2016 (9) TMI 1028 - HC - Service Tax

Auction of aircraft to recover service tax dues - rights of bidder - non-deposit of amount since the sale was not confirmed - Seeking recall of its earlier order and permission to Applicant/Respondent No. 1 to conduct fresh auction of the concerned aircraft. - in earlier order this court passed an order allowing confirmation of the sale of concerned aircraft upon acceptance of the highest bid of one M/s. SGI Commex Limited - limit has been already sets out in Draft Disposal Manual that any bid up to 20% lower can be accepted, but beyond the same, no concession and ordinarily can be given - till date a written confirmation of the sale or acceptance of the highest bid has not been communicated. Held that - a curious and interesting picture emerges. Firstly, the Service Tax Commissioner, knowing fully well that the offer of the highest bidder is much below the reserved price, persuaded this court to pass an order and record a statement therein that the commissionerate be allowed to accept this bid. Secondly, statements were made by the Service Tax Commissioner seeking to confirm the sale without informing the court that a written communication communicating acceptance of the offer has to be released and issued to the bidder. Finally and more importantly that the sale must be concluded within 21 days from the date of such communication was also not a statement and factually made before this court. Pertinently, there is a limit prescribed and that there is a Draft Manual has also not been stated ever before this court. Since everything is now emerging during the course of hearing and the auction purchaser/highest bidder desiring time in addition to what was understood and stipulated by it and seeking leave to file an affidavit to that effect, we place this matter on 19th September, 2016. If any affidavit is filed, copies thereof shall be duly served by this auction purchaser/highest bidder to all concerned parties. Eeven if we proceed to reject the request of the Service Tax Commissioner to recall our order dated 22nd August, 2016, given the facts and circumstances, which we have noted today, we would be issuing such further orders and directions and at the entire risk, cost and consequences of those moving the motion and participating in the sale.

Summary

Issues:
1. Request to recall the court's order dated 22nd August, 2016.
2. Permission sought for conducting a fresh auction of the concerned aircraft.
3. Discrepancy between the highest bid and the reserve price.
4. Interpretation of the Draft Disposal Manual regarding bid acceptance limits.
5. Delay in written confirmation of sale affecting the deposit of balance amount.
6. Service Tax Commissioner's actions and statements regarding bid acceptance and sale confirmation.
7. Need for additional time for the highest bidder to deposit the balance amount.
8. Impleadment of the highest bidder as a party respondent in the motion.
9. Potential consequences of rejecting the request to recall the court's order.

Analysis:

1. The court was presented with a request to recall its order dated 22nd August, 2016, along with a plea to conduct a fresh auction of a specific aircraft. The matter was brought before the court due to discrepancies and concerns regarding the bid acceptance process and the subsequent actions of the Service Tax Commissioner.

2. A significant issue arose from the observation that the highest bid of 4.1 Million USD was substantially lower (81.8%) than the reserve price of USD 22.5 Million. The Service Tax Commissioner relied on a Draft Disposal Manual to argue that bids up to 20% lower than the reserve price could be accepted, beyond which no concession could be given. This discrepancy led to the request for the court to recall its order and allow for a re-auction of the aircraft.

3. The delay in providing a written confirmation of the sale to the highest bidder, despite the court's order, resulted in the bidder not being able to deposit the balance amount within the stipulated time frame. The highest bidder sought additional time for depositing the balance amount, citing the absence of written confirmation as the reason for the delay.

4. The court highlighted the Service Tax Commissioner's actions, noting that the Commissioner had not informed the court about the requirement for a written communication accepting the bid and the subsequent 21-day time limit for depositing the balance amount. Furthermore, the existence of a limit prescribed in the Draft Manual was not previously disclosed to the court.

5. In light of the emerging issues and the highest bidder's request for additional time, the court granted leave for the bidder to be impleaded as a party respondent in the motion. The court clarified that any decision regarding the recall of the order would entail further orders and directions, with the associated risks and consequences borne by the parties involved in the sale.

This detailed analysis provides a comprehensive overview of the issues raised in the legal judgment, addressing each aspect of the case and the court's considerations in a structured manner.