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Commissioner of Customs loses his shirt

AIT News Network

NEW DELHI. Nothing can be a worse news for Customs than its Commissioner of Delhi Customs losing his shirt as a result of Delhi High Court ruling AIT-2006-300-HC for non-payment of Refund to Honda Siel Cars India Ltd. The interest of Rs.65 lakh on delayed payment of refund is now to be recovered from the salary of the Commissioner of Customs and Assistant Commissioner of Customs (Refund) and other defaulting Officers.

The direction to initiate disciplinary proceedings has already taken its toll. Assistant Commissioner(Refund) has already been transferred and the search is on for a suitable candidate for Position of Commissioner of Customs for which many candidates have started making rounds of North Block to be in circulation at the right place at the right time.

The Settlement Commission, Customs and Central Excise, Principal Bench, New Delhi settled the case holding that the correct duty liability of the applicant in the case at Rs.32,63,032/- which was paid by them by appropriating from the deposit of Rs.3 crores made during the investigation. Revenue was directed to consider the return of the balance amount of deposit in accordance with the law.

The Respondents sought the issuance of a direction to the Petitioner to refund Rs.2,67,36,968/-, being the balance amount of principal deposit, along with interest thereon, which the Respondents were constrained/ compelled to deposit during the investigation. The Respondents filed a Refund Application dated 10.4.2003 for the aforementioned sum, followed up by their letters dated 5.5.2003, 7.5.2003 and 13.5.2003.

T H E R U L I N G:

The evasive conduct of the Petitioners in these proceedings has also pervaded all throughout in their Departmental proceedings in respect of the said Refund Application.

Our attention has been drawn to circular No. 802/35/2004-CX., dated 8-12-
2004 The salient portion of the circular reads as follows:
”3. The Board has noted in the observations of the Hon'ble Supreme Court in its order dated 21-9-2004 and has decided that pre-deposits shall be returned within a period of three months of the disposal of the appeals in the assessee's favour.
…It is again reiterated that in terms of Hon'ble Supreme Court's order such pre-deposit must be returned within 3 months from the date of the order passed by the Appellate Tribunal/Court or other Final Authority unless there is a stay on the order of the Final Authority/CESTAT/Court, by a superior Court.
5. Delay beyond this period of three months in such cases will be viewed adversely and appropriate disciplinary action will be initiated against the concerned defaulting officers. All concerned are requested to note that default will entail an interest liability, if such liability accrues by reason of any orders of the CESTAT/Court, such orders will have to be complied with and it may be recoverable from the concerned officers.”

It is a matter of great regret that till date requisite action has not been taken by the Petitioners. Instead, Mr. Dubey would have us believe that the concerned Commissioner was under the bona fide belief that the refund ought not to be made during the pendency of this writ petition and more particularly owing to the pendency of the stay application. We may simply reiterate that no orders had been passed, or for that matter have been pressed for, on the stay application. We may add that we find it difficult to accept this plea of “bonafide belief” particularly when the Department would itself never accept such a plea of an assessee who has gone in appeal against an outstanding demand of duty and has failed to obtain a stay of recovery of such demand. These very officers, who seem to “bonafide” believe that mere pendency of a stay application of the Department tantamounts to a stay, would insist that the assessee should in fact produce an order of stay of recovery. What is sauce for the goose is sauce for the gander. The yardstick can be no different when the appellant/petitioner is the Department.

It is a matter of regret that although three and half years have elapsed since the Respondent filed an application seeking refund, the petitioners have not till date passed orders thereon.

The loss to the public exchequer due to the willful inaction of the Commissioner of Customs is indeed staggering. In the wake of these Orders we cannot but express our doubts whether the obduracy of the Commissioner was bonafide. Since the impugned Order is dated 20.8.2002, the refund ought to have been made within three months thereof, i.e. latest by 20.11.2002. Section 27A was inserted into the Customs Act by Act 22 of 1995 by Section 55 thereof with effect from 26.5.1995; Section 11BB was inserted into the Central Excise Act, 1944 also by Act 22 of 1995 by Section 75 thereof with effect from 26.5.1995. Prior to these changes in the statutes both these Sections stipulated that if a refund is not made within three months from the date of the receipt of the application, interest at such rate not below ten per cent and not exceeding thirty per cent per annum as may be fixed by the Central Government by Notification in the Official Gazette would become payable. Act 14 of 2001 has substituted the words “not below ten per cent” by the words “not below five per cent”.

Assuming that the Respondent is entitled to a refund of Rs.2,67,36,968/-, the Department has needlessly incurred a liability for payment of interest at the rate of 6 per cent from 20.11.2002 to 19.12.2006 i.e.Rs.65,50,557/-. Furthermore, it has often been contended on behalf of Department that where a party presses for a refund and it is ultimately found that no refund was legitimately due, the Department would be entitled to claim interest at the rate of 15 per cent on the said amount at least on the premise of delayed payment of duty. In the event that the writ petition were to be decided in favour of the Petitioner/Department, by 19.12.2006 the
Respondents would have become liable to pay interest at the rate of 15 per cent on the said sum of Rs.2,67,36,968/- which from 20.12.2002 to 19.12.2006, would be as much as Rs.1,63,76,392/-. In other words if the Respondents request for refund the excise duty had been acceded to instead of paying Rs.65,50,557/- the Department may have been able to stake a claim for the amount of refund together with Rs.1,63,76,392/-. It is thus always in the interest of the Department to refund the excess amount of duties as per the adjudication given at that point of time. The failure to take prompt action on an application for refund may give rise to a legitimate apprehension that such inaction was not bonafide.

It is in these circumstances that we allow C.M. 13551/2006 by directing the Petitioner to comply with the Circular No. 802/35/2004-CX., dated 8.12.2004, the relevant portions of which had been extracted by us in our Order dated 11.12.2006. Furthermore, in terms of paragraph 5 of the Circular dated 8.12.2004 it prima facie appears to us that appropriate disciplinary action should be initiated against the concerned defaulting officers and the additional liability incurred by the Department should be recovered from the concerned officers if they fail to furnish a plausible defence. We order accordingly. Departmental proceedings should be commenced against Commissioner-Refund (Customs), I.C.D. Tughlakabad, Assistant Commissioner (Refund) I.C.D.Tughlakabad, among other officers. The Petitioner shall file a Report before the next date of hearing furnishing details of the action that has been initiated against the delinquent officers and its progress. The Petitioner shall pay costs of Rs.25,000/-, within four weeks from today, to be deposited with the Prime Minister's Relief Fund. The application is allowed in these terms.

A copy of this Order be dispatched by the Registry to the Comptroller and Auditor General of India, and Chairman, Central Board of Excise and Customs.

( Click here for full text of ruling AIT-2006-300-HC )