SERVICE TAX : RECOVERY OF AMOUNT DUE TO CENTRAL GOVERNMENT

[Dr. Sanjiv Agarwal]

SERVICE TAX : RECOVERY OF AMOUNT DUE TO CENTRAL GOVERNMENT

Section 87 was been inserted by Finance Act, 2006 (w.e.f. 18-4-2006) to provide for recovery of any amount due to the Central Government by any one of the following modes, namely:-

a)  the Central Excise Officer may deduct or may require any other Central Excise Officer or any officer of customs to deduct the amount so payable from any money owing to such person which may be under the control of the said Central Excise Officer or any officer of customs, or

b) the Central Excise Officer may require any other person from whom money is due or may become due to such person, or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central Government so much of the money as is sufficient to pay the amount due from such person, or

c) the Central Excise Officer may, on an authorization by Commissioner of Central Excise, in accordance with the rules made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid, or

d) the Central Excise Officer may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business and the said Collector, on receipt of such certificate shall proceed to recover from such person the amount specified thereunder as if it were an arrear of land revenue.

With section 87 in place, recovery provisions are now more comprehensive and tax recovery proceedings and mechanism shall have more power and more rigorous now.

As per sub-clause (a), Central Excise Officer having jurisdiction over the service tax assessee will be empowered to deduct the amount of service tax payable by assessee from any money payable to him by the Government, e.g., refunds due to assessee, other sums payable to assessee by others etc. This is the first recourse that a CEO can take for recovery of sums due. 

As per clause (b), Central Excise Office may require any other persons who presently are or in future will be liable to pay any amount to the service provider, who is in default, to the government instead of paying it to the assessee in default. Thus, the revenue officers shall be empowered to barge into the assessee’s position and recover any amounts receivable by him from his debtors. It would imply that if one has given some loans and advances and has defaulted in any payment to the Department in relation to service tax, he may face a situation where he does not get his loan back and the debtor is asked to pay to the Government on his behalf that will discharge him from his obligation towards the assessee. This clause can work wonders for the Department and create problems for the assessee as the revenue can even ask banks (to encash fixed deposits) or mutual funds (to redeem units) or insurance companies (to pay maturity sums) to the Department and not to the assessee. taxmanagementindia.com

According to clause (c), assessee’s property could be attached (not just provisional attachment as prescribed in Section 73C). This attachment could be of any movable or immovable properties and may be owned by or belonging to or under the control of such assessee or service provider. If at the time of default, assessee is having his relative’s or friend’s property under control, these properties will also be hit by clause (c). Moreover, if somebody is in the business of providing property management services to his clients, such property under control, if taken over will lead to undue harassment of owners of such properties. Such properties- both movable as well as immovable can be detained or sold to realize the amounts due to the Central Government on account of Service Tax. This will be subject to authorization from the Commissioner of Central Excise. The property can be detained until the amount payable is paid and if the amount including cost of distress of keeping the property remains unpaid for a period of thirty days, revenue officer may cause the property to be sold and appropriate the proceeds towards the amounts due including costs and render the surplus, if any to the assessee.\Clause (d) is provision for mundane certification for recovery of dues as arrear of land revenue. Central Government shall prescribe rules for manner of recovery.

The provisions of section 87 are very stringent as they provide unlimited powers to revenue officers to recover the money due from the assessee under the Service Tax provisions. However, the time limit within which such amounts can be recovered has not been stipulated. 

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