2018 (10) TMI 1563 - HC - Service Tax

Recovery of service tax dues from the first charge on the property - attachment of property - Section 88 of Finance Act, 1994 - the present petitioner has purchased the asset of respondent No.4 from respondent No.5 SICOM Ltd. which is established by Government of Maharashtra and is a deemed State Financial Corporation as per Section 46 of the State Financial Corporation Act, 1951 - Proviso to Section 87(c) of the Finance Act, 1994. Held that - It is not in dispute that the business of the respondent No.4 M/s. Ujjain Treasure Bazar Ltd. Indore had been taken over by the petitioner M/s Future Market Networks Ltd. Mumbai on as is where is and what is basis according to the Tri-Party Settlement Order issued by DRT, Mumbai vide order dated 30/07/2014. In these circumstances, the acquisition by the petitioner is not limited to immovable property only but they also acquired entire running business of the respondent No.4 and, therefore the plea of petitioner that they had not taken over the business / liabilities of the respondent No.4 does not appear to be correct. It is an admitted fact that entire business of the respondent No.4 has been transferred to the petitioner and Ujjain Treasure Bazar Mall was under the control and possession of the petitioner. The properties, which were subject to mortgage has been transferred in favour of the petitioner by a consent decree. As per Clause 1(d) and 1(k), the petitioner has virtually taken over the entire business, which they are running since 2013 and, therefore, Section 87(c) applies with full force. The Finance Act and Clause 1(d) and 1(k) Memorandum of Understanding (MoU) are very clear and specific. The transactions so been entered between the parties is covered by Section 87(c) of the Service Tax Act - In the case in hand, as per proviso to Section 87(c) of the Finance Act and Clause (d) and (k) of MoU dated 01.07.2013, the Department is empowered to recover the dues of service tax of respondent No.4 from the present petitioner, who had purchased the mortgaged property of the respondent No.4 from respondent No.5 by a consent decree. Petition dismissed - decided against petitioner.

Issues Involved:
1. Quashment of demand notice and order of attachment.
2. Liability of the petitioner for the service tax dues of the respondent No.4.
3. Applicability of Section 87(c) and Section 88 of the Finance Act, 1994.
4. Transfer and control of the business and property.
5. Opportunity of hearing and procedural fairness.

Detailed Analysis:

1. Quashment of Demand Notice and Order of Attachment:
The petitioner sought the quashment of the demand notice dated 31/01/2017 and the order of attachment dated 4/03/2017 issued by the respondents. The petitioner argued that they had not taken over the liabilities of respondent No.4 and thus were not responsible for the service tax dues.

2. Liability of the Petitioner for the Service Tax Dues of the Respondent No.4:
The court noted that the business of respondent No.4 had been taken over by the petitioner on an "as is where is and what is" basis according to a Tri-Party Settlement Order issued by the DRT, Mumbai. Thus, the acquisition by the petitioner was not limited to immovable property but included the entire running business of respondent No.4. Consequently, the petitioner was liable for the service tax dues.

3. Applicability of Section 87(c) and Section 88 of the Finance Act, 1994:
Section 87(c) allows the Central Excise Officer to distrain any movable or immovable property belonging to or under the control of the defaulter for recovering dues. The proviso to Section 87(c) extends this power to the successor of the business. Section 88 establishes that the liability under the Act is the first charge on the property, save as otherwise provided in specific acts. The court held that the provisions of Section 87(c) and Section 88 applied to the petitioner, who had taken over the business and property of respondent No.4.

4. Transfer and Control of the Business and Property:
The court found that the entire business of respondent No.4 had been transferred to the petitioner, and the Ujjain Treasure Bazar Mall was under the control and possession of the petitioner. The properties subject to mortgage had been transferred to the petitioner by a consent decree. Hence, the petitioner had virtually taken over the entire business, making Section 87(c) applicable.

5. Opportunity of Hearing and Procedural Fairness:
The petitioner contended that the demand notice and order of attachment were issued without affording an opportunity of hearing. However, the court observed that multiple opportunities were provided to the petitioner and respondent No.4 before initiating action under Section 87(c). The court concluded that the procedural requirements were met.

Conclusion:
The court dismissed the writ petition, stating that the demand notices and order of attachment had merit. The petitioner was liable for the service tax dues of respondent No.4, and the actions taken by the respondents were in accordance with the provisions of the Finance Act, 1994. The court upheld the applicability of Section 87(c) and Section 88, confirming the liability of the petitioner for the dues.

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