ADOPTING COERCIVE MEASURES TO RECOVER SERVICE TAX

[Mr. M. GOVINDARAJAN]

In ‘Tata Teleservices (Maharastra) Limited V. The Ministry of Finance, Department of Revenue and others’ – WP No. 1014/2014, decided on 29.01.2014 [2014 (2) TMI 249 - BOMBAY HIGH COURT] by Bombay High Court, the Commissioner of Service Tax vide his order dated 27.12.2013 directed the petitioner to reverse the CENVAT credit of Rs. 22.28 crores and also pay the applicable interest and penalty. The said order was served on the petitioner on 02.01.2014. The assessee is entitled to file appeal before the Tribunal against the order of Commissioner of Service Tax. As such he is eligible to file appeal within three months from the date of receipt of the order of Commissioner of Service Tax.

In the mean time the Assistant Commissioner, vide his letter dated 22.01.2014 directed the petitioner to comply with the order of Commissioner of Service tax, dated 27.12.2013 within two days from the date of receipt of the said communication otherwise he would take coercive action to recover the said amount from the petitioner. In response to the said communication the petitioner replied to the Assistant Commissioner that they are in the process of filing appeal against the order of Commissioner of Service Tax before CESTAT along with stay application.   Further the petitioner brought to the notice of the Assistant Commissioner about the Circular No.1/2013, dated 01.01.2013 issued by the Central Board of Excise and Customs, Ministry of Finance (Department of Revenue), Government of India. The attention of the Assistant Commissioner was specifically invited to Entry no.4 of paragraph 2, which stipulates that in a situation where no appeal is filed against an order-in-original issued by the Commissioner, the recovery shall be initiated only after expiry of statutory period of 90 days. This is so far the reason that the period of three months is provided for filing an appeal to the Tribunal, from the date of communication of order passed by Commissioner of Service Tax.

Despite the reply filed by the petitioner, the Assistant Commissioner vide his letter dated 23.01.2014 which was served on the petitioner on 27.01.2014, directed to reverse the excess CENVAT credit along with applicable interest and penalty within two days, otherwise coercive proceedings for recovery was threatened.

Against the communications of the Assistant Commissioner, dated 22.01.2014 and 23.01.2014 the petitioner filed a writ petition before the High Court challenging the said two communications. The petitioner submitted the following before the High Court:

• The action of the Assistant Commissioner in seeking to recover the service tax as confirmed by the Commissioner of Service Tax on 27.12.2013 is bad in law since the three months time for filing appeal has not been expired;
• The action of the Assistant Commissioner is not only contrary to the statute but also in breach of circular dated 01.01.2013 issued by the Board;
• The demand on the petitioners by the Revenue Authorities is premature since the petitioner is having right to file appeal within three months from the date of receipt of the order of Commissioner of Service Tax;
• The petitioner is in the process of filing an appeal with the appellate authority against the order of adjudicating authority.

The Revenue contended that the petitioner has not yet filed any appeal before the Tribunal.   Instead of filing appeal before the Tribunal the petitioner approached the High Court which is prohibited. The Revenue contended that the communications issued by the Assistant Commissioner is correct and no interference may be called for.

The High Court heard both sides.   The High Court held that the impugned communications dated 22 January 2014 and 23 January 2014 issued by the  Respondent no.3 Assistant Commissioner of Service Tax insisting that the Petitioner should pay the amounts adjudicated upon by order dated 27 December 2013 is contrary to the provisions of the Finance Act which provides for a period of three months to file an appeal to the Tribunal. In this case, the impugned communications are issued without waiting for the statutory period of three months provided to enable the filing of an appeal and stay application to the Tribunal is over. This is contrary to the circular dated 1 January 2013 issued by CBEC. The impugned communications, to say the least, is high handed. The statute has advisedly provided a period of three months to an assessee to file an appeal before the appellate authority and also obtain a stay. This is with a view to enable the assessee to seek proper advice and considered opinion on the adjudication order before taking a decision and then challenging the adjudication order in appeal proceedings.

The High Court further observed that in case the Revenue is allowed to adopt coercive measures and if the assessee is required to pay the demand immediately, it would lead to injustice to the assessee as his opportunity to obtain a stay order from the appellate authority would stand foreclosed. The inherent right of an appellate authority to stay the order being appealed against would be rendered futile.

The High Court relied on its own decision in ‘Mahindra and Mahindra Limited V. Union of India and others’ – 1959-ELT-505 in which the High Court directed the Revenue to return the amount recovered by encashing bank guarantee of the assessees as it was done before the expiry of three months to file an appeal.

The High Court further observed that the officers are of the State, administering the Finance Act, 1994 and there should be fairness in their approach to the tax payers and acting in accordance with the Rules of law in discharging their functions. The High Court held that the impugned communications are not only in defiance of Circular 1/2013, dated 01.01.2013 but also in breach of statutory provisions which gives a period of three months to enable the aggrieved party to file appeal before the Appellate Authority. The High Court set aside the impugned communications. The High Court further restrained the Revenue from adopting any coercive procedure for recovery of tax dues till the statutory period of three months expires.