By TIOL News Service

MUMBAI, SEPT 25, 2018: THE petitioner challenges a notice dated 30th August, 2018 issued by the Dy. Director in the office of the Director General of GST Intelligence attaching the Petitioner's Account in Union Bank of India u/s 87(b)(i) of the FA, 1994 for recovery of service tax payable under the Act.

Incidentally, the impugned notice also directed the bank to pay the amount lying therein into the treasury under the head 'service tax'. Further, the impugned notice dated 30th August, 2018 also informed the bank that failure to comply with the notice would lead to the bank being declared as assessee in default under the Act.

Consequently, the Union Bank of India deposited an amount of Rs.19,19,676/- towards service tax into the treasury.

The facts are that the Petitioner had filed a declaration on 11th April, 2016 under Section 73(3) of the Act, that the service tax payable by it for the period 2012-13 to 2014-15 aggregating to Rs.28,34,866/- which was payable and was not paid along with interest of Rs.18,29,539/- thereon is now being paid in terms of Section 73(3) of the Act. In view of the aforesaid declaration dated 11th April, 2016, no show cause notice was issued and investigation into the Petitioner's activities was closed.

Nonetheless, during the course of search, the Revenue was of the prima facie view that the service tax liability paid by the Respondent in their declaration u/s 73(3) of the Act, was out of adjustment of false/fake/non-existing/ fabricated/forged and bogus challans.

And in view thereof, there was no need to await an order resulting from an adjudication proceeding. Inasmuch as the impugned notice dated 30 th August 2018 ought not to be set aside and/or interfered with.

Be that as it may, after filing of the present petition on (3 September 2018), a SCN dated 8th September, 2018 came to be issued calling upon the Petitioner to show cause why service tax amount of Rs.2,81,97,456/- should not be demanded and recovered for the period 1st October, 2012 to 30th June, 2017.

The SCN also records the fact that an amount of Rs.19,19,676/- had already been recovered consequent to the impugned notice dated 30th August, 2018.

The petitioner submits that the aforesaid action is without jurisdiction since the impugned notice has been issued when there is no amount adjudicated as payable under the Act after issuing a SCN u/s 73 of the Act. That the attachment ordered is contrary to and in defiance of the binding decisions in Quality Fabricators & Erectors - 2015-TIOL-2710-HC-MUM-ST, ICICI Bank Ltd. - 2015-TIOL-1164-HC-MUM-ST and Cleartrip (P) Ltd. - 2016-TIOL-863-HC-MUM-ST.

It is also submitted that the amount of Rs.19,19,676/ - which has been deposited by the Petitioner's bank with the Revenue may be retained by it till such time as show cause notice dated 8th September, 2018 is adjudicated upon.

The counsel for the Revenue inter alia submitted that invocation of Section 87(b)(i) of the Act in the present facts was justified as what is being sought to be recovered is only an amount of service tax liability which is due and not been paid, as admitted by the partners of the Petitioner and, therefore, the case laws cited are inapplicable to the facts of this case for the reason that in none of them, was there any admission of liability.

The High Court considered the arguments and negated the submission of the counsel for the Revenue that since the declaration u/s 73(3) was found to be incorrect, Revenue could recover the amount, by observing -

++ The submission completely ignores the proviso to Section 73(3) of the Act. This proviso to Section 73(3) of the Act caters to/ provides for such contingencies. It in terms states that where the amount as declared under Section 73(3) of the Act has not been paid, then the same is to be recovered by issuing a notice under Section 73(1) of the Act. Only the period within which the notice is to be issued, will commence from the date of receipt of information. Therefore, the very act of issuing the show cause notice dated 8th September, 2018 under Section 73(1) of the Act is in accord with the proviso to Section 73(3) of the Act. Therefore, till the same is adjudicated, the issue of coercive proceedings for recovery, cannot arise.

++ Therefore, till such time, as the show cause notice is adjudicated, it cannot be conclusively stated that any amount of service tax was paid by the Petitioner on the basis of forged/fabricated/bogus challans. This would necessarily have to await adjudication order passed after following the principle of natural justice. Thus, the invocation of Section 87 of the Act, at this stage, would in these facts, be premature.

++ Section 87 of the Act provides that only after the amount payable by an assessee to the Government has been determined and on such determination, the assessee does not make payment due to the Central Government that Section 87 of the Act can be invoked. Today, no amount has been determined as payable by an Adjudication Order. This, is evident from the show cause notice 8th September, 2018, where the amounts short paid, is subject of adjudication. Therefore, it cannot be said that any amount is due to the Central Government.

++ It is entirely possible that in response to the show cause notice dated 8th September, 2018 and at the hearing before the adjudicating authorities, the Petitioner would be able to establish that, prima facie , the view formed in the show cause notice with regard the service tax being discharged on the basis of false, forged and fabricated challans, was not justified. In such a case, it is likely that demand attributable to the statements made by the partners may be set aside.

Concluding that the issue raised by the Petitioner stands concluded in its favour by the cited decisions, the impugned notice dated 30 th August 2018 was quashed and set aside.

The Writ Petition was allowed.

(See 2018-TIOL-1977-HC-MUM-ST)