- 1 - HC-KAR NC: 2025:KHC:50433-DB WA No. 618 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 3RD DAY OF DECEMBER, 2025 PRESENT THE HON'BLE MR. JUSTICE B M SHYAM PRASAD AND THE HON'BLE MR. JUSTICE T.M.NADAF WRIT APPEAL NO. 618 OF 2023 (T-CUS) BETWEEN: 1. UNION OF INDIA REPRESENTED BY THE SECRETARY (FINANCE) DEPARTMENT OF REVENUE MINISTRY OF FINANCE NORTH BLOCK NEW DELHI 110 001. 2. INSPECTOR OF CUSTOMS (PREVENTIVE) CITY CUSTOMS COMMISSIONERATE, OFFICE COMMISSIONER OF CUSTOMS, CENTRAL REVENUE BUILDING, P.B. NO. 5400, QUEENS ROAD, BANGALORE 560 001. 3. SUPERINTENDENT OF CUSTOMS HPU CITY CUSTOMS COMMISSIONERATE, OFFICE COMMISSIONER OF CUSTOMS, CENTRAL REVENUE BUILDING, P.B. NO. 5400, QUEENS ROAD, Digitally Signed by REKHA R Location : High Court of Karnataka - 2 - HC-KAR NC: 2025:KHC:50433-DB WA No. 618 of 2023 BANGALORE 560 001. 4. COMMISSIONER OF CUSTOMS CENTRAL REVENUE BUILDING, P.B. NO. 5400, QUEENS ROAD, BANGALORE 560 001. …APPELLANTS (BY SRI.AKASH B SHETTY., CGC) AND: SURETEX PROPHYLACTICS (INDIA) PVT LTD (FORMERLY SURETEX PROPHYLACTICS (INDIA) LTD., 74-91 KIADB INDUSTRIAL ESTATE JIGANI PHASE II, ANEKAL BENGALURU 560 105 REPTD BY MR SUMESH, MANAGING DIRECTOR. …RESPONDENT (BY SRI. P B HARISH.,ADVOCATE) THIS WRIT APPEAL IS FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO i) ALLOW THE WRIT APPEAL FILED BY THE APPELLANT BY SETTING ASIDE THE IMPUGNED ORDER DATED 27/02/2023, PASSED IN WP NO.2444/2022 BY THE SINGLE JUDGE OF THIS COURT; ii) CONSEQUENTLY, TO DISMISS THE WP NO.2444/2022 AND LET THE - 3 - HC-KAR NC: 2025:KHC:50433-DB WA No. 618 of 2023 ADJUDICATING AUTHORITY TO DECIDE THE ISSUE OF REFUNDING OR APPROPRIATING THE RECOVERED AMOUNT OF RS.1.5 CRORE. THIS APPEAL, COMING ON FOR PRELIMINARY HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE B M SHYAM PRASAD and HON'BLE MR. JUSTICE T.M.NADAF ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE B M SHYAM PRASAD) The Union and its Customs Officers are aggrieved by the writ Court's order dated 27.02.2023 in W.P.No.2444/2022 [T-CUS]. The respondent has filed this writ petition for a declaration that the third appellant has collected and retained the sum of Rs.1.5 crores without the authority of law and that the said amount must be refunded with applicable interest. The respondent has also sought for further declaration that no customs duty is payable on the finished goods, raw materials, spares and - 4 - HC-KAR NC: 2025:KHC:50433-DB WA No. 618 of 2023 consumables, plant and machinery etc. destroyed during the fire in the factory premises on 19.03.2014. 2. The writ Court has allowed the writ petition declaring that the petitioner is entitled for the refund of 1.5 crores along with interest at the rate of 6% per annum from 15.10.2019 till the date of payment with a further direction that the appellant shall refund such amount with interest within three months from the date of receipt of a certified copy of its order. This Court, in this intra-Court appeal on 02.08.2023, has granted an interim order of stay subject to the appellant depositing 50% of the amount as stated in the operative portion of the writ Court's order. The appellants have carried this order to the Apex Court in SLP [Diary] No.13524/2024, and the Apex Court has disposed of this petition on 15.04.2024 observing that no case is made out for interference under Article 136 of the Constitution of India. - 5 - HC-KAR NC: 2025:KHC:50433-DB WA No. 618 of 2023 3. The appellants have thereafter deposited 50% of Rs.1.5 crores, and there is some canvass on behalf of the respondent about the appellants’ failure to deposit the interest portion as directed by the writ Court. Sri Akash B. Shetty, the learned Central Government Counsel for the appellants, and Sri. P. B. Harish, the learned counsel for the respondent, are heard for final disposal of the appeal on perusal of the writ Court's impugned order. Sri. Akash B. Shetty submits that the respondent’s liability to pay the customs duty with all other incidental amounts is because of its failure to cover the risk to pay excise duty as is required under the Warehouse stipulations. 