2021 (6) TMI 376 - HC - Service Tax

Maintainability of petition - compliance with the requirement of pre-deposit - HELD THAT - It is undisputed fact that petitioner has filed an appeal before First Appellate Authority against the assessment order, whereby demand was created. It is also undisputed that Board Circulars are binding on department and as per Circular coercive measures for recovery of balance liability are not permissible if appeal is filed alongwith mandatory pre-deposit of 7.5%. The contention of the respondent that petitioner must file appeal before Appellate Authority seems to be highly technical, in view of the fact that petitioner has already filed an appeal against the assessment order whereby demand was created and tax liability intended to be recovered stands stayed in view of Board Circular dated 16.09.2014. Petition allowed.

Summary

Issues:
Quashing of order attaching bank account under Section 87(c) of the Finance Act, 1994 | Demand of service tax confirmed by Assessment Order | Benefit under Amnesty Scheme | Extension of limitation period for appeal | Coercive recovery proceedings | Applicability of Board Circulars | Maintainability of writ petition vs. appeal before Appellate Authority

Analysis:

The petitioner, a Private Limited Company, sought the quashing of an order attaching its bank account under Section 87(c) of the Finance Act, 1994, based on a demand of service tax confirmed by an Assessment Order. The demand arose from commissions received on account of incentive/sale promotion, deemed liable to service tax under Business Auxiliary Services, for the periods 2014-15 to 2016-17. The petitioner, registered with the Service Tax Department, failed to deposit the assessed tax under the Amnesty Scheme, rendering the declaration meaningless. Subsequently, the respondent initiated recovery proceedings by attaching the petitioner's bank account.

Taking advantage of an extension of the limitation period by the Supreme Court, the petitioner filed an appeal before the First Appellate Authority against the assessment order. The petitioner contended that coercive recovery proceedings were improper, citing a Circular by the Central Board of Excise & Customs and a judgment of the Bombay High Court in a similar matter.

The respondent did not dispute the factual and legal positions but argued that the impugned order was appealable, making the writ petition not maintainable. However, the High Court found that the petitioner had already filed an appeal with the mandatory pre-deposit, as required under the Circular, which stayed the tax liability intended to be recovered. The Court noted that the respondent should have refrained from coercive recovery upon learning of the appeal with the pre-deposit. Consequently, the Court rejected the respondent's contention and set aside the impugned order, directing the respondents to allow the petitioner to operate its bank account.

In conclusion, the Court allowed the petition, emphasizing the stay on the recovery proceedings due to the filed appeal with the mandatory pre-deposit, in line with the Circular's provisions and the precedent set by the Bombay High Court.