2018 (11) TMI 688 - HC - Customs

Court rules against unlawful revenue demand, orders refund to petitioner within 4 weeks.

The court found in favor of the petitioner, ruling that the Directorate of Revenue Intelligence's unlawful demand of Rs. 40,00,000 during goods import ... Retention of amounts without assessment or demand - Requirement of show cause notice before appropriation - Voluntary deposit versus deposit under coercion - Violation of Article 265 of the Constitution - Deposit requirement for prosecution of appeal (10%)Retention of amounts without assessment or demand - Requirement of show cause notice before appropriation - Violation of Article 265 of the Constitution - Whether amounts taken from the petitioner without any assessment or show cause notice can be retained by the revenue - HELD THAT: - The Court held that where no crystallized demand or assessment exists, the revenue has no authority to appropriate amounts paid by an importer in the absence of a statutory provision permitting provisional retention. Reliance was placed on earlier Division Bench decisions which found that sums recovered from importers without a show cause notice or demand could not lawfully be retained and that such retention would offend Article 265 of the Constitution. The factual dispute as to voluntariness of the deposit does not cure the absence of a formal demand or assessment entitling the revenue to retain the sum.Amount taken without assessment or demand cannot be retained by the revenue and retention in such circumstances would be violative of Article 265.Voluntary deposit versus deposit under coercion - Deposit requirement for prosecution of appeal (10%) - Relief to be granted to the petitioner in view of the unlawful retention and pending proceedings - HELD THAT: - Having found that no finalized liability had been shown and that the department had not concluded proceedings despite issuance of a show cause notice, the Court applied the principle that, ordinarily, only a proportionate deposit (notably 10% for prosecuting an appeal to CESTAT) may be required. Exercising its discretion in the circumstances of the case and having regard to precedents directing refund where amounts were recovered without demand, the Court directed refund of the balance of the sum paid by the petitioner after permitting the department to retain a limited amount.The department was directed to refund the balance of the amount paid by the petitioner after retaining a specified limited sum; refund to be made within four weeks.Final Conclusion: Writ petition allowed in part; holding that amounts taken without assessment or show cause notice cannot be retained (being violative of Article 265), the Court directed refund of the balance of the sum paid by the petitioner after permitting retention of a limited amount, to be refunded within four weeks. Issues Involved:1. Unlawful demand of Rs. 40,00,000 by Directorate of Revenue Intelligence (DRI) during goods import.2. Violation of Article 265 of the Constitution of India due to payment without show cause notice.3. Comparison with previous judgments regarding refund of unlawfully recovered amounts.4. Dispute over voluntary payment of the amount by the petitioner.5. Pending proceedings despite the issuance of a show cause notice in April 2017.6. Legal provisions for retention of amounts by revenue authorities.Analysis:1. The petitioner raised the issue of an unlawful demand of Rs. 40,00,000 by the DRI during the import of goods, despite already paying the leviable duty. The petitioner alleged that the payment was made under pressure to avoid clearance delays and demurrage charges at the port. This action was contested as a violation of Article 265 of the Constitution of India, which prohibits the collection of any tax or duty without the authority of law.2. The petitioner's counsel referred to previous Division Bench judgments and a Delhi High Court judgment where refunds were ordered for amounts recovered without proper assessment or demand. The court noted that unless there is a finalized assessment and demand, the revenue authorities cannot retain any amount deposited, even if claimed to be voluntary. The court emphasized that any retention without a specific statutory provision would violate Article 265 of the Constitution.3. The respondents argued that the amount was voluntarily paid by the petitioner due to a violation of import laws, as duty was paid based on transaction value instead of the maximum retail price. They claimed that a show cause notice had been issued in April 2017, but proceedings were still pending. However, the court reiterated that voluntary payment does not justify retention without a finalized demand and assessment.4. The court compared the current case with previous judgments where refunds were ordered for amounts recovered without proper legal basis. It emphasized that unless a demand is finalized and existing, the revenue authorities cannot retain any amount, as it would violate constitutional provisions. The court highlighted that the pending proceedings and the appeal process allowed for a deposit of only 10% of the duty amount, indicating that the current retention of the full amount was unjustified.5. Despite the issuance of a show cause notice in April 2017, no order had been passed even after more than a year. The court noted that the proceedings had not been concluded, and the petitioner was entitled to a refund of the unlawfully retained amount. The court ordered the refund of the balance amount deposited by the petitioner, retaining only a nominal sum, within four weeks from the date of the order.6. The court emphasized that the revenue authorities cannot retain any amount without a finalized demand and existing liability. It highlighted the lack of specific statutory provisions authorizing such retention and reiterated that any retention without legal basis would contravene Article 265 of the Constitution. The judgment concluded by directing the refund of the unlawfully retained amount to the petitioner within a specified timeframe.