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2023 (3) TMI 845 - HC - CustomsRefund / return on amount collected during investigation - It submitted that, teh amount collected and retained by the Respondent No.3 without the authority of law - payment was made under compulsion and has to be construed as payment under protest - respondents/revenue contended that the petitioner had deliberately chose to insure value of the imported goods and excluded the customs duty and consequently, the question of refunding the customs duty / tax to the petitioner do not arise. Can any subsequent show-cause notice or adjudication proceedings be made the basis to deny refund? HELD THAT - As can be seen from the Circular dated 25.05.2022, no recovery can be made unless the amount become payable in pursuance of the order passed by the Adjudicating Authority or otherwise become payable under the provisions of the GST Act as well as under the provisions of the Customs Act also. The Circular dated 19.01.2022 clearly states that arrears are the over due payment of the amount of tax, interest, fine or penalty that is confirmed against a person who is liable to pay the same to the exchequer and it arises as result of Order-in-Original. The said Circular also clarifies the amount in the case under investigation, unconfirmed demands, Show Cause Notice etc., and the Order-in-Original that has been set aside or remanded for de-novo adjudication by Appellate authority do not fall under the category of arrears. In the instant case, it is an undisputed fact that prior to recovery of a sum of INR 1.5 crores from the petitioner, there is no adjudication or any order made/passed by the respondents, which entitled them to recover the money paid by the petitioner. As rightly contended by the learned Senior counsel for the petitioner, the respondents have themselves admitted in their statement of objections that the petitioner did not voluntarily make the payment and that he made it under protest. Under these circumstances, in the light of the aforesaid material on record, which clearly establishes that the petitioner had made the payment under protest and that the payment was not preceded by any order of adjudication, the respondents did not have any jurisdiction or authority of law to recover INR 1.5 crores, which is clearly violative of Article 265 of the Constitution of India and consequently, the petitioner would be entitled to refund of the aforesaid amount collected by the respondents without jurisdiction or authority of law. In the case of M/S. VALLABH TEXTILES VERSUS SENIOR INTELLIGENCE OFFICER AND ORS. 2022 (12) TMI 1038 - DELHI HIGH COURT the High Court of Delhi has held that The violation of the safeguards put in place by the Act, Rules and by the Court, to ensure that unnecessary harassment is not caused to the assessee, required adherence by the official respondents/revenue, as otherwise, the collection of such amounts towards tax, interest and penalty would give it a colour of coercion, which is not backed by the authority of law. This Court has categorically held that the contention of the Department that the amount under deposit must be made subject to the outcome of the pending investigation cannot be accepted. It is therefore clear and evident that in the instant case also, the subject amount of INR 1.5 crores collected from the petitioner company by the respondents is in violation of Articles 265 and 300-A of the Constitution of India and the same deserves to be refunded back to the petitioner - in the facts of the instant case, in the absence of any material to establish that there was any order or adjudication made by the respondents quantifying the amount of tax / duty payable by the petitioner as on the date of collecting / recovering the same during investigation, the respondents were clearly not entitled to recover the same, leading to the sole inference that the respondents are liable to refund the amount collected by them. The facts of the instant case clearly establishes that the respondents have recovered INR 1.5 crores during the course of search proceedings, is without jurisdiction or authority of law and without being any order of adjudication and consequently, in the facts of the instant case, the respondents would be liable to pay refund with applicable interest - Petition allowed.
Issues Involved:
1. Legality of the collection of INR 1.5 crores by the respondents. 2. Refund entitlement for the petitioner. 3. Applicability of Customs duty on goods destroyed in a fire. 4. Validity of the investigation and subsequent notices. 5. Requirement for an application under Section 27 of the Customs Act for a refund. Detailed Analysis: 1. Legality of the Collection of INR 1.5 Crores by the Respondents: The petitioner contended that the collection of INR 1.5 crores was without jurisdiction or authority of law, violating Article 265 of the Constitution of India. The court agreed, noting that the amount was collected under coercion and without any prior adjudication or order. The respondents admitted that the payment was made under protest. Circulars dated 25.05.2022 and 19.01.2022 were cited, which clarified that no recovery could be made without an adjudication order. The court concluded that the collection was illegal and violative of constitutional provisions. 2. Refund Entitlement for the Petitioner: The petitioner sought a refund of INR 1.5 crores with interest, arguing that the amount was collected without legal authority. The court referenced multiple judgments, including those from the Delhi High Court and Punjab and Haryana High Court, which supported the petitioner's claim that amounts collected without adjudication must be refunded. The court ruled that the petitioner was entitled to a refund with interest, noting that the respondents' actions were without jurisdiction or authority of law. 3. Applicability of Customs Duty on Goods Destroyed in a Fire: The petitioner argued that no customs duty was payable on goods destroyed in a fire. The respondents contended that the petitioner had not applied for remission of duty under Section 23 of the Customs Act, and thus was liable to pay duty. The court did not explicitly resolve this issue but focused on the illegality of the collection of INR 1.5 crores. 4. Validity of the Investigation and Subsequent Notices: The petitioner sought a declaration that the investigation and subsequent notices were barred by limitation and void ab initio. The court did not directly address this issue but noted that the show cause notice issued after the petition was filed could not justify the prior illegal recovery of funds. The court kept all rival contentions regarding the show cause notice and adjudication proceedings open. 5. Requirement for an Application Under Section 27 of the Customs Act for a Refund: The respondents argued that the petitioner should have filed an application under Section 27 of the Customs Act for a refund. The court rejected this contention, stating that Section 27 applies to refunds of customs duty and not to amounts collected without authority of law. The court cited the judgment in EBIZ.COM Pvt. Ltd. v. Commissioner of Central Excise, which held that voluntary payments made under protest are in the nature of pre-deposits and must be refunded. Conclusion: The court allowed the petition, declaring the petitioner entitled to a refund of INR 1.5 crores with 6% interest from the date of collection until payment. The respondents were directed to process the refund within three months. The court kept open all rival contentions related to the show cause notice and adjudication proceedings.
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