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2017 (5) TMI 759 - DELHI HIGH COURT

2017 (5) TMI 759 - DELHI HIGH COURT - TMI - Forced recovery of duty / collection of undated cheques - Anti Evasion of duty - Rate of duty - mobile phone batteries - mobile phone charger - LED bulbs - the unit was paying duty @ 2% ad valorem on mobile phone battery and mobile phone charger, and 6% on LED bulbs - According to the Respondents, the tariff rate of duties on these products is 12.5% ad valorem - benefit of N/N. 12/2012-CE dated 17th March, 2012 - Held that: - The ADC has been unable to .....

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vasion Department of Central Excise requires a deeper investigation. The Court has every reason to believe that this has come to light only because the Petitioner has approached this Court. This practice is perhaps being adopted in a number of instances which are yet to come to the notice of the Court. There will be serious ramifications if this practice is allowed to continue unchecked. In the first place, it must be realised that the officers of the Anti Evasion Wing of the Central Excise Depa .....

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s mentioned. - W.P.(C) 3070/2017 & CM No. 13393/2017 - Dated:- 15-5-2017 - S. MURALIDHAR & CHANDER SHEKHAR JJ. Petitioner Through: Mr. Priyadarshi Manish with Ms.Anjali Jha Manish, Mr. Sagar Rohtagi and Mr. Ashutosh Mishra, Advocates. Respondents Through: Mr. Harpreet Singh, Senior Standing Counsel with Ms. Namrata Bhati, Advocate for Respondent Nos. 2,3, 4 and 5. SI Adarsh Shrivastava, Superintendent, Central Excise. O R D E R Dr. S. Muralidhar, J.: 1. This writ petition has brought to ligh .....

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atteries, mobile phone charger and LED bulbs. The unit was registered with the Central Excise Department since 4th January, 2016. The intelligence gathered was that the unit imported more than 20 kinds of components/raw materials under nil rate of duty for the manufacturing of mobile phone battery, mobile phone battery charger and LED bulb. More than 70% of the clearances of finished goods of the unit are stated to be of mobile phone battery. It is further stated that the unit is selling all the .....

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oner's ER-3 Returns filed for the period of April to December, 2016 it had been observed that the unit had cleared mobile phone batteries valued at ₹ 13,76,75,874 on payment of duty of central excise at 2% ad valorem whereas it was liable to pay a differential duty of 10.5% ad valorem. Likewise, it cleared the LED bulbs by paying a differential duty at 6% while it was required to pay differential duty at 6.5%. A note was prepared by the Superintendent (Shri Adarsh Kumar Shrivastava) on .....

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that it is recorded in the note that there was a purported admission by Mr. Jain that above notification exemption was not applicable in their case. The note states that Shri Rohit Jain was ready to deposit the differential duty of 10.5% as they had short-paid the duty on all the clearances of mobile phone battery. Accepting his offence, he voluntarily tendered five undated cheques towards their duty liability amounting to ₹ 1,25,00,000/- as detailed below: Sl.No. Cheque No. Amount (in Rs .....

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s as under: Sh. Rohit Jain, Director of the firm, after going through the relevant provisions of Central Excise Act and the relevant notifications showed to him by the officers, admitted their lapse regarding short-payment of duty resulting in evasion of Central Excise duty and voluntarily tendered five post-dated cheques of ₹ 20 Lacs, ₹ 25 Lacs, ₹ 25 Lacs, ₹ 25 Lacs and ₹ 30 Lacs respectively (total amounting ₹ 1.25 Crore only) on account of liability of Cent .....

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r presence. (emphasis supplied) 6. It requires to be noted that while the note dated 14th March, 2017 prepared by the Superintendent, a portion of which has been extracted hereinbefore, talks of undated cheques having been collected, the panchnama talks of the Petitioner having voluntarily tendered five 'post-dated' cheques. 7. The Petitioner s version of what happened on 10th March, 2017 is of course different. Its version is that all of a sudden on 10th March, 2017, a team of the Anti .....

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entative went along with its counsel to meet the Commissioner of Central Excise, Delhi-II on 27th March, 2017. They handed over to him a representation dated 21st March, 2017 explaining why the Petitioner was entitled to Exemption Notification No. 1/2011-CE dated 1st March, 2011. They also handed over to the Commissioner a copy of the Circular/Instruction of the Central Board of Excise and Customs (CBEC) bearing No. F.No.528/2/2008-Cus (TU) dated 6th February, 2009 which purportedly stated that .....

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the benefit of exemption notification in question. The Petitioner thereafter filed the present petition on 30th March, 2017 alleging illegalities committed by the Department. The Petitioner prayed inter alia for a declaration that the Petitioner is entitled to the benefit of exemption and for a mandamus to the Respondent No.3 i.e. the Commissioner of Central Excise, Delhi-II not to encash the five cheques dated nil . 10. When this writ petition was listed first for hearing on 12th April, 2017 th .....

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Anti Evasion Wing, Commissioner of Central Excise, Delhi-I. 3. The officer of the Respondent (Mr Adarsh Shrivastava, Superintendent) present in Court instructs Mr Harpreet Singh to state that the originals of the five cheques are available with the Department and have not yet been encashed. It is directed that the said five cheques shall be brought to the Court by a responsible officer of the Department on the next date of hearing. 4. The Court would like to know on what instructions, orders an .....

