2013 (6) TMI 245 - HC - Customs

Court directs revenue: retain Rs.2 Cr, return Rs.8 Cr in 2 weeks. No encumbrance on plot. Cooperation needed in investigations.

The court directed the revenue to retain Rs.2 Crores and return Rs.8 Crores within two weeks. The petitioners were instructed not to encumber a specified ... Maintainability of writ for refund under Article 226 - Right to refund of amounts deposited without finalized demand - Retention of sums by revenue pending investigation - Protection of revenue interest by provisional security - Requirement of statutory authority to retain tax amounts (Article 265)Maintainability of writ for refund under Article 226 - Writ petition seeking refund was maintainable in the facts of the case. - HELD THAT: - The Court rejected the submission that Suganmal's case barred the petition. It followed the later authoritative exposition that Suganmal must be read with subsequent decisions and that a writ for refund is not absolutely barred; relief may be granted where the lis has public law character, collection was without authority, or where the High Court's equitable powers under Article 226 demand consequential relief. Applying those principles to the case at hand, the Court held reliance on Suganmal misplaced and that the petition was maintainable. [Paras 9, 10]Writ petition maintainable and respondents' objection on this ground rejected.Right to refund of amounts deposited without finalized demand - Requirement of statutory authority to retain tax amounts (Article 265) - Revenue cannot retain deposited amounts in absence of a finalized demand or statutory provision authorising retention; petitioners entitled to return of amounts except to the extent legitimately required to safeguard revenue. - HELD THAT: - The Court found no crystallized liability against the petitioners and noted only a show cause notice exposing a limited potential liability. It reiterated the settled principle that unless a demand is finalized, revenue has no authority to appropriate monies paid and retention without statutory backing would violate Article 265. On the record, the revenue conceded absence of a statutory provision to provisionally retain the amount except an arguable reference to Section 42 of the Customs Act, which did not justify blanket retention. Consequently the Court directed refund subject to limited safeguarding measures. [Paras 11, 12, 13]Revenue directed to return deposited amounts except as provisionally retained to safeguard legitimate interest.Protection of revenue interest by provisional security - Retention of sums by revenue pending investigation - Limited provisional retention of funds and protective directions were appropriate to safeguard the revenue while investigations and show cause proceedings are finalized. - HELD THAT: - Balancing the petitioners' right to refund against the revenue's interest, the Court exercised its remedial powers to permit provisional retention of a specified portion of the deposited amount to meet any liability ultimately found. The Court directed the revenue to retain a limited sum as security and to return the balance within a short period; it further required earnest completion of investigations and finalization of proceedings by a defined date and mandated return of any excess if final liability proved to be less than the retained amount. [Paras 14, 15, 16]Revenue to retain limited provisional amount; balance to be returned within specified period; investigations to be concluded by fixed date and any surplus returned thereafter.Protection of revenue interest by provisional security - Court granted protective injunction against alienation or creation of encumbrance on specified immovable property to safeguard revenue interest. - HELD THAT: - On statement made on behalf of the owner, the Court directed that the identified plot shall not be alienated or encumbered for a stated period or until finalization of proceedings, as a measure to protect the revenue while the matter is adjudicated. [Paras 8, 14]Direction that the specified plot shall not be alienated or encumbered until the earlier of the stated date or finalization of proceedings.Final Conclusion: Writ petition upheld as maintainable; in absence of a finalized demand or statutory authority the revenue was ordered to return the deposited amount except for a limited provisional retention to safeguard potential liability, the balance to be refunded within the timeframe directed; the revenue was directed to conclude investigations by the specified date and a protective injunction was issued against alienation or encumbrance of the identified plot. Issues Involved:1. Quashing of Panchnama and permission for export.2. Return of Rs.10 Crores allegedly recovered under coercion.3. Return of Managing Director's passport and company records.4. Prevention of coercive action against company directors.5. Request for CBI enquiry.6. Exemption from filing certified copies of annexures.Detailed Analysis:1. Quashing of Panchnama and Permission for Export:The petitioners sought a writ of certiorari to quash the Panchnama dated 30.04.2012 and 01.05.2012, which led to the detention of two containers at the Inland Container Depot, New Delhi, and requested permission for their export. However, this relief was rendered infructuous due to various interim orders passed by the court during the pendency of the writ petition.2. Return of Rs.10 Crores Allegedly Recovered Under Coercion:The petitioners argued that Rs.10 Crores was forcibly obtained by the Directorate of Revenue Intelligence (DRI) on 26th April 2012 without any existing liability. They cited precedents such as Bhagwati International vs. Union of India and M/s Century Metal Recycling Pvt. Ltd. vs. Union of India, which emphasize that money deposited under coercion should be returned if no demand is finalized against the petitioners.The respondents contended that the petitioners voluntarily deposited the amount and cited the Constitution Bench Judgment in Suganmal vs. State of M.P. to argue that the writ petition was not competent. They also claimed that the amount should be retained to safeguard revenue interests, with potential liabilities amounting to Rs.60 Crores or more.The court, referencing Godavari Sugar Mills Limited vs. State of Maharashtra, clarified that a writ petition for refund could be entertained under Article 226 in appropriate cases. The court found no crystallized liability against the petitioners and directed the revenue to retain Rs.2 Crores while returning Rs.8 Crores within two weeks.3. Return of Managing Director's Passport and Company Records:The petitioners requested the return of the Managing Director's passport and company records. This relief was rendered infructuous due to interim orders passed during the pendency of the writ petition.4. Prevention of Coercive Action Against Company Directors:The petitioners sought to prevent coercive action against the company directors during the investigation. This relief was also rendered infructuous due to interim orders passed during the pendency of the writ petition.5. Request for CBI Enquiry:The petitioners requested a CBI enquiry into the incidents. This relief was rendered infructuous due to interim orders passed during the pendency of the writ petition.6. Exemption from Filing Certified Copies of Annexures:The petitioners sought exemption from filing certified copies of annexures, allowing them to file photocopies or computer printouts. This relief was rendered infructuous due to interim orders passed during the pendency of the writ petition.Conclusion:The court directed the revenue to retain Rs.2 Crores to safeguard its interest and return the balance amount of Rs.8 Crores within two weeks. The petitioners were also instructed not to create any encumbrance or alienate the specified plot until 31st March 2014 or until the finalization of proceedings, whichever is earlier. The petitioners were required to cooperate in the investigations and the decision of the show cause notice. The court emphasized the need for the revenue to complete investigations and finalize proceedings by 31st March 2014. The review petition was rendered infructuous and disposed of accordingly.