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CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.12299 OF 2024
Ramkaran Karwa, Age 85 years, having his residence at Flat No.74, Blue Haven, Mount Pleasant Road, Malabar Hill, Mumbai – 400 006 ...Petitioner
2. The Commissioner, CGST & CX, Palghar, having his office at 5th
Floor, Plot No.C-24, Utpad Shulk Bhavan
Sector-E, Bandra-Kurla Complex, Bandra East, Mumbai – 400 051
3. The Assistant Commissioner, CGST & CX, Palghar Division-III having his office at 3rd
Floor, Central GST Bhavan, Plot No.P-94, Takinaka, Boisar, West, Maharashtra – 401 504.
4. The Additional Director General, Directorate General of GST
Intelligence, Mumbai Zonal Unit, having his office at NTC House, 3rd
Floor, 15, N M Road, Ballard Estate, Mumbai – 400 001. ...Respondents
Samir Karwa, Age 56 years, having his residence at
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2024:BHC-AS:37629-DB
A-1002, 10th
Floor, A Wing, Lodha World View, Senapati Bapat Marg, Lower Parel, Mumbai – 400 013. ...Petitioner
2. The Commissioner, CGST & CX, Palghar, having his office at 5th
Floor, Plot No.C-24, Utpad Shulk Bhavan
Sector-E, Bandra-Kurla Complex, Bandra East, Mumbai – 400 051
3. The Assistant Commissioner, CGST & CX, Palghar Division-III having his office at 3rd
Floor, Central GST Bhavan, Plot No.P-94, Takinaka, Boisar, West, Maharashtra – 401 504.
4. The Additional Director General, Directorate General of GST
Intelligence, Mumbai Zonal Unit, having his office at NTC House, 3rd
Floor, 15, N M Road, Ballard Estate, Mumbai – 400 001. ...Respondents
Mr. Abhishek Mishra for Respondent No.1 to 3.
Mr. Jitendra B. Mishra a/w Ms. Sangeeta Yadav, Mr. Ashutosh Mishra and Mr. Rupesh Dubey for Respondent No.4.
Mr. Shubh Agarwal, Deputy Director, Directorate General of GST
Intelligence, Mumbai Zonal present.
Mr. Harpreet Singh, AGM Punjab & Sind Bank present.
DATED : 20th SEPTEMBER 2024
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JUDGMENT
1. Rule. By consent of the parties heard finally since the pleadings were completed.
2. Writ Petition (Stamp) No.26523 of 2024 not on board, but by consent of the parties is taken up for hearing alongwith the present writ petition since the issue involved is common. However, in the present order, facts relating to Writ Petition No.12299 of 2024 are narrated for sake of convenience.
3. By this petition under Article 226 of the Constitution of India, Petitioner is seeking for quashing of Order-in-Original (O-I-O) dated 5th July 2024 whereby Respondents have granted interest @ 6% per annum on the amount refunded to Petitioner by rejecting the claim of Petitioner to grant interest @18% per annum. Brief undisputed and admitted facts are as under:
4. On 29th August 2011, an investigation was initiated by Respondent No.4 against one Perfect Containers Pvt. Ltd. In the course of the investigation, Petitioner’s residence premises were searched and a sum of Rs.2,06,33,000/- was seized on the allegation that same constitutes unaccounted receipts arising out of sales made by Perfect Containers Pvt. Ltd. In the course of said investigation Rs.15,94,000/was also seized from the residence of Petitioner’s son. The aggregate 3 of 20 cash seized was Rs.2,22,27,008/-. The seized amount was deposited by Respondent No.4 in fixed deposit with Punjab & Sind Bank.
5. On 19th May 2016, O-I-O was passed against Perfect Containers Pvt. Ltd., Petitioner and others whereby it was held that cash seized was towards sale proceeds of clandestinely removed goods and therefore the said cash was liable for confiscation. Penalty of Rs.21,25,199/- under Rule 26 of the Central Excise Rules was also imposed on Petitioner. Against the said O-I-O Petitioner and Respondents filed cross-appeals before Commissioner of Central Excise (Appeals).
6. On 31st March 2017, the first appellate authority set aside the order of confiscation of cash seized and penalty imposed on Petitioner. The said order was challenged by Respondents by filing an appeal with the Tribunal. The Tribunal, vide its order dated 18th October 2023, upheld the first appellate authority’s order of setting aside the confiscation of cash seized and penalty imposed on Petitioner. The said order of the Tribunal has attained finality. However, inspite of the order of both the appellate authorities being in favour of Petitioner and inspite of there being no stay on any of the appellate order and inspite of Petitioner’s request for refund vide various letters, Petitioner was not granted refund of the cash seized of Rs.2,06,33,000/-. So also 4 of 20 Petitioner’s son was not given refund of Rs.15,94,000/-. Petitioner’s son has filed a separate writ petition being Writ Petition (Stamp) No.26523 of 2024.
