M/S Unisys INDIA Private Limited vs. The Principal Commissioner Of Central Tax

Held

The Court held that the recovery of Rs. 2,52,85,310/- made via Demand Draft bearing No. 620628 dated 11.01.2021 was illegal. The Court reasoned that the appeal was presented on 08.01.2021, and the recovery action, effectuated on 11.01.2021, occurred subsequent to the filing of the appeal. This was in contravention of the Board Circulars dated 16.09.2014 and 10.03.2017, which stipulate that no coercive measures for recovery of the balance amount should be taken during the pendency of an appeal, provided the pre-deposit is made and the appeal memo is furnished. The Court noted that the appellate authority had accepted the petitioner's contention regarding the timely filing of the appeal, thereby precluding the revenue from arguing otherwise. The ratio decidendi is that recovery actions initiated after the filing of an appeal, and post payment of the statutory pre-deposit, are illegal. The Court set aside the recovery and directed the refund of the recovered amount within four weeks. Any further recovery action is to be made only in terms of Paragraph No. 4.3 of the Circular dated 16.09.2014.

Facts

The petitioner, M/s. Unisys India Private Limited, filed a writ petition challenging a letter dated 12.10.2020 issued by the Superintendent of Central Tax and a recovery notice dated 09.12.2020 issued by the Assistant Commissioner of Central Tax. The petitioner had preferred an appeal before the Customs, Central Excise and Service Tax Appellate Tribunal (CESTAT) on 08.01.2021 against an order of the Commissioner of Central Taxes (Appeals-1). Along with the appeal, the petitioner remitted 10% of the disputed amount. The respondents initiated recovery proceedings, including a recovery notice to Citi Bank on 09.12.2020, which was effectuated on 11.01.2021, resulting in the recovery of Rs. 2,52,85,310/- via a demand draft dated 11.01.2021.

Key Issues

1. Whether the recovery action initiated by the revenue authorities is illegal and untenable in light of the pendency of the appeal before the CESTAT and the payment of the pre-deposit amount by the petitioner? (Section 35F of the Central Excise Act, 1944, and Board Circulars dated 16.09.2014 and 10.03.2017). The petitioner argued that as per Board Circulars, no coercive measures for recovery of the balance amount should be taken during the pendency of an appeal, provided the stipulated pre-deposit is made and proof of payment and the appeal memo are furnished. The petitioner contended that they had complied with these requirements and their appeal was admitted by the CESTAT. The revenue contended that the recovery notice was issued before the appeal was filed and that the petitioner's argument regarding the prohibition of recovery from the date of appeal filing was a technical one, as the notice was sent prior to the appeal. The revenue also argued that the appeal was filed belatedly, though this was contested by the petitioner and accepted by the appellate authority.