ST - Unless VCES application is considered and decided, no proceedings under Sec 87 (Recovery) - Object of VCES may be defeated, if recovery is allowed to proceed: High Court
By TIOL News Service
ALLAHABAD, SEPT 30, 2013: THIS writ petition is directed against the summoning order dated 31.5.2013 issued by the Superintendent (AE), Central Excise and Service Tax, Noida; notice dated 7.6.2013 issued by the Deputy Commissioner (AE) Central Excise and Service Tax, Noida and the proceedings under Section 87 of the Finance Act, 1994 by way of issuing garnishee order.
The order dated 7th June, 2013 passed under Section 87 of the Finance Act, 1994 states that on verification of the available records and the declaration made by M/s K. Anand Caterers indicate that the petitioner is required to deposit an amount of Rs.60 lacs (Rupees Sixty Lacs ) approx. as service tax along with applicable rate of interest in respect of the taxable services provided within the jurisdiction of Commissioner of Customs, Central Excise and Service Tax, Noida. After quoting Section 87 the order requires the petitioner to pay money due to the credit of the Central Government without prejudice to any other action that may be taken to recover the amount. The notice has been addressed to the clients of the petitioner on the addresses given in the notice from Sl.No.1 to 5, the Branch Manager of Standard Chartered Bank, B-68, Greater Kailash Part 1, New Delhi; the Branch Manager, Standard Chartered Bank, Narain Manzil , 23 Barakhamba Road, New Delhi and the Branch Office of Nainital Bank Ltd., N-26, Sector-18, Near Lal Pathology, Noida as noticee nos.6 , 7 and 8.
The petitioner states that he is liable to pay service tax and is registered with the service tax authorities. On 31.5.2013 a search was conducted on its business premise in which it was detected that the petitioner is required to pay Rs.60 lacs as service dues. He does not deny the liability and has challenged the garnishee order under Section 87 of the Finance Act, 1994 on the ground that the petitioner filed an application under Section 106 as amended by the Service Tax Voluntary Compliance Encouragement Scheme, 2013, which is operative from 1st October, 2007 to 31st December, 2012 and covers all the liability, which has to be paid as on 1st March, 2013. It is submitted that the application was made, when the scheme is operative of which cut off date prescribed in the scheme is 1st March, 2013 under the amended Section 106 of the Finance Act, 1994. Since the petitioner has submitted an application for voluntary compliance under which service tax is to be deposited, under which it can deposit 50% of the admitted tax due by 31st December, 2013 and the remaining amount by 30th June, 2014, the garnishee order has been illegally and arbitrarily issued without deciding the application. In the circumstances set out as above, when the liability of service tax is admitted and application has been made under the scheme on 20th June, 2013, no recovery proceedings could be taken until the application is disposed of and which under Section 107 permits the defaulter to deposit tax in two installments i ,. e. to pay 50% by 31st December, 2013 and remaining 50% by 30th June, 2014.
The Department states that it is within its rights to initiate recovery proceedings and to issue notice for recovery of the amount. It is submitted that unless application is found to be validly made within the period prescribed under Service Tax Voluntary Compliance Encouragement Scheme, 2013, the petitioner is not entitled to any relief in the writ petition. He submits that an application can be made under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 subject to conditions provided under section 106 and 107 of the Act. The immunity from penalty interest and other proceedings is subject to fulfilling condition under Section 106 and 107 of the Service Tax Voluntary Compliance Encouragement Scheme, 2013.
The High Court was of the view that in the present case, the petitioner has prima facie demonstrated that he fulfills the conditions under prescribed Section 106 and 107 of the Finance Act, 1994 as amended by Finance Act, 2013 and that unless application is considered and decided, no proceedings under Section 87 may be allowed to continue. The object of the Service Tax Voluntary Compliance Encouragement Scheme, 2013 may be defeated, if the recovery is allowed to proceed.
In the facts and circumstances, the High Court passeed interim order directing the petitioner's application under the Service Tax Voluntary Compliance Encouragement Scheme, 2013 made on 20th June, 2013 to be decided by the Commissioner of Central Excise (competent authority) within a period of 60 days from today. The petitioner will file certified copy of this order with the competent authority within a week.
The High Court further directed that until disposal of the application dated 20th June, 2013, the recovery proceedings including operation of the impugned notice dated 7.6.2013 under Section 87 of the Finance Act, 1994 issued by the Deputy Commissioner (AE), Central Excise and Service Tax Noida shall remain suspended. The bank accounts shall be released by the respective banks . Any amount adjusted will be subject to result of the writ petition.
(See 2013-TIOL-741-HC-ALL-ST)
