2006 (12) TMI 6 - HC - Central Excise

Court sets aside order, emphasizes officer diligence, statutory remedies

The Court allowed the petition and set aside the communication/order dated 29th November 2006, emphasizing that high-handed actions by the Officer could ... Encashment of bank guarantee - provisional assessment - appeal under Section 35 of the Central Excise Act, 1944 - order under Section 35F relieving deposit on ground of undue hardship - stay application restraining coercive action - officer not to take action which renders statutory remedy infructuous - administrative instruction in Excise Manual Rule 1.3 restraining recovery pending stayEncashment of bank guarantee - stay application restraining coercive action - officer not to take action which renders statutory remedy infructuous - administrative instruction in Excise Manual Rule 1.3 restraining recovery pending stay - Validity of the communication dated 29th November, 2006 seeking encashment of the bank guarantee furnished during provisional assessment of the year 2003 and whether such action would render statutory remedies infructuous - HELD THAT: - The petitioner had furnished a bank guarantee during provisional assessment for the year 2003. After finalisation of the provisional assessment by the Order-in-original dated 28th November, 2006, the respondent issued a communication dated 29th November, 2006 claiming encashment of the bank guarantee. The Court noted the availability of statutory remedies to the assessee, including appeal under Section 35 and an application under Section 35F to avoid deposit on grounds of undue hardship, and observed the Excise Manual (Rule 1.3, Part 3) which directs that where a stay application is filed no coercive action should be taken to realise dues until disposal of the stay application. Allowing the bank guarantee to be encashed before the filing or adjudication of stay would render those remedies ineffective. The Court found that the Officer had acted precipitously and that such high-handed action would nullify the statutory remedy available to the petitioner. In these circumstances the communication seeking encashment was quashed to preserve the effectiveness of the statutory remedies and administrative instruction against coercive recovery pending stay. [Paras 4, 6]Communication dated 29th November, 2006 quashed and set aside; rule made absolute in terms of prayer clause (a); no order as to costs.Final Conclusion: Writ petition allowed; the communication for encashment of the bank guarantee is quashed to prevent nullification of the statutory remedies available to the petitioner; petition disposed of with no order as to costs. Issues:Bank guarantee encashment during provisional assessment finalizationAnalysis:The petitioner had provided a bank guarantee through H.D.F.C. Bank during the provisional assessment of their excise duty for the year 2003. After the finalization of the provisional assessment and the issuance of the Order-in-original on 28th November 2006, the respondent No. 3 sought to encash the bank guarantee on 29th November 2006. The petitioner, represented by Mr. Patil, highlighted the availability of an appeal under Section 35 of the Central Excise Act, 1944, which could be filed within 60 days along with a stay application against the impugned order. The petitioner argued that allowing the encashment of the bank guarantee before the filing of the stay application would render the remedy under the statute ineffective. Reference was made to the Excise Manual and the provision that no coercive action should be taken for recovering dues if a stay application is pending. The petitioner sought the quashing of the communication/order dated 29th November 2006 to prevent the nullification of statutory remedies.Mrs. Bharucha, representing the Revenue, acknowledged the steps taken by the Officer to recover the dues in accordance with the provisions of the Manual but left the decision to the Court. The Court, considering the circumstances, allowed the petition and set aside the communication dated 29th November 2006. The Court emphasized that high-handed actions by the Officer could make statutory remedies ineffective. It was noted that while officers should be diligent in collecting dues, they should not take actions that would undermine the available statutory remedies. The Court made the rule absolute in favor of the petitioner, with no order as to costs, thereby disposing of the writ petition.