Once the Assessee has filed an appeal by paying the mandatory pre-deposit amount of 7.5%, their bank account cannot be freeze

[Bimal jain]

Dear Professional Colleague,

“Once the Assessee has filed an appeal by paying the mandatory pre-deposit amount of 7.5%, their bank account cannot be freeze”

We are sharing with you an important judgment of Hon’ble CESTAT, Mumbai, in the case of Kala Mines and Minerals Vs. Commissioner of Customs, Central Excise and Service Tax, Goa [2015 (2) TMI 195 - CESTAT MUMBAI] on the following issue:

Issue:

Whether the Department can freeze the bank account of Assessee when appeal has already been filed by paying the mandatory pre-deposit amount of 7.5%?

Facts and background:

In the instant case, an Order was passed by the Ld. Commissioner, Goa confirming Service tax liability on Kala Mines and Minerals (“the Appellant”). Being aggrieved by the said Order, the Appellant preferred an appeal before the Hon’ble CESTAT, Mumbai by making a pre-deposit of 7.5% of the Service tax demand confirmed in terms of Section 35F of the Central Excise Act, 1944 (“the Excise Act”).

Despite of such compliance, the Deputy Director, DGCEI, Goa has written a letter to Appellant’s bankers namely HDFC, SBI and Corporation Bank to remit the amounts lying balance in the account of the Appellant in order to credit the same with the Government exchequer against the dues. Pursuant to the said communication, the banks froze the accounts and were not allowing the Appellant to operate the accounts for their day-to-day activities/ functioning.

Being aggrieved, the Appellant made a plea before the Hon’ble Tribunal.

Held:

On listing of the matter before the Hon’ble Tribunal on January 19, 2015, the Hon’ble Tribunal held that once statutorily mandatory deposit of 7.5% has been made, there is no reason for recovery of any further amount from the Appellant and the action of the Deputy Director, DGCEI seems to be beyond the scope of law. Hence, there is no need to freeze the account of the Appellant as long as the appeal is pending before the CESTAT.

Accordingly, the Hon’ble Tribunal directed the lower authorities, especially the Deputy Director, DGCEI, Goa to defreeze the account forthwith by issuing appropriate instructions to the Appellant's bankers.

Our Comments:

The Central Board of Excise and Customs vide Circular No. 984/08/2014-CX dated September 16, 2014 clarified that no coercive measures for the recovery of balance amount i.e., the amount in excess of 7.5% or 10% deposited in terms of Section 35F of the Excise Act or Section 129E of the Customs Act, 1962 shall be taken during the pendency of appeal where the Assessee shows to the Jurisdictional Authorities:

(i) Proof of payment of stipulated amount as pre-deposit of 7.5% / 10%, subject to a limit of ₹ 10 crores , as the case may be; and

(ii) Copy of appeal memo filed with the Appellate Authority.

It was further provided that recovery action, if any, can be initiated only after the disposal of the case by the Commissioner (Appeals)/ Tribunal in favour of the Department unless the order of the Tribunal is stayed by the High Court/ Supreme Court.

The recovery, in such cases, would include the interest, at the specified rate, from the date duty became payable, till the date of payment.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks and Best Regards,

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)

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