Refund of tax collected during investigation granted where recovery lacked adjudication and was made under protest, refund with interest ordered

Refund claim concerning tax recovered during investigation: the HC found the sum was collected without any preceding adjudication or order, and the payer made the payment under protest. Relying on departmental circulars distinguishing confirmed arrears from unconfirmed demands, the court held respondents lacked jurisdiction or legal authority to recover the amount during investigation, rendering the recovery coercive and violative of constitutional protections over taxation and property. Consequence: the collected amount must be refunded with applicable interest as the recovery was unauthorized and not supported by an Order-in-Original or adjudication.

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Issues Involved:
1. Legality of the collection of INR 1.5 crores by the respondents.
2. Refund entitlement for the petitioner.
3. Applicability of Customs duty on goods destroyed in a fire.
4. Validity of the investigation and subsequent notices.
5. Requirement for an application under Section 27 of the Customs Act for a refund.

Detailed Analysis:

1. Legality of the Collection of INR 1.5 Crores by the Respondents:
The petitioner contended that the collection of INR 1.5 crores was without jurisdiction or authority of law, violating Article 265 of the Constitution of India. The court agreed, noting that the amount was collected under coercion and without any prior adjudication or order. The respondents admitted that the payment was made under protest. Circulars dated 25.05.2022 and 19.01.2022 were cited, which clarified that no recovery could be made without an adjudication order. The court concluded that the collection was illegal and violative of constitutional provisions.

2. Refund Entitlement for the Petitioner:
The petitioner sought a refund of INR 1.5 crores with interest, arguing that the amount was collected without legal authority. The court referenced multiple judgments, including those from the Delhi High Court and Punjab and Haryana High Court, which supported the petitioner's claim that amounts collected without adjudication must be refunded. The court ruled that the petitioner was entitled to a refund with interest, noting that the respondents' actions were without jurisdiction or authority of law.

3. Applicability of Customs Duty on Goods Destroyed in a Fire:
The petitioner argued that no customs duty was payable on goods destroyed in a fire. The respondents contended that the petitioner had not applied for remission of duty under Section 23 of the Customs Act, and thus was liable to pay duty. The court did not explicitly resolve this issue but focused on the illegality of the collection of INR 1.5 crores.

4. Validity of the Investigation and Subsequent Notices:
The petitioner sought a declaration that the investigation and subsequent notices were barred by limitation and void ab initio. The court did not directly address this issue but noted that the show cause notice issued after the petition was filed could not justify the prior illegal recovery of funds. The court kept all rival contentions regarding the show cause notice and adjudication proceedings open.

5. Requirement for an Application Under Section 27 of the Customs Act for a Refund:
The respondents argued that the petitioner should have filed an application under Section 27 of the Customs Act for a refund. The court rejected this contention, stating that Section 27 applies to refunds of customs duty and not to amounts collected without authority of law. The court cited the judgment in EBIZ.COM Pvt. Ltd. v. Commissioner of Central Excise, which held that voluntary payments made under protest are in the nature of pre-deposits and must be refunded.

Conclusion:
The court allowed the petition, declaring the petitioner entitled to a refund of INR 1.5 crores with 6% interest from the date of collection until payment. The respondents were directed to process the refund within three months. The court kept open all rival contentions related to the show cause notice and adjudication proceedings.

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