ST - Provisional attachment of property - Careless exercise of power - HC allows WP with cost - Issues warning to Commissioner - Directs CBEC to issue Circular
By TIOL News Service
ALLAHABAD, DEC 07, 2015: THE petitioner is a company and is engaged in fabrication, erection and installation of power substations. The Petitioner had availed CENVAT Credit of Service Tax paid by sub-contractor.
An enquiry was instituted by the respondent under Section 14 of the Central Excise Act. In response thereto, the petitioners appeared and supplied the necessary information and documents. During the course of the enquiry, it appears that the respondents were insisting that the Cenvat credit availed by the petitioner should be reversed. In spite of these oral directions, the Cenvat credit was not reversed and accordingly a show cause notice dated 20th October, 2015 was issued under Section 73 of the Act directing the petitioner to show cause within 30 days from date of the receipt of the show cause notice as to why recovery should not be made to the tune of Rs. 1,15,27,245/ towards the Cenvat credit that was wrongly availed. This show cause notice was issued by the Commissioner of Service Tax, respondent no.2. It is contended that the show cause notice was received by the petitioner on 21 st October, 2015 but before the petitioner could submit a reply, the respondents attached two bank accounts of the petitioner in ICICI Bank and in Central Bank of India on 20th October, 2015. The petitioner, being aggrieved by the action of the respondents in attaching the bank accounts without giving an opportunity to the petitioner has filed the present writ petition.
After going through the relevant Rules and the CBEC Circular dated 01.07.2008, the High Court held:
++ Paragraph 2(iii) of the Circular indicates that the provision for attaching a property provisionally is of an extraordinary nature and should be resorted to in the utmost circumspection and with maximum care and caution. The authorities should have a reasonable belief that the assessee may dispose of, or remove the property which would not be in the interest of the revenue and, therefore, a firm opinion should be formed that the interest of the revenue is required to be protected. The circular contemplates that once an opinion is formed, the proposal should forward it within one month of the issuance of the show cause notice but where proceedings under Section 73 or 73 (A) of the Act has already been initiated, only the Commissioner would have the power to attach the property. Paragraph 2 (iii) further contemplates that if the power is frivolously exercised and attachment is made without any cogent reasons then appropriate disciplinary proceeding may be initiated against the officers.
++ In the light of the aforesaid, we find from a reading of the affidavits and impugned notice as well as the order directing attachment of the property and perusal of the satisfaction recorded in the original that without waiting for a reply to the show cause notice, and without giving any opportunity and without giving any notice, the bank accounts were attached in gross violation of Rule 3 of the Rules of 2008 read with paragraph 2 (iii) of the Circular dated 1 st July, 2008. It is mandatory for the authority to issue a notice giving 15 days' time to reply before attaching a property.
++ Respondent No. 3 clearly indicated that first the property should be attached and thereafter notice should be issued. This proposal was approved by the Commissioner without any application of mind and without considering the provision of the Rules and the circular. We also find that proceedings under Section 73 of the Act had been initiated and a show cause notice had already been issued to the petitioner. Action for attachment would only have been initiated by the Commissioner and could not have been initiated by the Deputy Commissioner. Such action on the part of the Deputy Commissioner is patently illegal and without jurisdiction.
++ Once, we found that the action of the respondents was done without cogent reasons, the Court issued a show cause to the respondent nos. 2 and 3 to show cause as to why disciplinary proceeding should not be instituted against them in terms of paragraph 2 (iii) of the Circular. We perused the replies and we find that the reasons indicated by them is a mere afterthought and an eyewash. New grounds have been taken to justify their action which in our opinion was not available.
++ Considering the totality of the facts that have been brought on record we find that the action of the respondents was not malafide and consequently considering this fact, we issue only a warning to respondents 2 and 3 that they need to be careful while resorting to exercise the powers contemplated under Rule 3 of the Rules of 2008. Such exercise of power has to be resorted to with utmost circumspection and with maximum care and caution.
++ In the light of the aforesaid, the impugned orders are quashed. The Writ Petition is allowed with cost of Rs. 25,000/, which shall be paid by the respondents to the petitioner within four weeks from today.
++ Registry is also directed to send a certified copy of this Order to the Central Board of Excise & Customs, Department of Revenue, Ministry of Finance, Government of India, New Delhi with specific instruction to issue a circular to all the officers ensuring that the powers under Rule 3 should be exercised with utmost care and caution and should not be exercised frivolously.
(See 2015-TIOL-2728-HC-ALL-ST)