7. On 21st May 2018, Respondent No.4 refused to grant the refund on the ground that the matter is pending before the Tribunal. The refusal was challenged by filing an appeal with the Commissioner GST & CX (Appeals) who, vide order dated 23rd January 2019, directed Respondents to process the claim of refund since there was no stay on the appellate order.
8. Meanwhile, on 2nd May 2019 Respondent No.4 informed Respondent Nos. 2 and 3 that the seized currency was placed in fixed deposit with Punjab & Sind Bank. The said fact is also recorded in the impugned order dated 5th July 2024 and in the Affidavit in Reply of Respondent Nos. 1 to 3 affirmed by Manjula Arulselvan on 9th September 2023.
9. On 26th December 2023, 22nd February 2024 and 10th April 2024, Petitioner requested for refund of Rs.2,06,33,000/- along with interest @18% per annum.
10. Since Respondents were not granting refund of cash seized a Miscellaneous Application was filed before the Tribunal praying for refund of cash seized along with interest @18% per annum. Pending 5 of 20 the Miscellaneous Application, impugned O-I-O dated 5th July 2024 came to be passed ordering return of seized cash of Rs.2,06,33,000/along with interest @6% from the date of fixed deposit, i.e. 30th August 2011 till the date of refund. The rate of 6% interest was granted on the basis of Circular No.984/08/2014 dated 16th September 2014 and the relevant extract of the said Circular reproduced in the impugned O-I-O states that in case appeal is decided in favour of assessee he shall be entitled to refund of amount deposited @6% per annum from the date of making the deposit to the date of refund in terms of section 35FF of the Central Excise Act, 1944 or section 129EE of the Customs Act. Petitioner, thereafter, filed a letter dated 29th July 2024 with the Tribunal informing that Respondents have granted refund along with interest @6% and therefore do not wish to pursue the Miscellaneous Application. However, in the said letter it was stated that Petitioner is aggrieved by rate of 6% per annum and will pursue the remedies available in law for redressal of the same. The interest worked out by Respondents @6% per annum from the date of fixed deposit till the grant of refund was Rs.1,59,83,313/-.
11. It is on the aforesaid backdrop that the present petition is filed challenging the grant of interest only @6% per annum and praying for interest to be granted @18% per annum. 6 of 20 Submissions of Petitioner:
12. Petitioner submitted that Circular No.984 dated 16th September 2014 relied upon in impugned O-I-O is applicable only to pre-deposits made under section 35FF of the Central Excise Act and section 129EE of the Customs Act and not to the return of cash seized in the course of the investigation. Petitioner further submitted that the Circular is dated 16th September 2024 whereas the cash was seized on 29th August 2011 and therefore the said Circular is not applicable. Petitioner submitted that Respondents were not justified in not refunding the cash seized although there was no stay on the appellate order which was in favour of Petitioner. Petitioner submitted that they are entitled to 18% per annum being the commercial rate of interest on the amount of refund of cash seized. Alternatively, Petitioner submitted that admittedly Respondents have earned interest at the rate of more than 6% whereas they have granted interest only at the rate of 6%, thereby unjustly enriching by the differential rate of interest and therefore Petitioner is entitled to the entire interest earned on the fixed deposit from the bank. Submissions of Respondent Nos. 1, 2, 3 and 4:
13. Respondents have supported the impugned O-I-O by relying upon Circular No.684 dated 16th September 2014 whereby rate of interest prescribed is 6% per annum. Respondents have further 7 of 20 submitted that there was no delay in refunding the cash seized since they were pursuing appellate remedies by filing appeal. Therefore, Writ Petition be dismissed. Other than these submissions, Respondents have not made any further submissions. Analysis:
14. The short issue which arises in the present petition is whether Respondents are justified in granting interest @6% per annum on the refund of cash seized although the said cash seized was deposited in fixed deposit and earned interest at more than 6% per annum.
15. The whole basis of Respondents justification for grant of interest @6% per annum is based on Circular No.984 dated 16th September 2014 which reads as under: 8 of 20 9 of 20 10 of 20 11 of 20
16. In our view, the aforesaid Circular is not applicable to the case of Petitioner since, admittedly, the cash seized was during investigation proceedings against the company of which Petitioner was a Director. The said cash seized was not an amount deposited by Petitioner as predeposit for filing an appeal under the Central Excise Act. Affidavit of Respondent Nos.[1] to 3 in paragraph 3 have admitted that this is not a case of interest on delayed refund of amount deposited under section 35FF of the Central Excise Act. In our view, on the basis of this admission and on a reading of Circular 984 of 2014, the contention raised by Respondents to justify interest @6% per annum is erroneous. The said Circular was issued in the light of amendments made to section 35F of the Central Excise Act and 129E of the Customs Act whereby these sections were substituted by section 35FF and section 129EE, respectively, providing for certain percentage of the demand to be paid as a condition precedent for entertaining the appeal. It is also important to note that in the present case cash was seized on 29th August 2011 and therefore appropriation of cash seized during investigation towards any pre-deposit as a condition for filing an appeal also cannot arise. Therefore, the contention raised by Respondents to justify the impugned O-I-O on this count is to be rejected.
