2014 (7) TMI 666 - HC - Service Tax

Power of Revenue authority to recover tax from the debtors / bank - petitioner says that this notice is illegal as no money is due and payable by the bank to the writ petitioner unless the writ petitioner asks the bank to pay - whether Section 87 of the Finance Act, 1994, empowers the revenue authority to issue impugned notice intending to recover the amount - Held that - Section 87 is one of the modes of recovery of the dues payable by debtor. The power given appears to be sweeping and wide in nature. Above provision obliges the third party (here Bank) to pay not only when it becomes due and payable to the debtor, even also the same is being held by the third party, however with precondition that the money must be legally due and actually held. In this case when respondent Bank has not come forward to object to the action of Revenue, we do not see any reason fundamentally to stall the operation of the notice. However, as the Revenue has agreed to hear the petitioner as to quantum of the legitimate amount of tax, we permit the petitioner to make a representation to the Revenue Officer who has issued the notice, within fortnight from the date of receipt of the copy of this order, failing which the notice in question shall be operative - Decided conditionally in favour of assessee.

Summary

Issues:
1. Validity of notice issued by Revenue to recover an amount from a bank account.
2. Interpretation of Section 87 of the Finance Act, 1994 regarding recovery of dues.

Analysis:

Issue 1: Validity of notice issued by Revenue
The writ petitioner challenged a notice issued by the Revenue to a bank to recover an amount allegedly payable by the petitioner. The petitioner argued that the notice was illegal as no money was due unless specifically requested. The Revenue contended that the notice was issued under Section 87 of the Finance Act, 1994, and was justifiable. The Court noted the submissions and directed the petitioner to represent the quantum of the legitimate tax amount to the Revenue Officer who issued the notice. The Court stayed the operation of the notice pending the decision on the representation, with a condition that the petitioner must not withdraw any amount without maintaining a balance.

Issue 2: Interpretation of Section 87 of the Finance Act, 1994
The Court analyzed Section 87 of the Finance Act, 1994, which provides modes for the recovery of amounts due to the Central Government. The section empowers Central Excise Officers to recover dues by various means, including deducting from money owed by third parties or detaining movable or immovable property. The Court observed that the provision obliges third parties, like banks, to pay amounts due to the Central Government, even if the money is held by them, provided it is legally due and actually held. In this case, as the bank did not object to the Revenue's action, the Court found no reason to halt the notice's operation. However, the Court allowed the petitioner to make a representation regarding the legitimate amount of tax within a specified timeframe. The Court emphasized that the notice would remain stayed until a decision was made on the representation.

In conclusion, the High Court of Andhra Pradesh upheld the validity of the notice issued by the Revenue for recovering the alleged amount from the bank account. The Court interpreted Section 87 of the Finance Act, 1994, and allowed the petitioner to represent the legitimate tax amount before the Revenue Officer. The Court provided clear directions for the process and conditions to be followed during the representation, ensuring a fair opportunity for the petitioner to address the issue.