1992 (4) TMI 42 - HC - Central Excise

Premature bank guarantee encashment held invalid; authorities ordered refund, assessee to furnish fresh guarantees pending stay decision

HC allowed the writ petition, holding that the Collector and Assistant Collector acted improperly in encashing the bank guarantees before expiry of the ... Encashment of bank guarantee before expiry of statutory appeal period - interim relief pending stay application - quashing of Tribunal order directing deposit of recovered money - restitution and re-execution of bank guarantee - expeditious disposal of stay applicationQuashing of Tribunal order directing deposit of recovered money - Impugned order of the Tribunal directing the Department to hold the money realised in deposit till disposal of the appeal was unsustainable and was set aside. - HELD THAT: - The Court examined the Tribunal's direction that the Department should retain amounts realised and found that the direction could not be sustained. In consequence the impugned order dated 17th February 1992 (Ex.L) was quashed and set aside. The Court recorded its conclusion that the stay application and related interim relief should be dealt with by the Tribunal, and therefore removed the operative effect of the Tribunal's earlier direction to retain the realised amounts. [Paras 3, 6]Impugned Tribunal order directing deposit/retention of realised money quashed.Encashment of bank guarantee before expiry of statutory appeal period - interim relief pending stay application - restitution and re-execution of bank guarantee - Encashment of the petitioners' bank guarantees by the Collector and Assistant Collector before the expiry of the statutory three month appeal period and while a stay application was pending was improper; respondents were directed to repay and petitioners ordered to re execute bank guarantee. - HELD THAT: - The Court found that the petitioners had filed an appeal within the three month statutory period and had applied for stay, with the stay hearing fixed. Despite being informed of the scheduled stay hearing, the Collector and Assistant Collector encashed the bank guarantees. The Court held this conduct to be highly improper, ordered respondents to repay the entire amount realised by encashment within ten days, and directed the petitioners to execute a fresh bank guarantee in favour of the Collector within two weeks of receipt. It was clarified that the substitute bank guarantee would continue until disposal of the stay application and, if the Tribunal rejected the stay, the order would not be executed for two weeks from service on the petitioners. [Paras 3, 4]Encashment before expiry of appeal period and pending stay was improper; respondents to refund and petitioners to re execute bank guarantee with protective timings ordered.Expeditious disposal of stay application - interim relief pending stay application - Tribunal directed to hear and dispose of the petitioners' stay application expeditiously and preferably before 30th May 1992. - HELD THAT: - Recognising that the merits of interim relief rested with the Tribunal, the Court mandated prompt adjudication of the stay application. This direction was given to ensure timely resolution of the pending interim claim and to avoid further prejudice to the parties while the appeal process continued. [Paras 5]Tribunal directed to hear and dispose of stay application expeditiously (preferably before 30th May 1992).Final Conclusion: Petition allowed; the Tribunal's order dated 17th February 1992 quashed; respondents directed to refund amounts realised by encashment and petitioners directed to re execute bank guarantee; Tribunal ordered to dispose of the stay application expeditiously. Issues involved: Impugned order of Tribunal directing Department to hold money in deposit; Encashment of bank guarantee before expiry of statutory period; Stay application by petitioners; Direction to pay recovered amount to petitioners; Execution of new bank guarantee; Disposal of stay application by Tribunal.Impugned Order of Tribunal: The High Court found the order directing the Department to hold the money realized in deposit till the appeal's disposal as unsustainable. The petitioners had filed an appeal challenging the Collector's order, and despite informing the Collector about the pending stay application, the bank guarantees were encashed prematurely by Respondents Nos. 2 and 3.Encashment of Bank Guarantee: The Court deemed it highly improper for the Collector and Assistant Collector to encash the bank guarantees before the statutory three-month period, especially when the petitioners had informed about the scheduled hearing of the stay application. Respondents Nos. 2 and 3 were directed to pay the entire amount recovered to the petitioners within 10 days, with the petitioners required to execute a new bank guarantee in favor of the Collector of Central Excise within two weeks thereafter.Stay Application by Petitioners: The Court made it clear that until the disposal of the stay application, the bank guarantee would remain in force. If the Tribunal rejects the stay application, the order shall not be executed for two weeks from the date of service on the petitioners. The Tribunal was directed to hear and dispose of the stay application expeditiously and preferably before a specified date.Direction to Pay Recovered Amount: Respondents Nos. 2 and 3 were directed to pay the entire amount recovered by encashing the bank guarantees to the petitioners within a specified timeframe. The petitioners were then required to execute a new bank guarantee in favor of the Collector of Central Excise within two weeks of receiving the recovered amount.Disposal of Stay Application by Tribunal: The Tribunal was directed to hear and dispose of the stay application of the petitioners as expeditiously as possible and preferably before a specified date. The impugned order was quashed and set aside, with the stay application made by the petitioners to the CEGAT, West Regional Bench, Bombay, to be disposed of accordingly. The petition succeeded, and the rule was made absolute with no order as to costs. A certified copy of the order was to be furnished out of turn within one week upon application.