4. The facts relevant for this Court's consideration, as asserted by the respondent, are stated thus. There was a fire in its factory premises on 19.03.2014 destroying raw materials, packaging material and other goods, and intimation of this - 6 - HC-KAR NC: 2025:KHC:50433-DB WA No. 618 of 2023 incident is filed with the Assistant Commissioner, Central Excise and the jurisdiction Police on 20.03.2014. It has filed different claims between 11.06.2014 and 30.06.2016 against its Insurer and received insurance amounts which do not cover the liability to pay tax or duties. The Customs officers have visited the factory premises on 15.10.2019, and these Officers have conducted a search between 11:45 a.m. to 08.00 p.m. The respondent is compelled to hand over the Cheque dated 15.10.2019 in No.433975 during this search. 5. During the pendency of the writ petition, the Additional Commissioner of Customs, Headquarters Preventive Unit, City Customs Commissionerate, Bengaluru has issued a Show Cause Notice dated 11.02.2022 under Sections 72 and 124 of the Customs Act, 1962. This Officer has recorded thus in the Show Cause Notice amongst others. - 7 - HC-KAR NC: 2025:KHC:50433-DB WA No. 618 of 2023 (vi) Consequent to search operation conducted M/s. Suretex Prophylactics (India) Limited has agreed upon the Customs Duty liability be paid on the goods destroyed in the fire accident, the assessee have submitted a cheque no.433975 for Rs.1,50,00,000/- vide letter dated 15.10.2019 of HSBC Bank dated 15.10.2019 in favour of the Commissioner of Customs, Bangalore towards Customs Duty payment; (vii) M/s. Suretex Prophylactics (India) Limited had furnished letter dated 25.10.2019 Vide the said letter, the assessee had informed that the payment of Rs.1,50,00,000/- made vide cheque No.433975 dated 15.10.2019 and TR-6 challan No.003 dated 16.10.2019 with reference to "customs duty be considered as payment made under protest." 6. The writ Court has interfered at the respondent's insistence declaring that it is entitled to refund of Rs.1.5 crores with interest at the rate of 6% per annum from 15.10.2019 without expressing any - 8 - HC-KAR NC: 2025:KHC:50433-DB WA No. 618 of 2023 opinion on the rival contentions against the Show- Cause Notice or the adjudication proceedings observing that all questions are left open. However, the writ Court's interference is on two grounds: [a] The authority in the appellants to receive levy will be subject to Article 265 of the Constitution of India and the afore authority to the receive such amount must be shown in law with the opinion that when the investigation is underway, such authority cannot be asserted. [b] The Circulars have been issued on 25.05.2022 and 19.01.2022 underscoring that, while it will be open to the assessee concerned to opt for depositing in full or part GST liability to restrict the consequences subject to further proceedings, the authorities cannot compel to an assessee to deposit the said demand. - 9 - HC-KAR NC: 2025:KHC:50433-DB WA No. 618 of 2023 7. Sri. Akash B. Shetty submits that this Court must intervene because the writ Court has relied upon the Circulars which are issued in the context of the GST regime and the Scheme thereunder, and therefore this should not have been exte+nded to the proceedings under the Customs Act. However, as is pointed out by Sri P. B. Harish, this Court does not in any manner undermine the writ Court’s findings. It is undisputed that the investigation was underway when the cheque for Rs.1.5 crores is received, and that the respondent has handed over the Cheque under protest. 8. Further, this Court, because the constitutional mandate is that no tax or levy can be levied without the authority of law and because such authority [in the present case will only be if there is an adjudication against the respondent], is not persuaded to opine that there is any error that would justify interference with the writ Court's order. The - 10 - HC-KAR NC: 2025:KHC:50433-DB WA No. 618 of 2023 investigation is admittedly still underway. Hence, the appeal is disposed of but permitting the appellants within six [6] weeks from the date of receipt of a certified copy of this order, to refund 50% of the amount as directed by the writ Court along with interest in terms of such direction. The registry is directed to transfer the amount in deposit to the respondent who is at liberty to file the account details to facilitate the electronic transfer of such deposit. In view of the disposal of the appeal, the pending applications, if any, also stand disposed of. Sd/- (B M SHYAM PRASAD) JUDGE Sd/- (T.M. NADAF) JUDGE SA ct:sr