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Issues: Whether the communication directing encashment of the bank guarantee could be sustained when the assessee had a statutory remedy of appeal and stay against the order-in-original, and whether such recovery action would nullify that remedy.
Analysis: The petition arose from provisional excise assessment, finalisation of assessment, and a subsequent move to encash the bank guarantee towards recovery of duty. The Court noted that the assessee had an appeal remedy under Section 35 of the Central Excise Act, 1944 and could seek stay and waiver of pre-deposit under Section 35F of the Central Excise Act, 1944. It held that allowing encashment before the assessee could invoke those remedies would make the statutory remedy ineffective and infructuous, and that recovery steps should not be taken in a manner that defeats the remedy provided by law.
Conclusion: The communication dated 29 November 2006 was quashed and set aside, and the writ petition was allowed in favour of the assessee.
Final Conclusion: Recovery action by encashment of the bank guarantee was held impermissible where it would defeat the assessee's statutory appellate and stay remedies.
Ratio Decidendi: A recovery measure that would render a statutory appeal and stay remedy ineffective cannot be sustained and must be restrained to preserve the efficacy of the remedy provided by statute.
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