Disposed

M/S Unisys India Private Limited v. the Principal Commissioner of Central Tax

Karnataka HC10 Feb 2021WP/2178/2021

Case brief

AI extract

What is this about?

High Court quashed recovery of GST amount made by bank after petitioner filed appeal, ruling recovery illegal as coercive measures were prohibited during appeal pendency with verified deposit.

What did the court decide?

Recovery of Rs. 2,52,85,310/- made via Demand Draft dated 11.01.2021 is set aside and overstated amount refundable to petitioner.

M/S Unisys India Private Limited Vs the Principal… — GST and Indirect Tax | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 10^TH DAY OF FEBRUARY, 2021

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BEFORE

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THE HON'BLE MR.JUSTICE S. SUNIL DUTT YADAV

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WRIT PETITION No.2178/2021 (T-RES)

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BETWEEN :

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M/s. Unisys India Private Limited, RGA Tech Park, Block-3, Wings B, Survey No.31/1, Chikkakannalli Village, Varthur Hobli, Sarjapur Road, Bengaluru-560 035. (Represented by its Finance Controller Mr. V.V.N. Narasimha Raja Ponnuru, Aged about 43 years, Son of Shri Venkateswararao Ponnuru) … Petitioner

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(By Sri K.S. Naveen Kumar and Sri R. Dakshina Murthy, Advocates)

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AND :

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The Principal Commissioner of Central Tax, GST Bengaluru East Commissionerate TTMC/BMTC Building 4^th Floor, Domluru, Bengaluru - 560 071.

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Deputy Commissioner of Central Tax, Arrears Recovery Cell, Office of the Principal Commissioner of Central Tax, GST Commissionerate Bengaluru East, TTMC/BMTC Building 4^th Floor, Domluru, Bengaluru - 560 071.

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Superintendent of Central Tax, Arrears Recovery Cell, Office of the Principal Commissioner of Central Tax, GST Commissionerate Bengaluru East, TTMC/BMTC Building 4^th Floor, Domluru, Bengaluru - 560 071.

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The Assistant Commissioner of Central Tax, Arrears Recovery Cell, Office of the Principal Commissioner of Central Tax, GST Commissionerate Bengaluru East, TTMC/BMTC Building 4^th Floor, Domluru, Bengaluru - 560 071.

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Citi Bank NA, M.G. Road Branch - 506-507, Level 5, Prestige Meridian 2, No.30, MG Road, Bengaluru - 560 001. (Represented by its Branch Manager) ... Respondents

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(By Sri Jeevan J. Neeralagi, Advocate for R1 to R4)

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This Writ Petition is filed under Articles 226 and 227 of the Constitution of India, praying to quash the letter dated 12.10.2020 in Annexure-D, issued by the R-3 and recovery notice dated 9.12.2020 in Annexure-F issued by the R-4 as being illegal and untenable in law and etc.

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This Writ Petition coming on for preliminary hearing this day, the Court, made the following:

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ORDER

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Petitioner is seeking for issuance of writ of certiorari to quash the letter dated 12.10.2020 at Annexure-D issued by the 3^rd respondent and the recovery notice dated 09.12.2020 at Annexure-F. Further direction is sought to the respondents not to take any coercive action in light of the pendency of the appeal.

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Petitioner submits that as against the order of the Commissioner of Central Taxes (Appeals-1), an appeal has been preferred before the Customs, Central Excise and Service Tax Appellate Tribunal on 08.01.2021 as is evident from Annexure – H2. It is further submitted that along with an appeal, there has been remittance of 10% of the disputed amount as morefully detailed in Column No.14 of Form No.ST-5.

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Learned counsel for the petitioner submits that in light of the Board Circular (Compilation at Sl.No.1) dated 16.09.2014, at paragraph No.4.2, it is clear that no coercive measures for recovery of the balance amount in excess of

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7.5% or 10% deposited in terms of Section 35F of the

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Central Excise Act, 1944 would be taken during the pendency of appeal where the assessee demonstrates proof of payment of 7.5% or 10% as may be applicable and on furnishing copy of the appeal memo. It is further clarified as per paragraph No.4.3 that recovery action could be initiated only after the disposal of the case by the Tribunal. Attention is also drawn to the Circular dated 10.03.2017 at paragraph No.20.2(IV), which reiterates the same position.

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Relevant portion of Circular dated 16.09.2014 at paragraph No.4.2 is extracted hereinbelow:

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“4.2 No coercive measures for the recovery of balance amount i.e., the amount in excess of 7.5% or 10% deposited in terms of Section 35F of Central Excise Act, 1944 or Section 129E of Customs Act, 1962, shall be taken during the pendency of appeal where the party/assessee shows to the jurisdictional authorities:

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(i) Proof of payment of stipulated amount as pre-deposit of 7.5% / 10%, subject to a limit of Rs.10 crores, as the case may be; and

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(ii) The copy of appeal memo filed with the appellate authority.

