No recovery during pendency of adjudication
Q ; Whether recovery can be made if the adjudication proceedings are pending ?
Service Tax : During pendency of adjudication proceedings, only provisional attachment under section 73C (service tax) can be made; recovery under section 87 would apply only after adjudication order is passed under section 73
Section 87, read with sections 73 and 73C, of the Finance Act, 1994, section 11, of the Central Excise Act, 1944 and section 142 of the Customs Act, 1962
Subject : Recovery of sums due to Government
Facts of the case are :-
Before passing adjudication order, department issued garnishee notices under section 87 to banks for recovery of dues pertaining to assessee .
Asessee argued that no recovery can be made without adjudication and only power that is available before adjudication is of ‘provisional attachment under section 73C’, which was not exercised –
Only ‘provisional attachment’ under section 73C applies during pendency of proceedings under section 73; section 87 would apply only after a proceeding under section 73 is concluded by an order determining amount due and payable
Since, in this case, adjudication order had not been passed, garnishee notices under section 87 were quashed
HIGH COURT OF KARNATAKA
GSP Infratech Development Ltd.
Union of India
WRIT PETITION NOS. 13781 & 14061 OF 2013 (T – TAR)
APRIL 3, 2013
B.G. Chidananda, URS, Advocate for the Appellant. T.M. Venkata Reddy, Advocate for the Respondent.
1. Petitioner when issued with a show-cause notice dt . 12.4.2012 Annexure-A by the 2nd respondent-Assistant Director, Directorate General of Central Excise Intelligence, Bangalore, to furnish an explanation as to why service tax should not be levied and recovered for the period from 1.10.2006 to 31.3.2011 exercising jurisdiction under Section 73 of the Finance Act, 1994, for short ‘Act’, was responded by a reply dt . 20.11.2012 Annexure-B inter alia denying the liability. Respondent without considering the explanation and concluding the proceeding, nevertheless addressed a correspondence dt . 11.3.2013 Annexure-C to the Manager, ING Vysya Bank, Banjara Hills Branch, Hyderabad and to the Manager, ING Vysya Bank, Bangalore, requiring the Banks to ensure that no amount is withdrawn or transferred from the said accounts maintained in the name of the petitioners until the dues are paid. Hence these petitions.
2. Learned Counsel for the petitioner while pointing to sub-section (2) of Section 73 of the Act submits that the Officer is required to consider the representation made by the petitioner on whom show-cause notice is served under sub-section (1) and determine the amount of service tax and thereafter the petitioner shall become liable to pay the amount so determined. According to the learned counsel such a determination having not been done and the proceeding not concluded no amount is payable by the petitioner to the credit of the Central Government and therefore, Section 87(b)(iii) of the Act could not be invoked by the 2nd respondent- Asstt. Director to attach the Bank Accounts of the petitioner. Learned counsel hastens to add that Section 73-C of the Act is a special provision in the matter of provisional attachment by order and in writing, of any property belonging to the person on whom notice is served under sub-section (1) of Section 73 and the proceeding pending and if in the opinion of the Central Excise Officer, for the purpose of protecting the interest of the revenue, it is necessary so to do subject to securing the prior approval of the Commissioner of Central Excise. 2nd respondent having not exercised a jurisdiction under Section 73-C of the Act, the communications Annexures – C and D addressed to the Bank not to permit the withdrawal of monies from the Bank Accounts of the petitioner, it is submitted is illegal.
3. Per contra, Sri. T.M. Venkata Reddy, learned counsel for the respondent-revenue seeks to sustain the impugned communications as being well merited, fully justified and not calling for interference.
4. Regard being had to Section 73(1) of the Act, whereunder show-cause notice, Annexure-A was issued to the petitioner, responded by the explanation Annexure – B, and no order having been passed thereon to conclude the proceeding as required by sub-section (2) of Section 73, while the proceeding, is pending before the 2nd respondent, then Section 73-C of the Act comes into play in the matter of provisional attached of the properties belonging to the petitioner. The contention that Section 87(b)(iii) of the Act is applicable, in my considered opinion, is without merit, since it applies only after a proceeding under Section 73 is concluded by an order determining the amount due and payable by the petitioner. Such a situation having not arisen as there is no conclusion of the proceeding, Section 87 is inapplicable.
5. In these circumstances, the 2nd respondent was not justified in invoking Section 87(b)(iii) of the Act to direct the Banks not to permit withdrawal of monies from the Accounts of the petitioner maintained in ING Vysya Bank, Hyderabad and a Branch at Bangalore by the impugned communications.
6. In the result, these petitions are allowed. The impugned communications, Annexures-‘C ‘ and ‘D’ of the 2nd respondent addressed to branches of ING Vysya Bank at Hyderabad and Bangalore are quashed.