Neelkamal Realtors Towers PVT. LTD. And Anr vs. The Union Of INDIA Throu The Secretary And Ors

Held

The Court held that the Petitioners were coerced into reversing the Cenvat Credit of Rs. 11.25 crores under the threat of arrest, prior to the issuance of any show cause notice or adjudication order. The Court found that the revenue's denial of threats was not supported by contemporaneous evidence, particularly the lack of dispute to the Petitioners' letter dated May 7, 2018, which detailed the pressure and threat of arrest. The Court relied on the Supreme Court's decision in Dabur India Ltd. and its own previous judgments in Vodafone Essar South Ltd. and Cleartrip Pvt. Ltd., emphasizing that revenue officers cannot take the law into their own hands or resort to extra-legal steps to collect amounts not yet held payable by a judicial or quasi-judicial order. The Court directed the Respondents to allow the Petitioners to recredit the Rs. 11.25 crores to their Cenvat Credit account, but prohibited its utilization until the adjudication of the show cause notice dated September 28, 2018. The adjudication was to be completed expeditiously, within five weeks.

Facts

The petitioners, Neelkamal Realtors Power Pvt. Ltd. & Anr., challenged the action of the respondents (Union of India & Ors.) in compelling them to reverse Cenvat Credit of Rs. 11.25 crores. The petitioners alleged this reversal was done under threat of arrest by revenue officers during an investigation, even before any show cause notice was issued or adjudicated. The petitioners had provided legal opinions stating arrest was not permissible in such circumstances. The respondents denied issuing any threat of arrest and stated a show cause notice had been issued. The court noted that the petitioners' letter dated May 7, 2018, detailing the pressure and threat of coercive proceedings, was not disputed by the revenue at the time.

Key Issues

1. Whether the Revenue's action in compelling the Petitioners to reverse Cenvat Credit of Rs. 11.25 crores under the threat of arrest, prior to the issuance of any show cause notice or adjudication, is permissible in law, particularly in light of the principles of rule of law and established precedents? (Relates to principles of natural justice and due process). Petitioner's Contention: The Petitioners argued that the reversal of Cenvat Credit was a result of "strong-arm tactics" and coercion by revenue officers, including the threat of arrest, which is illegal and a subversion of the rule of law. They relied on Supreme Court and High Court decisions in Dabur India Ltd. vs. State of Uttar Pradesh, Vodafone Essar South Ltd. vs. Union of India, and Cleartrip Pvt. Ltd. vs. UOI, which prohibit coercive recovery before adjudication. Revenue's Contention: The Revenue contended that no threat of arrest was issued and that the Petitioners' claim was untrue. They argued that since a show cause notice was already issued and pending adjudication, no interference was warranted, as any wrongly paid amount would be refunded if the notice was decided in favour of the Petitioners. They also submitted that Petitioners, being builders, should not be easily coerced.