By TIOL News Service

MUMBAI, OCT 31, 2013: THE petitioner has challenged the notice dated 1 October 2013 issued by the Superintendent, Group X, Anti Evasion, Service Tax II, Mumbai (respondent No.2 ) under Section 87(b) of the Finance Act 1994. By the impugned notice, the respondent No.2 has directed the petitioner bankers viz. Respondent Nos 5 to 8 banks not to allow any withdrawal from the account of the petitioner to the extent of Rs.1.22 crores as the same is due to the revenue from the petitioner

The Counsel for the petitioner states that so far as dues payable upto 31 December 2012 is concerned they have already made an application for availing of the benefit of the Service Tax Voluntary Compliance Encouragement Scheme (VCES). Further, under that scheme the petitioner's liability would be to pay only 50% of the outstanding liability by 31 December 2013. It is submitted that the entire amount of Rs.31 ,96,971 is payable in respect of dues prior to 31 December 2012. Therefore, at this stage nothing is payable by the petitioner to the revenue subject to petitioner's application for availing of the benefit of the scheme being accepted by the revenue.

On the other hand, the Counsel for the respondents states that the petitioner has made application under the Scheme on 10 October 2013 and therefore, respondent would take a decision thereon by 10 November 2013. However, it is contended that till the petitioner's application is accepted, it cannot be exempted from its liability to pay the amount of the service tax, which has admittedly not been paid. It is submitted that the petitioner has collected the service tax from its customers though the petitioner claims the benefit of Rs.60 ,40,684 /as cenvat credit the same is subject to verification by the revenue.

The High Court found that the entire basis of the demand for Rs.1.22 crores is on the basis of the statement dated 25 September 2013 made by the petitioner's Director to the respondents. In the above statement while admitting the liability to Rs.1.22 crores the petitioner has also pointed out that they have cenvat credit of Rs.60.40 lacs available.

The High Court observed, "If the application under VCES is accepted the petitioner would be liable to pay only Rs.16 lacs (approximately) prior to 31 December 2013 and the balance amount thereafter. Therefore, for the present subject to the petitioner's application for settlement under the scheme being accepted, interest of justice would be served if the respondent revenue are directed to vacate the attachment of the petitioner's bank accounts with respondent Nos.5 to 8 Banks on the petitioner depositing 50% of Rs.16 lacs."

The High Court ordered release of the attachment of bank accounts upon deposit of Rs.8.00 lacs and filing an undertaking that the petitioner will discharge its liability from the month of September, 2013 onwards with revenue. However, it is made clear that this order will ensure to the benefit of the petitioner only till a decision is taken on their application for settlement under the scheme.

(See 2013-TIOL-860-HC-MUM-ST)