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1994 (2) TMI 57 - SC - Central ExciseWhether it can be said that the furnishing of a bank guarantee for all or part of the disputed excise duty pursuant to an order of the court is equivalent to payment of the amount of excise duty? Held that - The answer is in the negative.The bank guarantee is security for the Revenue, that in the event the Revenue succeeds its dues will be recoverable, being backed by the guarantee of a bank. In the event, however, unlikely, of the bank refusing to honour its guarantee it would be necessary for the Revenue or, where the bank guarantee is in favour of the principal administrative officer of the Court, that officer to file a suit against the bank for the amount due upon the bank guarantee. The amount of the disputed tax or duty that is secured by a bank guarantee cannot, therefore, be held to be paid to the Revenue. There is no question of its refund, and Section 11B is not attracted. The bank guarantees given by the appellants were not properly the subject matter of the writ petition before the High Court and the High Court was in error in directing the appellants to renew the same. We reiterate our direction to the 1st and 2nd respondents forthwith to re-pay to the State Bank of Patiala, Overseas Branch, Millar Ganj, Ludhiana, the amount of ₹ 1,18,00,000/- collected upon the bank guarantees within two weeks - review petition is dismissed.
Issues:
Classification of toilet soap for excise duty, refund of money recovered by authorities, interpretation of Section 11B of Central Excises and Salt Act, 1944, applicability of bank guarantees in refund claims. Analysis: 1. The judgment pertains to a review petition filed by respondents 1 and 2 in relation to a previous order by the Supreme Court granting special leave and directing the refund of money recovered by them from the State Bank of Patiala based on certain bank guarantees. 2. The appellants had filed an appeal regarding the classification of toilet soap for excise duty. Interim orders were passed allowing a stay on recovery of excise duty, with conditions for payment and bank guarantees. The appeal was ultimately allowed, and the Court stated that the question of refund should be dealt with by the authorities in accordance with the law. 3. Despite requesting a refund and filing a writ petition for expeditious disposal, the appellants faced delays. The High Court directed the excise authorities to dispose of the refund claim within a month and extend the bank guarantees. 4. The excise authorities, citing Section 11B of the Act, held that the amounts deposited and covered by bank guarantees were not refundable. The bank guarantees were encashed, leading to the current review petition. 5. Section 11B outlines the procedure for claiming a refund of excise duty, requiring an application accompanied by evidence that the duty was paid and not passed on to others. 6. Counsel for respondents argued that bank guarantees should be treated as equivalent to money deposited in court, placing the burden on the appellants to prove non-passing of the duty incidence to customers. 7. Reference was made to a previous case where the Court emphasized the duty on the assessee to show non-passing of duty before claiming a refund, preventing abuse of court orders to avoid paying assessed duties. 8. The judgment in the referenced case applies to situations where excise duty is deposited in court and later withdrawn by authorities, necessitating a refund application under Section 11B. 9. The Court clarified that a claim for refund presupposes payment of excise duty to authorities, which is then subject to repayment upon a successful claim. 10. The Court determined that furnishing bank guarantees does not equate to payment of excise duty, as they serve as security pending court proceedings and are only invoked if the Revenue succeeds, not constituting payment subject to refund under Section 11B. 11. Ultimately, the Court found no merit in the review petition, reiterating that bank guarantees were not the subject of the writ petition and directing the repayment of the encashed amounts to the bank. 12. The review petition was dismissed, and respondents were ordered to pay costs to the appellants.
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