The Delhi High Court on Monday pulled up the authorities of the Central Excise department and asked them to explain the practice of collecting undated cheques from assessees..A writ petition was filed in the High Court by Digipro Import & Export Pvt. Ltd, a company that manufactures mobile phone batteries, chargers and LED bulbs..The company was paying excise duty @ 2% ad valorem on mobile phone battery and mobile phone charger, and 6% on LED bulbs. However, the respondents claimed that the tariff rate of duties on these products is 12.5% ad valorem. The petitioners claimed that they were liable to avail an exemption as per a notification issued in March 2012 by the Central Excise department..As per the petitioner’s version of events, on March 10, a team of the Anti-Evasion Wing of Central Excise, Delhi visited its office, conducted a search, seized some documents and collected five undated cheques amounting to a total of Rs. 12.5 crore..Then, on March 27, the petitioner along with his counsel visited the Commissioner of Central Excise Delhi-II and submitted the notification allowing him to avail an exemption on excise duty. In response, the Additional Commissioner (ADC) issued the following directions:.“(i) Please realise the cheques early. (ii) Please quantify duty liability (iii) Please put up file as soon as cheque is realised.”.After summons was issued to the petitioner, he asked the Department not to encash the cheques, and subsequently filed a writ petition before the High Court. The petitioner prayed for a direction that he was liable for exemption under the aforesaid notification, and for another direction to the Central Excise not to encash the five cheques..On April 12, the Court directed that all cheques be brought before the court. It also asked the department to highlight the orders by which officers were allowed to collect undated cheques..In response, the ADC stated,.“…at the time of tendering the cheques, the petitioner requested for some time for making good the payment and stated that since he is not having sufficient balance/funds with him at that point of time…The petitioner, therefore, requested that no date may be put on the cheques and as and when the petitioner would have sufficient balance, he would inform the deponent and accordingly the deponent may encash these cheques. On getting the assurance from the petitioner, the officer who visited the premises of the petitioner, agreed not to put any date on the cheques.”.However, the Court was not convinced. When the matter came up for hearing on May 15, the Court asked Senior Standing Counsel Harpreet Singh, appearing for the respondents, to point out the laws/rules under which officers were entitled to collect undated cheques. The counsel was able to show no such provision, notification or circular..To this, the Bench of Justices S Muralidhar and Chander Shekhar reacted,.“It is indeed extraordinary that officers at the level of a Superintendent would have such vast powers of collecting duty on the spot without even a quantification of the duty amount preceded by a show cause notice (SCN). No attempt has been made to demonstrate that the above is a procedure known to law. It actually points to the opposite. And that is what makes it inexcusable.”.The Bench also warned “serious consequences” against the Anti-Evasion Wing should this practice continue unchecked..“This illegal practice adopted by the Anti-Evasion Department of Central Excise requires a deeper investigation. The Court has every reason to believe that this has come to light only because the Petitioner has approached this Court. This practice is perhaps being adopted in a number of instances which are yet to come to the notice of the Court. There will be serious ramifications if this practice is allowed to continue unchecked.”.The Court also pulled up the ADC, highlighting the scope of misuse of these powers..“At least two scenarios are possible when such unbridled power of ‘collection’ of duty, on the spot, is allowed to go unchecked. One is that since there is nothing written down anywhere, the unscrupulous officers who constitute the survey/search team can ‘negotiate’ an amount of evaded duty and also agree to waiver of interest and penalty….…The second scenario is where an Assessee refuses to comply with an illegal demand and under threat and coercion is compelled to issue cheques or pay cash which is supposed to constitute the differential duty..This is undoubtedly prejudicial to the Assessee and is harmful to public interest. It is not rule of law but anarchy unleashed by holders of public office. Neither is it an acceptable scenario in a system governed by the rule of law. It metamorphises into a system of rule by law and, worse still, by abuse of law. It has to be stopped.”.Leaving no stone unturned, the Court summoned the Commissioner of Central Excise, Delhi-II and directed him to file an affidavit showing the steps taken to curb this practice. He was directed immediately to conduct an enquiry to find out which officers performed the “illegal exercise”..Moreover, the Court directed that a copy of this order be sent to the Central Vigilance Commissioner (CVC) in view of the seriousness of the issue. It held,.“The extent of harm this can cause to the government exchequer and the harassment it can cause to innocent persons is immense. It symbolises what economists term as ‘rent seeking behaviour’ of public servants. It also raises serious issues about accountability and transparency of the functioning of these Departments. It is imperative for the CVC to issue clear guidelines.”.Priyadarshi Manish, appearing for the petitioner, requested that he be allowed to be present when the petitioner is next summoned to show cause to the department. In light of the “peculiar facts and circumstances of this case”, the Court allowed Manish to do so..Read the order:
