News Update

 
Service Tax : Power to attach property is iniquitous!

MARCH 02, 2006

By Radha Arun, Ex-IRS

THE Finance Bill, 2006, has introduced a draconian provision in service tax. It provides for attachment of property of a person pending adjudication of a notice demanding tax. The attachment could extend upto two years!

The provision is contained in the new section 73C of the Finance Act 1994 (which is the statute for levy of service tax). The new section provides that where a notice has been served on a person under Section 73 or 73A and proceedings are pending, and where the central excise officer feels it necessary he may, with the permission of the Commissioner, attach any property of the person on whom notice has been served and proceedings are pending. The intitial attachment is for a period of six months, but it can be extended by the Chief Commissioner upto two years.

This should be read in the context of another new provision, viz., a new sub section(1A) in section 73. Under this the person who is served a notice alleging suppression of facts etc may pay up alongwith interest and one-fourth of the amount as penalty, and the proceedings will be deemed to be closed.

If the matter is not closed, it remains a matter pending adjudication and therefore remains a matter for which the department may attach property. We all know the department's proclivity to issue notices alleging suppression of facts etc at the drop of a hat. Any number of pending proceedings can thus be created. So, the combined effect, and probably an intended effect, of the two new provisions is to push the assessee to capitulate to arbitrary demands. If he dares to seek justice and represent his case he is in danger of loss of the means of his livelihood for a period that may extend to two years.

Once forced into capitulation the hapless assessee cannot even go in appeal, as there is no order against which he can appeal. His payment will be taken to be voluntary!

As this seems an unreasonable and iniquitous measure it is hoped that the government would think the better of it and remove it before the Bill is enacted.

(The views expressed are personal of the author)


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