TMI Blog2016 (5) TMI 300X X X X Extracts X X X X X X X X Extracts X X X X ..... y a bank guarantee, cannot be held to be “paid” to the Revenue, we are in respectful agreement. However, these observations were made in the background of the facts where the High Court had directed the assessee to furnish bank guarantee for the differential duty. The writ petition was ultimately dismissed on the ground of alternative remedy. While doing so, the Court directed the assessee to keep the bank guarantee alive till the matter was decided by the Commissioner, (Appeals). After the Commissioner, (Appeals), dismissed the appeal, the department encashed the bank guarantee. In this background, the CEGAT held that the encashment of the bank guarantee would not amount to payment of duty. This judgment, the High Court upheld holding that no question of law arises. Therefore, the contention of the petitioner cannot be upheld. The petitioner failed to pass the test of unjust enrichment - refund not allowed - Decided against the assessee. - SPECIAL CIVIL APPLICATION NO. 14540, 14541, 14542 of 2015 - - - Dated:- 28-4-2016 - MR. AKIL KURESHI AND MR. A.Y. KOGJE, JJ. FOR THE PETITIONER : MR.G.L.RAVAL, SENIOR ADVOCATE with MR. JAY TRIVEDI, ADVOCATE for MR DIPEN DESAI, ADVOCA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the High Court, upon the petitioner furnishing the bank guarantee, the goods were allowed to be cleared by paying customs duty, payable under section 14(1) of the Act. 5. The writ petition came to be decided by the High Court by judgment dated 13.09.2012 alongwith other petitions of similar nature. The High Court dismissed all the petitions and vacated the interim relief. 6. Against the judgment of the High Court, the present petitioner and other aggrieved importers filed appeal before the Supreme Court. The Supreme Court by the judgment in case of Union of India v. Param Industries Ltd., reported in 2015 (321) E.L.T. 192 (S.C.), allowed the appeals and reversed the judgment of the High Court, making following observations. 7. On the facts of these appeals as well, we find that though the notification may have been published on the date when the goods were cleared, it was not offered for sale by the concerned Board, which event took place much thereafter. Therefore, it was not justified and lawful on the part of the Department to claim the differential amount of duty on the basis of said notification. These appeals are, accordingly, allowed only on this ground and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unjust enrichment ? 11. Counsel for the petitioner submitted that the petitioner had provided bank guarantees as directed by this Court in the interim order dated 07.10.2002, which was in the nature of security to protect the interest of the Revenue in case the petitions failed. When the department therefore, encashed the bank guarantees, it was merely the recovery affected through security and not payment of duty by the petitioner. The principle of unjust enrichment would not apply. He relied on following decisions: 1) Oswal Agro Mills Ltd. v. Asstt. Collector of C.Ex., reported in Ludhiana, 1994 (70) E.L.T. 48 (S.C.) 2) Somaiya Organics v. State of Uttar Pradesh, reported in 2001 (130) E.L.T. 3 (S.C.) 3) Union of India v. Grasim Industries Ltd., reported in 2005 (183) E.L.T. 12 (Raj.) 12. On the other hand, learned counsel Shri R.J.Oza opposed the petitions contending that once the High Court dismissed the writ petitions by judgment dated 13.09.2012, the differential customs duty became payable. After waiting for a reasonable period, when the petitioner was not protected by any order from the Supreme Court, the bank guarantees were encashed. At that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without reference to section 11B of Central Excises Salt Act as amended by Act 40/1991.) (B) The decision in Kanhaiya Lal's case and the cases following the same, cannot be understood as laying down the law that even in cases the liability has been passed on , the assessee can maintain an action for restitution. If the decision in Kanhaiya Lal's case (supra) and the cases following the said decision, enables such a person to claim refund (restitution), with great respect of the learned Judges, who rendered the above decisions, I express my dissent thereto. In this context, the observations in para 29 Clause III shall also be borne in mind. (C) Article 265 should be read along with the Preamble and Article 39(b) and (c) of the Constitution, and so construed in cases where the assessee has passed on the liability to the consumer or third party, he is not entitled to restitution or refund. The fact that the levy is invalid need not automatically result in a direction for refund of all collections made in pursuance thereto. (D) The presumption is that the taxpayer has passed on the liability to the consumer (or third party). It is open to him to rebut the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be