2017 (2) TMI 900 - HC - Service Tax

Validity of Garnishee order - no tax is due on petitioner s account to the respondents and tax, if any due, was payable, if at all, by the erstwhile proprietorship concern - Held that - the respondents could not have, willy-nilly, passed the garnishee orders without first passing an assessment order - garnishee order set aside - petition allowed - decided in favor of petitoner.

Summary

Issues:
1. Jurisdiction of respondents in recovering service tax liability from a petitioner company registered with a different Commissionerate.
2. Validity of recovery proceedings without an assessment order against the proprietorship concern.
3. Legality of garnishee orders issued without passing an assessment order.
4. Liability of the petitioner company for tax dues of the erstwhile proprietorship concern.
5. Authority to recover from the estate of the deceased proprietor of the concern.

Analysis:
1. The petitioner, a company registered with the Bangalore Commissionerate, challenged the jurisdiction of the respondents to recover service tax liability from them. The petitioner argued that the tax liability pertained to a dissolved proprietorship concern, not under the jurisdiction of the respondents.

2. The petitioner contended that no assessment order had been passed against the deceased father's proprietorship concern, which was the basis for the recovery proceedings initiated by the respondents. The petitioner emphasized that the recovery without a valid assessment order was illegal and unsustainable in law.

3. The court noted the petitioner's grievance regarding garnishee orders issued to their customers without any legal basis. The court found that the respondents had passed the garnishee orders without first issuing an assessment order, which was a procedural requirement.

4. It was argued by the petitioner that since the deceased proprietor left no estate, the recovery could not be made from the petitioner company, even if the customers were previously associated with the proprietorship concern. The court agreed that no tax liability existed for the petitioner company.

5. The court, after considering the arguments and records, set aside the garnishee orders issued against the customers of the petitioner company. The court clarified that the respondents could pursue proceedings against the estate of the proprietorship concern if entitled under the law, but the recovery from the petitioner company was not justified.

In conclusion, the court disposed of the writ petitions in favor of the petitioner, quashing the garnishee orders and allowing the petitioner to seek refund if applicable. The judgment highlighted the importance of following due process, including issuing assessment orders before initiating recovery proceedings.