NO TAX COULD BE COLLECTED FROM THE ASSESSEE WITHOUT AN APPROPRIATE ASSESSMENT ORDER

[Mr. M. GOVINDARAJAN]

Section 82 of Finance Act, 1994 deals with the power of search. The said section provides that If the Joint Commissioner of Central Excise has reason to believe that any documents or books or things which in his opinion will be useful for or relevant to any proceeding under this Chapter are secreted in any place, he may authorize any Superintendent of Central Excise to search for and seize or may himself search for and seize, such documents or books or things. The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches, shall, so far as may be, apply to searches under this section as they apply to searches under that Code.

The issue to be discussed in this article is that whether any amount can be recovered from the assessee by the authorities during the course of search with decided case law.

In ‘Chitra Builders P. Limited V. Additional Commissioner of Central Excise & Service Tax, Coimbatore’  2013 (2) TMI 38 - MADRAS HIGH COURT the petitioner was registered with service tax department, Kolkata for the purpose of service tax.   The petitioner was paying the service tax regularly from the date of registration to the department. The petitioner also registered with the Central Excise and Service tax at Rayagada, for the payment of service tax in respect of the works undertaken by it.

During the course of the business the petitioner has executed certain works in the nature of excavation and site clearance for M/s Larsen & Toubro Limited, as the main contractors for the various infrastructural works, which had been entrusted to it. A search warrant had been issued by the Additional Commissioner of the Customs, Central Excise and Service Tax, Coimbatore. The search was conducted at 119 Amaravathy II Street, Gurusamy Nagar, Bharathiar University Post, Coimbatore on 1.3.2012.   On the same date a search has been conducted at the residence of Director of the petitioner company. During the search a deposition had been recorded from one of the Directors under coercion. It is recorded as though a sum of Rs.2 crores was being paid to the Department voluntarily as a part of the arrears of service tax due from the company.

The petitioner filed a claim to the Department to return the sum Rs. 2 crores collected by the Department during the search. The Department rejected the claim against which the petitioner filed the present writ petition before the High Court.   The petitioner submitted the following contentions:

• None of the works had been carried out by the petitioner within the jurisdiction of the Coimbatore Commissionerate;
• The respondent has no jurisdiction to search the premises of the petitioner company or of its Directors;
• The petitioner has not been registered with the Department at Coimbatore;
• There is no liability to pay service tax; therefore the collection of sum of Rs. 2 crores from the petitioner is arbitrary and illegal;
• It is well settled position of law that no tax can be collected from the assessee without a proper assessment order being passed, in accordance with the procedures established by law;

Therefore the petitioner prayed that the sum may be directed to be refunded to the petitioner.

          The Revenue contended the following:

• The petitioner, having collected a huge amount of Rs.17 crores, as service tax, by raising tax invoice, and by enabling the service recipient, namely M/s Larsen & Toubro Limited, to avail the input service credit, does not have the locus standii to claim for the return of the sum of Rs. 2 crores paid by the petitioner voluntarily during the search conducted on 01.03.2013;
• The said amount has been paid by the petitioner to mitigate the offence committed by it under Section 73(3) of the Finance Act, 1994;
• The present petition is devoid of merits and therefore, it is liable to be dismissed.

The High Court was of the considered view that the collection of Rs.2 crores by the Revenue from the petitioner during the search conducted on 1.3.2012 cannot be held to be valid in the eye of the law. Even the amount has been collected voluntarily in respect of service tax liability it has not been shown by the Revenue that the petitioner was liable to pay service tax to the Department relating to the works being carried on by it during the course of its business. The High Court further held that it is a well settled position in law that no tax could be collected from the assessee, without an appropriate assessment order being passed by the authority concerned and by following the procedure established by law.   No such procedure had been followed by the Department while collecting the sum of Rs. 2 crores, from the petitioner.   In such circumstances the Court found it appropriate to direct the Department to return the said sum of Rs.2 crores within a period of 10 days from the date of receipt of the copy of the order.