governed by section 27 of the Act. 16. The question can be looked from slightly different angle. Suppose there was no requirement of giving bank guarantee by the petitioner for clearance of the goods pending the petitions, but the petitions were ultimately dismissed, would the department not be entitled to recover the duty payable through other means? Answer to this question is obviously in the affirmative. If therefore the department had recovered such duties coercively from the petitioner, which later on becomes refundable on account of the judgment of the Supreme Court, would the principle of unjust enrichment not apply? Once again the answer is obvious. We see no distinction between this hypothetic situation and the actual fact situation of these cases merely because the recovery in the instant cases came through the bank guarantees furnished by the petitioner pending the writ petitions. 17. In case of Oswal Agro Mills Ltd. (supra), on which heavy reliance was placed by the counsel for the petitioner, the High Court had granted stay against the judgment of CEGAT in favour of the assessee on the condition of payment of 50% of the duties to the Excise department within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s equivalent to payment of the amount of excise duty. In our view, the answer is in the negative. For the purposes of securing the Revenue in the event of the Revenue succeeding in the proceedings before a Court, the Court as a condition of staying the demand for the disputed tax or duty, imposes a condition that the assessee shall provide a bank guarantee for the full amount of such tax or duty or part thereof. The bank guarantee is required to be given either in favour of the principal administrative officer of the Court or in favour of the concerned Revenue authority. In the event that the Revenue fails in the proceedings before the Court the question of payment of the tax or duty, the amount of which is covered by the bank guarantee, does not arise and, ordinarily, the Court, at the conclusion of its order, directs that the bank guarantee shall stand discharged. Where the Revenue succeeds the amount of the tax or duty becomes payable by the assessee to the Revenue and it is open to the Revenue to invoke the bank guarantee and demand payment thereon. The bank guarantee is security for the Revenue, that in the event the Revenue succeeds its dues will be recoverable, being backed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision in case of Oswal Agro Mills Ltd. (supra). This was however, a case of simple furnishing of bank guarantee, to which the department desired to apply the principle of unjust enrichment. The Supreme Court upheld the contention of the counsel for the assessee that furnishing of a bank guarantee does not tantamount to payment of tax. Following observations may be noted. 33. Furthermore in, view of the enunciation of the law by this Court in Oswal Agro Mills Ltd. case (supra), a bank guarantee which is furnished cannot be regarded as payment of excise levy which the Government is entitled to retain. The furnishing of a bank guarantee is ordered normally in order to ensure collection of dues. Where, however, the State, as in the present case, has been held not to be entitled to collect or realise vend fee after 25th October, 1989 it cannot be allowed to invoke the bank guarantee and realise the amount of vend fee. What cannot be done directly cannot be done indirectly either. Furnishing of bank guarantee is only a promise by the bank to pay to the beneficiary the amount under certain circumstances contained in the bank guarantee. Furnishing of bank guarantee cannot tanta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent situation is covered by the ratio laid down by the Supreme Court either in the case of Oswal Agro Mills Ltd. (supra) or Somaiya Organics (supra). 23. The case on hand is similar to the one decided by the Supreme Court in case of DCW Ltd. v. Union of India, 2015 (324) E.L.T. 702 (S.C.) relied upon by the counsel for the Revenue. In such case, dispute about classification of the imported machinery arose. The High Court first directed the appellant to furnish bank guarantee for a sum of ₹ 1,45,27,079/. Later on, the High Court directed the assessee to deposit ₹ 70 lakhs with the department and reduced the bank guarantee to be continued by corresponding sum. When the assessee after depositing the first installment of ₹ 17.50 lacs, defaulted in paying the remaining three installments, High Court vacated the stay granted earlier and permitted the department to encash the bank guarantee. In further appeal, the Supreme Court allowed the department to encash part of the bank guarantee to the extent of ₹ 70 lakhs. The classification dispute was ultimately settled by the Tribunal, under which, a sum of ₹ 41,48,176/became payable to the assessee being the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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