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apri Bathaid Private Limited v. Commissioner of Trade &Taxes 2016 (155) DRJ 526 where a similar practice followed in the Department of Trade and Taxes of the Government of the NCT of Delhi was directed to be stopped forthwith. 6. The Additional Commissioner, while filing the affidavit as directed above, will after reading the aforementioned decision, place/state the stand of the Anti Evasion Wing of the Central Excise Department. 7. Liston 8th May, 2017. 8. Till the next date, no coercive ac .....

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at the time of tendering the cheques, the petitioner requested for some time for making good the payment and stated that since he is not having sufficient balance/funds with him at that point of time, therefore, he requested that the cheques may not be presented immediately and assured that within a very short period of time he would clear his statutory duty liability. The petitioner, therefore, requested that no date may be put on the cheques and as and when the petitioner would have sufficient .....

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counsel appearing for the Respondents, to show any provision in Central Excise Act 1944 (CE Act) or the Rules made thereunder or any circular or notification that permitted the officers of the Department to collect undated cheques constituting the differential duty liability and in particular authorising officers to collect such differential duty liability during the process of a visit/search or survey. Mr. Harpreet Singh could point out to no such provision or notification or circular. What was .....

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ty by way of cheques; to decide again on the spot the terms on which such duty should be paid; to decide again on the spot whether to grant such duty evader the facility of postponement/late payment by 'agreeing' not to put any date on such cheques. It is indeed extraordinary that officers at the level of a Superintendent would have such vast powers of collecting duty on the spot without even a quantification of the duty amount preceded by a show cause notice (SCN). No attempt has been m .....

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hi Value Added Tax Act, 2004 ( DVAT Act ) as well as the Finance Act, 1994. The Court has in a detailed judgment in Capri Bathaid Private Limited v. Commissioner of Trade & Taxes 2016 (155) DRJ 526 held that: by no means does Section 87 (6) of the DVAT Act enable the officers who undertake a search and seizure operation under Section 60 of DVAT Act to collect tax dues on the spot from the dealers whose premises are searched. This is wholly impermissible in law and will lead to unhealthy prac .....

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that if any of the officers of the DT&T are found violating the instruction, they would be subject to disciplinary proceedings." 16. In that case again while directing the return of such cheques to the dealer from whom they were collected, the Court observed that the VAT Authorities have in these cases proceeded on a basic misconception of the scope of their powers and authority. In para 52, the Court observed as under: 52. The Court would like to impress upon the CVAT that given the f .....

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the exercise of powers and jurisdiction by different VAT Authorities. The CVAT should issue clear instructions that no VAT Authority will collect in cash or by cheque any alleged tax demand on the spot/field while undertaking a survey, or a search or seizure operation. In this regard, it should also be made clear that if any of the officers of the DT&T are found violating any of the instructions, they would be subject to disciplinary proceedings. 17. In its order dated 12th April, 2017 in th .....

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this Hon'ble Court passed in the case of 2016 (155) DRJ 526 and have understood the same. The present affidavit is being filed after going through the said Judgment. 17. That, the deponent further respectfully submits, the judgment passed by this Hon'ble Court in the case of Capri Bathaid Vs. Commr. Of Trade & Taxes is, with respect, not applicable to the facts of the present case. It is respectfully submitted in this regard that the case of Capri Bathaid is distinguishable on facts .....

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d empowered in this regard and the cheques handed over by the petitioner have still not been encashed as the petitioner had time and again requested for some time to arrange for the duty amount. Further the said cheques were handed over voluntarily in the wake of circumstances which have been explained supra. Thus, there was no action on part of the department which can be said to be lacking of any authorization by the Competent Authority. 18. The Court rejects the attempts of the ADC to disting .....

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to explain how these undated cheques were kept with the Department and why indulgence was shown by the Department to the Petitioner when the Petitioner requested for some time to arrange for the duty amount. 19. This illegal practice adopted by the Anti-Evasion Department of Central Excise requires a deeper investigation. The Court has every reason to believe that this has come to light only because the Petitioner has approached this Court. This practice is perhaps being adopted in a number of i .....

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s no scope at all to collect duty and that too without even quantifying the extent of duty evasion. 20. The most glaring feature here is that when the note dated 14th March, 2017 was put up before the ADC, his three instructions were to "1. Release the cheques early" (which is a tacit acceptance of the practice of collection of undated cheques); "2. To quantify the statutory liability" (which is a clear admission that till then the duty was not quantified) and "3. To aga .....

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nt. At least two scenarios are possible when such unbridled power of 'collection' of duty, on the spot, is allowed to go unchecked. One is that since there is nothing written down anywhere, the unscrupulous officers who constitute the survey/search team can 'negotiate' an amount of evaded duty and also agree to waiver of interest and penalty. This is without quantification and without a SCN. The duty evader gets away with a lighter amount and this is prejudicial to the interest o .....

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law and, worse still, by abuse of law. It has to be stopped. 21. The Court would like the matter to be carried out to its logical conclusion. The cheques brought to the Court are directed to be kept in a sealed cover with the Registrar General of this Court. The Court would like the Commissioner of Central Excise, Delhi-II to personally file an affidavit in this Court in light of the present order to explain to the Court what steps he proposes to take to immediately stop this illegal practice ad .....

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eeded to collect undated cheques in the manner indicated above and that too without any authorisation to do so under the CE Act, the rules made thereunder or under any circular/notification etc. In his affidavit to be filed in pursuance to the present order, the Commissioner of Central Excise, Delhi-II will detail all the consequential steps that he has taken in this regard including fixing responsibility on such of those officials who have crossed the line. 23. The Court would also like a copy .....

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