By TIOL News Service

HYDERABAD, DEC 07, 2011: THIS case has gone through CESTAT twice and High Court twice and the matter is yet to be admitted by the CESTAT!

The petitioner assails two notices of attachment under Section 87(c) of the Finance Act, 1994 dated 28.10.2011 and 29.10.2011 issued by the Assistant Commissioner of Central Excise for recovery of service tax and penalty thereon as assessed by the Commissioner of Customs, Central Excise and Service Tax for the years 2003-04 to 2006-07.

The petitioner runs commercial training/ coaching centres all over Andhra Pradesh. As per Section 65(105)(zzc) of the Act, imparting of training/ coaching is a service taxable under Section 73 of the Act.

Against the Order-in-Original (OIO) passed by the primary authority, the petitioner went in appeal under Section 86 of the Act. By an order dated 14.06.2010, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) waived the condition of pre-deposit [2010-TIOL-1306-CESTAT-BANG]. The Revenue then filed an appeal before the High Court. The same was disposed of by a Division Bench by order dated 11.01.2011 [2011-TIOL-147-HC-AP-ST]. While setting aside the order of the CESTAT, the court remitted the matter for de novo consideration. Prior thereto, the competent authority passed orders under Section 73C of the Act provisionally attaching immovable property of the petitioner valued approximately at Rs.27.00 crores.

After the remand by this Court, the CESTAT passed orders on 18.04.2011 [2011-TIOL-661-CESTAT-BANG] again granting waiver of pre-deposit and stayed recovery. This was again assailed by the Revenue. A Division Bench of the High Court allowed the appeal on 19.10.2011 [2011-TIOL-694-HC-AP-ST] directing the CESTAT to entertain the appeal of the petitioner on condition of deposit of Rs.80 crores under Section 35F of the Central Excise Act.

A week thereafter, the Assistant Commissioner issued the impugned notices.

The counsel for the petitioner would urge that Section 73C of the Act enables the Central Excise Officer to provisionally attach the property belonging to the person to whom notice is served under Section 73(1) and therefore any notice of attachment directly under Section 87(c) is illegal and arbitrary. The petitioner runs many coaching/training centres and if the movables like buses, vans and other vehicles as well as furniture are attached, the petitioner and its students would suffer hardship. This Court permitted the petitioner to pay Rs.80 crores as a condition for the CESTAT to entertain the appeal. As per Rule 21 of the Writ Proceedings Rules, 1977, if no time is prescribed by the Court, it is presumed that the petitioner has two months time from the date of receipt of the order, and the notice of attachment even before the expiry of the period granted by this Court is highly arbitrary and illegal.

In the background facts, the points that would arise for consideration are whether the appeal filed by the petitioner against the OIO dated 11.06.2009 passed by the Commissioner can be said to be pending and whether the pendency of such appeal bars the exercise of jurisdiction under Section 87(c) of the Act?

The High Court observed,

As mandated by this Court, the Tribunal shall entertain the appeal only if the condition imposed by this Court is fulfilled by the petitioner. The condition imposed is that the petitioner should deposit Rs.80 Crores under Section 35F of the Central Excise Act in compliance with Section 86 of the Act. Admittedly, the amount has not been deposited so far. The fact that the petitioner has got some more time to comply with the order passed by this Court or that he has other remedies to avail against the order passed by this Court cannot be a mitigating factor in favour of the petitioner.

Section 87 of the Act in plain terms empowers the Central Excise Officer to proceed to recover the amount of demand by one or more modes mentioned therein. Section 87 (c) empowers the Central Excise Officer to distrain any movable and immovable property until the amount payable is paid. The power is not circumscribed by any condition. The condition precedent is that the amount of service tax levied remains payable when the power is exercised. The pendency of an appeal before the CESTAT or the Commissioner (Appeals) or before this Court does not in any manner whittle down the power under Section 87(c) of the Act. Admittedly, as of now, the petitioner has not complied with the order of this Court dated 19.10.2011 in C.E.A. No.110 of 2011 and there is no stay operating. Therefore, the amount demanded by the Commissioner vide OIO dated 11.06.2009 remains payable and part of the said amount has to be paid as ordered by this Court in C.E.A. No.110 of 2011. The hardship vehemently pleaded by the counsel for the petitioner or the consequences that would follow pursuant to the attachment orders cannot in any manner regulate the exercise of power under Section 87(c) of the Act nor exercise of discretion by this Court under Article 226 of the Constitution of India.

The writ petition, for the above reasons, is dismissed.

But what about Board's instructions on recovery of arrears when appeals are pending? Apparently, they were not brought to the notice of the High Court. As per Section 94(eeee), the Government has the power to make rules to provide for the manner of recovery of any amount due under section 87. Has the Government made these rules?

(See 2011-TIOL-800-HC-AP-ST in 'Service Tax')