dated 17th October 2012, which formed the basis of the impugned demand, was never served upon them. The petitioner claimed they did not receive any further notice or order after their personal hearing on 25th July 2012. Despite repeated requests for a copy of the adjudication order, the respondent authorities failed to provide it or any proof of its delivery. The respondents, in their affidavit-in-opposition, could not produce any document from the postal authorities confirming the actual delivery of the adjudication order. The court emphasized that Section 37C of the Central Excise Act, 1944, mandates that orders must be sent by registered post with acknowledgment due, which was not complied with by the respondents. Consequently, the court ruled that without proof of service, the recovery actions based on the adjudication order were invalid.

Issue 2: Recovery Amount in Excess of Statutory Deposit
The petitioner challenged the recovery of amounts exceeding the statutory pre-deposit required for filing an appeal against the adjudication order. The petitioner highlighted that they made a statutory pre-deposit of 7.5% of the disputed duty before filing the appeal. The court noted that the relevant circulars and legal precedents restrict recovery to the pre-deposit amount during the pendency of an appeal. The court referenced decisions such as H.M. Leisure V State of West Bengal and Graphite India Ltd. V Deputy Commissioner of Income Tax, which support the principle that excess recovery must be refunded. The court declared the respondents' action of recovering more than the statutory pre-deposit amount as arbitrary and illegal.

Issue 3: Adjustment of Refund and Attachment of Bank Account
The petitioner contended that the respondents adjusted a refund due to them against the demand arising from the unserved adjudication order and subsequently attached their bank account. The court found these actions unjustified, especially since the adjudication order was not properly served, and the petitioner had already made the necessary pre-deposit for filing an appeal. The court directed the respondents to refund the excess amount recovered and withdraw the bank account attachment.

Conclusion:
The court concluded that the respondent authorities acted improperly by attempting to recover demands based on an unserved adjudication order and by recovering amounts exceeding the statutory pre-deposit required for an appeal. The court ordered the respondents to refund the excess recovered amount and lift the bank account attachment. The appellate authority was requested to expedite the disposal of the appeal within three months. The writ petition was disposed of with no order as to costs, and urgent certified photocopies of the judgment were to be provided upon compliance with requisite formalities.

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