By TIOL News Service

JAIPUR, MAY 06, 2014: THE adjudicating authority confirmed a Service Tax demand of over Rs. 83 lakhs with equal penalty and attendant interest. The Tribunal on 20.09.2012 granted stay subject to pre-deposit of 15% of the tax demanded.

After expiry of six months a notice dt.3.10.2013 was served upon petitioner from the office of Commissioner that the interim protection was for a period of six months and appeal is still pending but the stay granted by the CESTAT automatically stands vacated and called upon the petitioner to deposit the balance towards service tax along with interest and penalty in terms of order of the adjudicating authority under intimation to his office failing which necessary action shall be initiated for recovery of outstanding dues.

Then the petitioner filed an application seeking extension of order of pre deposit passed by the Tribunal dt.20.9.2012 and that application was listed before the Tribunal on 23.1.2014.

The Department wanted to pre-empt this and on 21.1.2014, they sent a notice to the petitioner's bank to freeze account of the petitioner and on 22.1.2014, a day prior to (23.1.2014), the date on which the application for extension of stay was coming up for hearing, the bank account was debited and the total money of Rs. 3477714/- lying in the bank account of the petitioner was credited by the Department to their own bank account.

The Tribunal heard the matter on 23.1.2014 and extended the operation of the stay during pendency of the appeal . Even after the Stay was granted by the Tribunal, the Department refused to return the money collected from the Bank.

The assessee is before the High Court. The Department's response is by the time the Tribunal granted the Stay, some money was already recovered from the bank and that cannot be returned. Only the demand for the balance amount will not be enforced.

The High Court observed, "Occasionally for the reason of other administrative exigencies for which the assessee cannot be held liable and if there is no reason attributable to the assessee regarding delay in disposal of the pending appeal or non cooperation and if appeal could not have been heard which is beyond control of the petitioner/assessee at least some balance has to be made to protect the right and interest of the assessee during intervening period the appeal remain pending before the Tribunal. "

The High Court further commented, "it is the settled principles of law and which is consistent and recognized that where a case is not considered because of multiplicity of business of the Court the party ought not to be prejudiced by that delay and when an act of the Court can prejudice no man, ditto would be for an omission in keeping with the aforesaid principles that if the matter has not been taken up for consideration on a given date at least the litigant cannot be left to suffer for such reason over which he has no control. The reason or cause for such eventuality could be many and usually as we have noticed that because of heavy load of work but still litigant cannot be made to suffer for these reasons but keeping in view the mandate of law by introducing Sec.35C ( 2A ) by Finance Act, 2002 and a third proviso added by Finance Act, 2013 in particular, it will be for the Tribunal to see that the matters must be decided within the period stipulated under the mandate of law, at the same time, where definite stay order has been granted, such cases must be heard on priority basis."

Overreaching the process of law : The High Court noted the peculiar situation where knowing fully well that the matter is to come up before the Tribunal on 23.1.2014, the hasty action of the Department in freezing the bank account of the petitioner on 21.1.2014 debiting the petitioner's bank account on 22.1.2014 i.e. a day prior to the date on which date the application for extension was coming up before the Tribunal cannot be appreciated and it tantamount to overreaching the process of law which cannot be approved by this Court.

The High Court quashed the freezing of the account and the debiting of the amount from the petitioner's account and directed the Department to refund the amount within two weeks.

(See 2014-TIOL-647-HC-RAJ-ST)