2013 (2) TMI 38 - HC - Customs

Writ of Mandamus - directing the department to return a sum of ₹ 2 crores collected under coercion during the search conducted at the branch office - Held that - Perusal of the records available,it can be concluded that the collection of ₹ 2 crores by the Department, from the petitioner company, during the search conducted cannot be held to be valid in the eye of law as even though it has been stated, that a sum of ₹ 2 crores had been collected from the petitioner company, volunatiry, in respect of its Service Tax liability, it has not been shown that the petitioner was liable to pay Service Tax to the respondent department, relating to the works being carried on by it, during the course of its business. 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 procedures established by law. As in the present case no such procedures had been followed by the respondent department this Court finds it appropriate to direct the respondents to return the sum of ₹ 2 crores, collected from the petitioner within a period of ten days from the date of receipt of a copy of this order - writ petition allowed - in favour of assessee.

Summary

Issues: Jurisdiction of search, Coercive collection of tax, Validity of tax collection

Jurisdiction of search:
The petitioner, a company registered with Central Excise Service Tax Department in Kolkata and Rayagada, challenged the search conducted by the Coimbatore Commissionerate at its branch office. The petitioner argued that it did not conduct any business within the Coimbatore jurisdiction, and hence, the search was unjustified. The court noted that no works were carried out by the petitioner within the Coimbatore Commissionerate, rendering the search warrant issued by the Additional Commissioner questionable.

Coercive collection of tax:
During the search, a deposition was recorded from one of the directors of the petitioner company under coercion, indicating a payment of Rs. 2 crores to the respondent Department as part of Service Tax arrears. The court emphasized that no tax can be collected without a proper assessment order, highlighting the illegality of coercive tax collection without following due process. The respondent argued that the payment was made to mitigate an offense under Section 73(3) of the Finance Act, 1994, but the court found this argument lacking merit.

Validity of tax collection:
The respondent Department collected Rs. 2 crores from the petitioner voluntarily, claiming it was towards Service Tax liability. However, the court found no evidence to support the petitioner's liability for Service Tax to the respondent department. It reiterated the legal principle that tax collection requires a proper assessment order and adherence to established procedures. As such, the court directed the respondents to return the sum of Rs. 2 crores collected during the search within ten days, deeming the collection invalid in the eyes of the law. The writ petition was allowed, with no costs imposed.