2018 (3) TMI 1390 - HC - Service Tax

Jurisdiction of Court - requirement of fulfillment of Bank Guarantee - petitioners collected the service tax from the service recipients and did not pay the same to the credit of the Central Government. - Bail conditions - The condition, that the petitioners shall furnish bank guarantee for the remaining due amount, within ten days from the date of order of the Court below, imposed, while granting bail to the petitioners, is what is brought into question in the present criminal petitions. Held that - The Court, on the basis of the undertaking given by a party, cannot convert itself into an executing Court to execute the terms agreed by the party, while deciding the bail application - the condition imposed by the Court below to the extent of directing the petitioners to furnish bank guarantee for the remaining amount cannot be sustained and is set aside. Petition allowed - decided in favor of petitioner.

Summary

Issues:
1. Imposition of the condition to furnish a bank guarantee for the remaining due amount while granting bail.
2. Compliance with provisions of the Finance Act, 1994 regarding payment of service tax.
3. Validity of the undertaking given by the counsel on behalf of the petitioners.
4. Applicability of estoppel against the Constitution and Statutes.

Analysis:
1. The judgment concerns the challenge to a condition imposed by the Court below, requiring the petitioners to provide a bank guarantee for the outstanding amount when granting bail. The petitioners were involved in providing taxable services related to loans and were accused of collecting service tax but not remitting it to the Central Government. The Court analyzed the legal provisions and found that the condition imposed was not sustainable, ultimately allowing the criminal petitions and closing any pending applications.

2. The case involved scrutiny of documents showing that the petitioners collected service tax but failed to credit it to the Central Government. The Court discussed the relevant provisions of the Finance Act, 1994, emphasizing the requirement to credit service tax amounts within a specified period. The defense argued that the due time for payment had not arisen as no notice was served as mandated by the Act. The Special Public Prosecutor's submissions were also considered, leading to the conclusion that the condition imposed by the Court below was not justified.

3. The issue of the validity of the undertaking given by the counsel on behalf of the petitioners was raised. The defense relied on a Supreme Court decision highlighting the limitations of lawyers' authority to bind their clients. The Court examined the legal principles governing such undertakings and concluded that the counsel's undertaking did not bind the petitioners, providing a detailed analysis of the relevant legal precedents.

4. The judgment delved into the concept of estoppel against the Constitution and Statutes, citing Supreme Court decisions to support the argument that parties cannot contract out of the benefits conferred by constitutional or statutory provisions. The Court emphasized that fundamental rights and statutory rules prevail over any concessions made in legal proceedings. This analysis informed the decision to set aside the condition imposed based on an undertaking and highlighted the limitations on courts in enforcing such agreements.

In conclusion, the High Court's judgment addressed various legal issues surrounding the imposition of conditions for bail, compliance with tax laws, the authority of legal undertakings, and the limits of estoppel against constitutional and statutory provisions. The detailed analysis provided clarity on each issue, leading to the allowance of the criminal petitions and closure of any pending applications.