By TIOL News Service

BANGALORE, JULY 15, 2015: PETITIONER is wife of Sri. P.S. Harsha, who was the Proprietor of M/s - Rapid Marine Suppliers, Mangalore. The petitioner challenged the action by the department in initiating proceedings for recovery of Service Tax allegedly not paid by the firm. Department after issue of Show Cause Notices, initiated action under Section 87 of the Finance Act, 1994 by issuing notices to the banks where the Petitioner had accounts.

Questioning the action of issuance of recovery notices and contending inter alia that without there being any adjudication under Section 73 of the Finance Act, 1994 recovery notices under Section 87 of the Finance Act could not have been issued petitioners are before the High Court.

The respondent department justified the action by contending that in order to safeguard the interest of revenue, the admitted service tax which had been collected by the proprietor of the Firm, namely, husband of the petitioner which had not been remitted to the Government as required under the Finance Act, 1994 had resulted in investigation being conducted and after verification of the invoices and ledgers submitted by the service receivers, quantification has been done and as such the amounts have been recovered which is in consonance with the provisions of Finance Act, 1994 and particularly Section 87 and there is no infirmity what so ever committed by the respondents.

After hearing both sides, the High Court held:

Perusal of Section 87 of the Act would clearly indicate that any amount due to the Central Government can be recovered by any one or more of the modes provided under Clauses (a) to (d) of Section 87 of the Act. The language employed under Section 87 of the Act would indicate that where any amount payable by a person to the credit of the Central Government under any of the provisions of the said Chapter or the Rules made thereunder is not paid, then the Central Excise Officer would be empowered to proceed to recover the amount by any one or more of the modes mentioned in clauses (a) to (d) of Section 87 of the Act. Thus, the words "amount payable by a person" will have to be considered in the background of Section 73 of the Act inasmuch as, show cause notice issued under Section 73(1) of the Act is required to be adjudicated after considering representation of the person if filed and thereafter determine the amount payable. Any deviation in this regard would be in violation of principles of natural justice or in other words, doctrine of Audi Alteram Partem would be attracted. Thus, jurisdictional Central Excise Officer would be entitled to recover the amount from the person payable and payable would by such person after adjudication has been done as otherwise, it would amount to putting the cart before horse.

Accordingly, the High Court allowed the Writ Petition and quashed the notices issued under Section 87. The High Court also directed to remit the amounts recovered to the respective accounts.

Quick bite - Also see 2015-TIOL-1164-HC-MUM-ST [ICICI Bank Ltd.]

(See 2015-TIOL-1596-HC-KAR-ST)