17. We may also observe that Petitioner has not brought to our notice any provision to justify claim of interest @18% per annum and 12 of 20 therefore such a claim cannot be granted to Petitioner. However, Petitioner’s alternative submission on grant of interest at the actual rate which the fixed deposit has earned is certainly required to be considered.
18. Admittedly and undisputedly, the cash seized from Petitioner was placed in fixed deposit with Punjab & Sind Bank. The said admission can be found in paragraph 15 of the impugned O-I-O dated 5th July 2024. The letter dated 4th September 2024 issued by Punjab & Sind Bank to the Deputy Director, DGGI also admits that the fixed deposits made from the cash seized earned rate of interest in the range of 9.6% per annum to more than 6% per annum. The said letter also records the actual interest paid to Respondents, on cash seized from Petitioner and his son, amounting to Rs.2,22,77,008/-.
19. The character of cash seized by Respondents from Petitioner in the course of investigation against the company of which Petitioner was a Director is in the nature of amount held in trust by Respondents till the determination of final liability, if any, and it is only after the said finalization and appropriation that the sum can be said to be belonging to Respondents as recovery of tax dues. Till the point of finalisation of tax dues Respondents continued to hold the cash seized in trust for and on behalf of Petitioner. In the present case it is undisputed that at no 13 of 20 point of time the cash seized was appropriated towards final tax dues and rightly so because the order discharging Petitioner of tax dues had attained finality. It is settled position that a trustee cannot enrich himself on behalf of the person for whom the money is held in trust. A trustee is supposed to account for each and every sum of money which is held in trust on behalf of the beneficiary. In the instant case, therefore, action of Respondents in granting interest @6% per annum when the fixed deposits arising out of cash seized from Petitioner have earned more than 6% per annum cannot be justified and Respondents are duty bound to handover the entire amount of interest which they have earned.
20. In our view, attempt of Respondents to retain interest earned at the rate of more than 6% and to grant interest @6% to Petitioner would amount to unjust enrichment and trading in interest by Respondents which is not permissible under any law nor has any such provision been shown to us by Respondents. In our view, it may amount misappropriation.
21. Respondent No.4 in its Affidavit affirmed on 9th September 2024 by one Shubh Agarwal has annexed letter dated 4th September 2024 issued by Punjab & Sind Bank giving calculation of total interest paid on fixed deposits arising out of cash seized from Petitioner and his son. Petitioner submitted that on a perusal of the said interest 14 of 20 calculation statement and more particularly for the period 4th January 2021 to 3rd March 2022 the interest earned is shown only Rs.5,98,217/whereas in the immediately preceding year the interest earned was Rs.25,04,477/- and although the rate of interest has gone down from 6.61% to 5.45%, the interest for the period 2021-22 cannot be Rs.5,98,217/-. Similarly, for the period 3rd January 2013 to 3rd January 2014, interest @9% is worked out to Rs.23,44,222/- whereas at the same rate of interest for the immediately subsequent year the interest earned is shown at Rs.20,53,017/-. The difference of Rs.2,91,205/- is also not explained. Petitioner submitted and rightly so that the discrepancies in this statement have not been explained by Respondents. In our view, Petitioner is justified in making this submission since Respondents ought to have taken same care in verifying the interest amount which they would have otherwise exercised if it would have been their own money. This we say so because it is settled position that a trustee has to take same care of the property which he would care while exercising caution with respect to his own property. We may also note that Petitioner in its rejoinder, pursuant to the working enclosed in the reply of the Respondents, has given a chart showing the amount due and payable after working out interest at the rate earned on fixed deposit receipts as evident from letter of Punjab & Sind Bank dated 4th March 2024. The said working 15 of 20 has not been disputed by Respondents. The said working is made by taking cash seized from Petitioner of Rs.2,06,33,000/- and Rs.15,94,000/- from his son aggregating to Rs.2,22,27,000/-. Based on the said calculation and after giving credit of payment received by Petitioner and his son on 25th July 2024 and 14th August 2024, sum of Rs.97,03,728/- is due and payable by Respondents to Petitioner and his son. Since the said working has not been disputed by Respondents, the alternative prayer made by Petitioner for grant of interest actually earned and after factoring the discrepancies which Respondents have neglected, in our view Petitioner is entitled to sum of Rs.90,07,829/-. The balance sum of Rs. 6,95,899/- is attributable to cash seized from Petitioner’s son. The aggregate of the said two sums is Rs.97,03,728/-.
