Ms Kvtek Power Systems PVT LTD & Anr vs. Union Of INDIA And Others

Held

The Court held that the Petitioner is entitled to a refund of the amount deposited during the investigation, as it was collected without a show cause notice or a confirmed demand. The Court relied on its previous judgments in Century Metal Recycling Pvt. Ltd. and Century Knitters (India) Ltd., which established that amounts deposited without assessment and demand cannot be appropriated by the revenue. The Court noted that retention of any amount by the revenue in such a situation would be violative of Article 265 of the Constitution. While the Petitioner sought a full refund of Rs. 1 Crore, the Court, considering the requirement for filing an appeal before the Tribunal (7.5% of the confirmed duty), directed the Respondent to retain Rs. 25 Lakh (7.5% of the confirmed duty of Rs. 3,32,46,063/-) and refund the balance Rs. 75 Lakh to the Petitioner within four weeks. The issue of whether the deposit was voluntary or under coercion was rendered moot by the principle that appropriation without demand is impermissible.

Facts

The Petitioner, M/s KVTEK Power Systems Pvt. Ltd., imported "Online Transformer Dissolved Gas Analysis Monitors" and classified them under Chapter heading 9027.20 of the Customs Tariff Act, 1975, clearing them at a Nil rate of duty. The Directorate of Revenue Intelligence (DRI) initiated an investigation alleging mis-declaration of classification, contending the goods should be under Chapter heading 9027.10. During the investigation, the Petitioner deposited a total of Rs. 1 Crore in various tranches between April 27, 2017, and September 27, 2017. The Petitioner's grievance is that the DRI has no authority to recover amounts during an investigation without a show cause notice or confirmed demand. The DRI contended that the amounts were deposited voluntarily and have since been appropriated against a confirmed demand of Rs. 3,32,46,063/- passed by the Adjudicating Authority on August 27, 2019.

Key Issues

1. Whether the Directorate of Revenue Intelligence (DRI) has the authority to recover amounts from an importer during the course of an investigation, prior to the issuance of a show cause notice or the finalization of a demand, under the Customs Act, 1962? 2. Whether the amounts deposited by the Petitioner with the DRI during the investigation, without a confirmed demand, are liable to be refunded? Petitioner's Arguments: The Petitioner argued that the DRI lacks the authority to recover any amount during an investigation, citing various judgments of the Punjab & Haryana High Court (Concept Global Impex, Century Metal Recycling Pvt. Ltd., Century Knitters (India) Ltd.) and the Delhi High Court (Digipro Import and Export Pvt. Ltd.). They contended that such recovery is without authority of law and amounts to coercion, especially as a deposit of 7.5% of the demanded duty is required for filing an appeal before the Tribunal. Therefore, the deposited amount should be refunded. Respondents' Arguments: The Respondents argued that the amount was paid voluntarily by the Petitioner, who had found to have violated the law. They further submitted that the Adjudicating Authority had since confirmed a demand, and the amounts deposited during the investigation had been appropriated against this confirmed demand, leaving no occasion for a refund.