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4.3. Recovery action, if any, can be initiated only after the disposal of the case by the Commissioner (Appeals)/Tribunal in favour of the Department. For example, if the Tribunal decides a case in favour of the Department, recovery action for the amount over the above the amount deposited under the provisions of Section 35F/129E may be initiated unless the order of the Tribunal is stayed by the High Court/Supreme Court. The recovery in such cases, would include the interest at the specified rate, from the date duty became payable, till the date of payment.”

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Relevant portion of Circular dated 10.03.2017 at paragraph No.20.2(iv) is extracted hereinbelow

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“Section 35F of the Central Excise Act, 1944 has been amended with effect from 06.08.2014 to provide for mandatory payment of 7.5% or 10% of the duty demanded where duty demanded is in dispute or where duty demanded and penalty levied are in dispute for admission of appeal

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before Commissioner (Appeals) or CESTAT. Once the amount is paid, no coercive action shall be taken for recovery of the balance amount during the pendency of the appeal proceedings before these authorities.”

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Learned counsel for the petitioner submits that in

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light of the said circulars and noting that the appeal was presented on 08.01.2021 furnishing proof of deposit of 10% as required, question of proceeding further as regards to the demand during the pendency of the appeal does not arise. Attention is also drawn to the order of the Tribunal whereby the appeal has been admitted as per the order dated 25.01.2021, copy of which is produced along with the application for production of additional documents.

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Learned counsel for the revenue does not dispute

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the validity of the said circulars. However, it is strenuously contended that the recovery notice was sent on 09.12.2020 to Citibank pursuant to power conferred under Section 87 of the Finance Act 1994 and such recovery notice was however effectuated belatedly on 11.01.2021 and the demand draft

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bearing No.620628 was received on 11.01.2021 from Citi Bank.

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It is submitted that the recovery notice was sent at point in time where no appeal was filed and hence to contend that the petitioner is to get the benefit of prohibition of further proceedings from 08.01.2021 when appeal was filed is a technical argument that ought not to be accepted.

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Learned counsel for the petitioner has, however, contended that though the order was passed on 23.10.2019, the impugned order was not communicated till 17.12.2020 and from such date of communication, the appeal is filed within time and in fact, the appellate order also accepts such contention. No doubt, there is some force in the submission of learned counsel for the respondent that the recovery notice was issued on 09.12.2020, though the same came to be effectuated belatedly. However, it is only a technical contention taken by the petitioner. In light of the order passed by the appellate authority on the application

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for condonation of delay in the appeal, whereby the appellate authority has rejected the assertion of the Department as regards delivery of notice on 30.10.2019 as the notice was not in requisite Form i.e.,ST-4, it is not open for this Court to enter into the question of appeal having been filed beyond the period of limitation and hence permit the recovery.

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If that were to be so and appeal was presented within the period of limitation, as noticed by the appellate authority, the petitioner was entitled to the benefit of prohibition of recovery from the date of institution of appeal which would extend to prohibition of any recovery subsequent to 08.01.2021, which would include prohibition of Citi Bank making payment to the Department

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In light of the above, taking note that the appeal was presented on 08.01.2021 in Form No.ST-5, copy of which is furnished at Annexure-H2 and noting the deposit made at Sl.No.14, clearly the recovery resorted to of a sum of Rs.2,52,85,310/- and recovery made by way of a

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Demand Draft bearing No.620628 favouring “the Principal Commissioner of Central Tax, GST Bangalore East Commissionerate”, dated 11.01.2021, which is subsequent to presentation of appeal on 08.01.2021, is illegal.

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Accordingly, recovery of a sum of

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Rs.2,52,85,310/- made as per the Demand Draft bearing No.620628 favouring “the Principal Commissioner of Central Tax, GST Bangalore East Commissionerate”, dated 11.01.2021 referred to at Annexure-J, being illegal, such recovery is set aside while observing that any further action for recovery is to be made only in terms of Paragraph No.4.3 of the Circular dated 16.09.2014.

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Accordingly, petition is disposed off . Refund of

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recovery made is to be made within a period of four weeks from the date of release of this order.

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Sd/JUDGE

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VP

M/S Unisys India Private Limited v. the Principal Commissioner of Central Tax

Case brief

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M/S Unisys India Private Limited v. the Principal Commissioner of Central Tax

Case brief

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