22. Respondents have made a fixed deposit of Rs.50,63,062/- on 14th August 2024 for a period of one year. In our view, there is no justification for making the said fixed deposit and, therefore, Respondents should foreclose the said fixed deposit and pay over the amount alongwith interest to Petitioner.
23. We may observe that if the aforesaid two amounts are not returned within a period of four weeks from the date of uploading the order then Respondents would be liable to pay interest @6% per annum on the said two amounts till the actual date of refund. The rate of 6% is not based on the Circular No.984 of 2014 but we have arrived at this 16 of 20 rate based on the fixed deposit made by Respondents on 14th August 2024 for a period of one year on which the interest yield is 6.45%.
24. Before parting, we may observe that as per letter dated 4th September 2024 issued by Punjab & Sind Bank giving working of interest, it is observed that for the period 4th January 2021 to 25th April 2024, there is no interest earned on the fixed deposits. On a submission made by Petitioner pointing to the said aspect and on a query raised by the Court, Respondents after consulting the Bank stated that there were regulations governing banking system whereby auto-renewal gets inactivated after a period of 10 years and therefore no interest is shown to have been earned on the fixed deposit. We fail to understand as to whether this aspect was brought to the notice of Respondents by Punjab & Sind Bank, and if yes, why the fixed deposits were not renewed post expiry of 10 years. If Punjab & Sind Bank has not informed Respondents about the said aspect, then we fail to understand as to under what legal right Punjab & Sind Bank retained the amount after the expiry of 10 years and earned interest by lending in their business of banking. Admittedly Petitioner cannot be faulted on account of this and Respondents have while granting interest, has granted interest for the period post the expiry of 10 years and Petitioner in his calculation has also reduced the same for arriving at the final claim. In our view, an inquiry should be initiated by Respondents to ascertain the 17 of 20 accountability on this aspect and fix the responsibility by taking appropriate action against the persons found negligent for non-renewal of the fixed deposits.
25. In view of above, we pass the following order: O R D E R
(i) Impugned O-I-O dated 5th July 2024, Exhibit A to the petition is quashed and set aside.
(ii) Petitioner is not entitled to interest @18% per annum.
However, is entitled to sum of Rs. 90,07,829/- being the interest in excess of 6% earned on fixed deposits arising out of cash seized from Petitioner.
(iii) Respondents are directed to refund a sum of Rs.
90,07,829/- within a period of four weeks from the date of uploading the present order to Petitioner and if the same is not paid within four weeks then Petitioner would be entitled to interest @6% per annum from the expiry of four weeks from the date of actual refund.
(iv) Respondents are directed to foreclose the fixed deposit made on 14th August 2024 amounting Rs.50,63,062/and return the same to Petitioner’s account alongwith interest actually received on the said fixed deposit from Punjab and Sind Bank. The said amount should be 18 of 20 returned within a period of four weeks from the date of uploading the present order. If the same is not returned within the aforesaid period of four weeks then Petitioner would be entitled to interest @6% per annum from the date of expiry of four weeks till the date of actual refund.
(v) Concerned Commissioner GST and CX is directed to initiate inquiry and fix the accountability and responsibility for non-renewal of fixed deposits after the expiry of 10 years and take appropriate action against the persons who are involved in the said negligence including recovery of the interest from the salary/retirement benefits of the person found responsible.
26. Writ Petition No.12299 of 2024 disposed.
27. Rule is made absolute in above terms.
WRIT PETITION (STAMP) NO.26523 of 2024:- O R D E R
(i) Impugned O-I-O dated 5th July 2024, Exhibit A to the petition is quashed and set aside.
(ii) Petitioner is not entitled to interest @18% per annum.
However, is entitled to sum of Rs.6,95,899/- being the 19 of 20 interest in excess of 6% earned on fixed deposits arising out of cash seized from Petitioner.
(iii) Respondents are directed to refund a sum of
Rs.6,95,899/- within a period of four weeks from the date of uploading the present order to Petitioner and if the same is not paid within four weeks then Petitioner would be entitled to interest @ 6% per annum from the expiry of four weeks from the date of actual refund.
(iv) Concerned Commissioner GST and CX is directed to initiate inquiry and fix the accountability and responsibility for non-renewal of fixed deposits after the expiry of 10 years and take appropriate action against the persons who are involved in the said negligence including recovery of the interest from the salary/retirement benefits of the person found responsible.
28. Writ Petition (Stamp) No.26523 of 2024 disposed.
29. Rule is made absolute in above terms. [JITENDRA JAIN, J.] [K. R. SHRIRAM, J.] 20 of 20 Designation: PA To Honourable Judge