2016 (1) TMI 770 - HC - Service Tax

Attachment and seizure by the Service Tax Department for substantial service tax dues not paid - there is no final assessment of the petitioner s duty and penalty liabilities. The petitioner is seeking installments for depositing the amount demanded by the Department, so that the bank accounts which are attached and the godowns of the petitioner which are sealed may be released from such attachment and sealing. - Held that - we are of the opinion that, upon certain conditions, the bank accounts and the godowns of the petitioner can be released from attachment, provided the petitioner deposits a total sum of ₹ 3.54 crores which would include ₹ 2.46 crores already collected by the Department so far. The Department shall release attachment of the bank accounts of the petitioner and remove the seals from the business godowns of the petitioner, on the conditions specified in the order.

Summary

Issues:
Petitioner facing attachment and seizure by Service Tax Department for substantial service tax dues not paid; Petitioner seeking installments for depositing demanded amount to release attached bank accounts and sealed godowns.

Analysis:
The petitioner, facing attachment and seizure by the Service Tax Department due to substantial service tax dues, sought installments to deposit the demanded amount for the release of attached bank accounts and sealed godowns. The Department conducted search operations at the petitioner's premises, where the petitioner acknowledged an outstanding service tax liability of Rs. 3.54 crores for the period between October 2009 and December 2014. The petitioner handed over post-dated cheques totaling Rs. 4 crores towards possible duty and other liabilities, but they were not honored. The petitioner previously filed an application for installments, which was rejected, leading to the current petition.

The petitioner argued that the statement recorded by the Department was under duress, emphasizing that a final assessment of duty, interest, and penalty liabilities had not been conducted. The petitioner contended that a significant amount had already been collected by the Department from the petitioner's deposits and collections from customers, suggesting that the remaining liability would not exceed Rs. 2.88 crores. On the other hand, the Department asserted that the petitioner had not deposited any amount towards service tax for the period in question, despite collecting substantial sums from customers. The Department insisted on the admitted duty liability of Rs. 3.54 crores, with additional interest and penalty liabilities.

After considering the arguments from both sides and reviewing the documents, the Court decided that the bank accounts and godowns could be released from attachment under certain conditions. The petitioner was required to deposit a total of Rs. 3.54 crores, including the amount already collected by the Department. Specific conditions were outlined for the installment payments, including deadlines and consequences for defaults. The Court also mandated the disclosure of all immovable properties owned by the petitioner and restrictions on dealing with such properties until the adjudication proceedings were finalized. The Department was urged to expedite the adjudication process while keeping all rights and contentions of the parties open. The petition was disposed of accordingly.