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The Bombay High Court has held that Non-Renewal Of FDs Arising Out Of Seized Cash Is Negligence Of GST Officers.
The Court directed the Commissioner GST and CX to initiate inquiry and fix the accountability and responsibility for non-renewal of fixed deposits arising our of seized cash after the expiry of 10 years and take appropriate action against the persons who are involved in the negligence including recovery of the interest from the salary/retirement benefits of the person found responsible.
The bench of Justice K. R. Shriram and Justice Jitendra Jain has observed that the petitioner-assessee is not entitled to 18% interest per annum. However, is entitled to a sum of Rs.6,95,899/- being the interest in excess of 6% earned on fixed deposits arising out of cash seized from Petitioner.
Background
An investigation was initiated by the Assistant Commissioner, CGST 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 the same constitutes unaccounted receipts arising out of sales made by Perfect Containers Pvt. Ltd. In the course of investigation Rs.15,94,000/- was also seized from the residence of Petitioner’s son.
The aggregate cash seized was Rs.2,22,27,008. The seized amount was deposited by department in fixed deposit with Punjab & Sind Bank.
The order was passed against Perfect Containers Pvt. Ltd., Petitioner and others in which 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. The Petitioner and Respondents filed cross-appeals before the Commissioner of Central Excise (Appeals).
The first appellate authority set aside the order of confiscation of cash seized and penalty imposed on Petitioner. The order was challenged by department by filing an appeal with the Tribunal.
The Tribunal upheld the first appellate authority’s order of setting aside the confiscation of cash seized and penalty imposed on Petitioner. The 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.
The petitioner requested for refund along with 18% interest per annum.
Since the department was not granting refund of cash seized a Miscellaneous Application was filed before the Tribunal praying for refund of cash seized along with 18% interest per annum. Pending the Miscellaneous Application, order came to be passed ordering return of seized cash of Rs.2,06,33,000 along with 6% interest 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.
Arguments
The Petitioner contended that Circular No.984 dated 16th September 2014 relied upon in order 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.
The petitioner urged that the Circular is dated 16th September 2024 whereas the cash was seized on 29th August 2011 and therefore the Circular is not applicable. The department was not justified in not refunding the cash seized although there was no stay on the appellate order which was in favour of Petitioner.
The petitioner argued that they are entitled to 18% per annum being the commercial rate of interest on the amount of refund of cash seized. The department has earned interest at the rate of more than 6% whereas they have granted interest only at the rate of 6%, by 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.
The department contended that they have supported the order by relying upon Circular No.684 dated 16th September 2014 by which rate of interest prescribed is 6% per annum.
The department submitted that there was no delay in refunding the cash seized since they were pursuing appellate remedies by filing appeal.
FAQs
What are the consequences of Non-Renewal Of FDs Arising Out Of Seized Cash due to the Negligence Of GST Officers?
The Bombay High Court in the case of Samir Karwa Vs Union of India directed the Commissioner GST and CX to initiate inquiry and fix the accountability and responsibility for non-renewal of fixed deposits arising our of seized cash after the expiry of 10 years and take appropriate action against the persons who are involved in the negligence including recovery of the interest from the salary/retirement benefits of the person found responsible.
Conclusion
The petitioner while disposing of the petition, directed the departmnet 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 6% interest per annum from the expiry of four weeks from the date of actual refund.
Case Title: Samir Karwa Vs Union of India
Case No.: Writ Petition No.12299 Of 2024
Date: 20/09/2024
Counsel For Petitioner: Jas Sanghavi
Counsel For Respondent: Abhishek Mishra
