2014 (2) TMI 249 - HC - Service Tax

Reversal of CENVAT Credit - recovery of demand - Held that - notice issued insisting that the Petitioner should pay the amounts adjudicated upon by order without waiting for the statutory period of three months provided to enable the filing of an appeal and stay application to the Tribunal is over. This is contrary to the circular dated 1 January 2013 issued by CBEC. The impugned communications, to say the least, is high handed. The statute has advisedly provided a period of three months to an assessee to file an appeal before the appellate authority and also obtain a stay. This is with a view to enable the assessee to seek proper advice and considered opinion on the adjudication order before taking a decision and then challenging the adjudication order in appeal proceedings. The officers of Respondent Revenue would do well to realize that their job is much more than merely collecting the tax. They are officers of the State, administering the Finance Act, 1994 and fairness in approach to the tax payers and acting in accordance with the Rule of Law is a sine-qua-non in discharge of all its functions - Notice quashed - Decided in favour of assessee.

Summary

Issues:
1. Challenge to communications by Assistant Commissioner of Service Tax demanding reversal of CENVAT credit and payment of penalty.
2. Interpretation of statutory period for filing an appeal under Finance Act and Central Excise Act.
3. Allegations of premature demand by Revenue authorities.
4. Compliance with circular dated 1 January 2013 issued by CBEC.
5. Jurisdiction of Assistant Commissioner to demand payment before expiry of statutory appeal period.
6. Coercive action threatened by Revenue authorities.
7. Legal validity of impugned communications and breach of statutory provisions.

Issue 1: Challenge to Communications by Assistant Commissioner:
The Petitioner challenged communications demanding reversal of CENVAT credit and payment of penalty issued by the Assistant Commissioner of Service Tax. The Petitioner argued that the demands were premature as they had a statutory period to file an appeal before the Tribunal.

Issue 2: Interpretation of Statutory Appeal Period:
The Court considered the statutory period of three months available to file an appeal under the Finance Act and Central Excise Act. The Assistant Commissioner's demands were found to be in contradiction with the statutory provision allowing the assessee time to file an appeal and seek a stay.

Issue 3: Allegations of Premature Demand:
The Petitioner alleged that the demand made by the Revenue authorities was premature since they were in the process of filing an appeal against the order of the adjudicating authority. The Court noted that demanding payment before the expiry of the statutory appeal period would deny the Petitioner the opportunity to seek proper advice and challenge the order.

Issue 4: Compliance with Circular by CBEC:
The Petitioner cited a circular by CBEC dated 1 January 2013, which prohibited coercive action until the expiry of the statutory appeal period. The Court emphasized the importance of adhering to such circulars to ensure fairness and proper legal procedures.

Issue 5: Jurisdiction of Assistant Commissioner:
The Court examined the jurisdiction of the Assistant Commissioner to demand payment before the expiry of the statutory appeal period. It held that such actions were not only contrary to the circular by CBEC but also breached statutory provisions providing a three-month period for filing appeals.

Issue 6: Coercive Action Threatened:
The Revenue authorities had threatened coercive proceedings for recovery if the demands were not met within a short period. The Court highlighted that allowing coercive measures before the expiry of the appeal period would be unjust and hinder the assessee's right to seek a stay.

Issue 7: Legal Validity of Impugned Communications:
The Court concluded that the impugned communications were not only in defiance of the CBEC circular but also violated statutory provisions. It emphasized the importance of fair treatment of taxpayers and adherence to the Rule of Law by Revenue officers.

In the final order, the Court quashed the impugned communications, restrained the Revenue authorities from taking coercive action until the expiry of the appeal period, and directed that no coercive procedures should be adopted if the Petitioner filed an appeal and stay application within the statutory period.