2019 (4) TMI 330 - HC - Service Tax

Recovery of arrears in installments - Garnishee proceedings - failure to pay liability towards interest on delayed payment of admitted liability of service tax - attachment of bank accounts - Held that - On plain reading of Section 68, Section 69 and Section 70 of the Finance Act, 1994 and Rule 6 of the Service Tax Rules 1994, it is clear that the liability to pay self-assessed service tax/ admitted tax within the prescribed period is binding on the petitioners as service tax being an indirect tax, the petitioners have already collected such tax from their customer. As the writ petitioners have delayed in making such payment, interest is charged on the petitioners and in such a case, the interest on delayed payment of self-assessed tax/ admitted tax has taken the character of self-assessed tax/admitted tax. The application dated 8th January, 2019 though remains pending before the Commissioner, the Deputy Commissioner of CGST & CX, Kolkata, the respondent no. 3 has rightly issued garnishee notice under Section 87 of the Finance Act, 1994 for non-payment of interest on self-assessed/ admitted service tax. Petition dismissed.

Summary

Issues:
1. Garnishee proceedings initiated for non-payment of interest on delayed service tax.
2. Request for installment payment and release of bank accounts.
3. Applicability of Circular No. 996/3/2015-CX for granting installments.
4. Interpretation of self-assessed tax and admitted tax under the Finance Act, 1994.
5. Obligation to pay self-assessed service tax and interest within prescribed period.
6. Consideration of representation by Commissioner in light of Circular No. 996/3/2015-CX.
7. Issuance of garnishee notice under Section 87 of the Finance Act, 1994.

Analysis:
1. The Deputy Commissioner initiated garnishee proceedings against the petitioners for failing to pay &8377;69,33,281 interest on delayed service tax. The petitioners requested installment payments and release of bank accounts, citing Circular No. 996/3/2015-CX for recovery in installments.

2. The respondents opposed the request, arguing that the circular does not apply to admitted tax. The court noted that admitted tax is self-assessed tax, as per the Finance Act, 1994 and Service Tax Rules, 1994. The liability to pay self-assessed service tax within the prescribed period is binding, with interest charged for delays.

3. The petitioners contended that the Commissioner should consider their representation in line with the circular for installment payments. However, the court found the circular applicable to arrear dues, not self-assessed tax. The garnishee notice issued for non-payment of interest on self-assessed service tax was deemed valid.

4. Ultimately, the court dismissed the writ petition, emphasizing the obligation to pay self-assessed tax and interest on time. The judgment clarified the distinction between self-assessed tax and arrear dues, affirming the validity of the garnishee notice under Section 87 of the Finance Act, 1994.