The Delhi High Court on Monday pulled up the authorities of the Central Excise department and asked them to explain the practice of collecting undated cheques from assessees..A writ petition was filed in the High Court by Digipro Import & Export Pvt. Ltd, a company that manufactures mobile phone batteries, chargers and LED bulbs..The company was paying excise duty @ 2% ad valorem on mobile phone battery and mobile phone charger, and 6% on LED bulbs. However, the respondents claimed that the tariff rate of duties on these products is 12.5% ad valorem. The petitioners claimed that they were liable to avail an exemption as per a notification issued in March 2012 by the Central Excise department..As per the petitioner’s version of events, on March 10, a team of the Anti-Evasion Wing of Central Excise, Delhi visited its office, conducted a search, seized some documents and collected five undated cheques amounting to a total of Rs. 12.5 crore..Then, on March 27, the petitioner along with his counsel visited the Commissioner of Central Excise Delhi-II and submitted the notification allowing him to avail an exemption on excise duty. In response, the Additional Commissioner (ADC) issued the following directions:.“(i) Please realise the cheques early. (ii) Please quantify duty liability (iii) Please put up file as soon as cheque is realised.”.After summons was issued to the petitioner, he asked the Department not to encash the cheques, and subsequently filed a writ petition before the High Court. The petitioner prayed for a direction that he was liable for exemption under the aforesaid notification, and for another direction to the Central Excise not to encash the five cheques..On April 12, the Court directed that all cheques be brought before the court. It also asked the department to highlight the orders by which officers were allowed to collect undated cheques..In response, the ADC stated,.“…at the time of tendering the cheques, the petitioner requested for some time for making good the payment and stated that since he is not having sufficient balance/funds with him at that point of time…The petitioner, therefore, requested that no date may be put on the cheques and as and when the petitioner would have sufficient balance, he would inform the deponent and accordingly the deponent may encash these cheques. On getting the assurance from the petitioner, the officer who visited the premises of the petitioner, agreed not to put any date on the cheques.”.However, the Court was not convinced. When the matter came up for hearing on May 15, the Court asked Senior Standing Counsel Harpreet Singh, appearing for the respondents, to point out the laws/rules under which officers were entitled to collect undated cheques. The counsel was able to show no such provision, notification or circular..To this, the Bench of Justices S Muralidhar and Chander Shekhar reacted,.“It is indeed extraordinary that officers at the level of a Superintendent would have such vast powers of collecting duty on the spot without even a quantification of the duty amount preceded by a show cause notice (SCN). No attempt has been made to demonstrate that the above is a procedure known to law. It actually points to the opposite. And that is what makes it inexcusable.”.The Bench also warned “serious consequences” against the Anti-Evasion Wing should this practice continue unchecked..“This illegal practice adopted by the Anti-Evasion Department of Central Excise requires a deeper investigation. The Court has every reason to believe that this has come to light only because the Petitioner has approached this Court. This practice is perhaps being adopted in a number of instances which are yet to come to the notice of the Court. There will be serious ramifications if this practice is allowed to continue unchecked.”.The Court also pulled up the ADC, highlighting the scope of misuse of these powers..“At least two scenarios are possible when such unbridled power of ‘collection’ of duty, on the spot, is allowed to go unchecked. One is that since there is nothing written down anywhere, the unscrupulous officers who constitute the survey/search team can ‘negotiate’ an amount of evaded duty and also agree to waiver of interest and penalty….…The second scenario is where an Assessee refuses to comply with an illegal demand and under threat and coercion is compelled to issue cheques or pay cash which is supposed to constitute the differential duty..This is undoubtedly prejudicial to the Assessee and is harmful to public interest. It is not rule of law but anarchy unleashed by holders of public office. Neither is it an acceptable scenario in a system governed by the rule of law. It metamorphises into a system of rule by law and, worse still, by abuse of law. It has to be stopped.”.Leaving no stone unturned, the Court summoned the Commissioner of Central Excise, Delhi-II and directed him to file an affidavit showing the steps taken to curb this practice. He was directed immediately to conduct an enquiry to find out which officers performed the “illegal exercise”..Moreover, the Court directed that a copy of this order be sent to the Central Vigilance Commissioner (CVC) in view of the seriousness of the issue. It held,.“The extent of harm this can cause to the government exchequer and the harassment it can cause to innocent persons is immense. It symbolises what economists term as ‘rent seeking behaviour’ of public servants. It also raises serious issues about accountability and transparency of the functioning of these Departments. It is imperative for the CVC to issue clear guidelines.”.Priyadarshi Manish, appearing for the petitioner, requested that he be allowed to be present when the petitioner is next summoned to show cause to the department. In light of the “peculiar facts and circumstances of this case”, the Court allowed Manish to do so..Read the order: