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2015 (5) TMI 300 - BOMBAY HIGH COURT

2015 (5) TMI 300 - BOMBAY HIGH COURT - 2015 (38) S.T.R. 907 (Bom.) , [2015] 82 VST 280 (Bom) - Recovery of service tax without making assessment - Whether, without there being any adjudication in any of the proceedings as provided under Chapter 5 of the Finance Act, 1994 coercive steps can be taken by the Revenue, for recovery of service tax or penalty or interest - Held that:- The benefit that the assessee would get by voluntarily paying service tax under the scheme provided is that he would be .....

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assessee is again having an option to pay service tax in full or in part, as he may accept to be the amount of tax chargeable or erroneously refunded alongwith interest payable thereon under section 75 and penalty provided therein. It further appears that under the said provision the assessee would be entitled to the benefit, in as much as maximum penalty that would be leviable is only 25 per cent, whereas otherwise it would be 50 per cent. Again under the said provision, the Central Excise Off .....

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e, in so far as disputed amount is concerned, determination as required under subsection 2 of section 73 is required to be done. By now it is settled principle of law that when a law requires a particular things to be done, in a particular manner, it has to be done in that manner alone and not at all. - If the Statute permits an authority to make a demand on the basis of the preliminary assessment made by it, even prior to there being adjudication, the matter would have been different. - Th .....

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however, with previous approval of the Commissioner of Central Excise. However, at the same time, the law enforcers cannot be permitted to do something which is not permissible within the four corners of law. - Impugned communication which demands the Petitioner to make payment of the interest and also threatens them that in the event the said payment of interest is not made, coercive action under Section 87 would be taken against them, would not be sustainable in law. - impugned action is n .....

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1. Rule. Rule made returnable forthwith. Heard by consent of the parties. 2. A short question that falls for consideration in the present petition is, as to whether, without there being any adjudication in any of the proceedings as provided under Chapter 5 of the Finance Act, 1994 (hereinafter referred to as "the said Act") coercive steps can be taken by the Revenue, for recovery of service tax or penalty or interest. 3. The undisputed facts which give rise to filing of the present Pet .....

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ich could be in the nature of membership fee etc. It is further contended that the issuing bank issues a monthly billing statement to the customer as per the pre-defined billing cycle. According to the Petitioner, the issuing bank pays service tax on the various fees and charges collected from the cardholder. According to the scheme, the acquiring bank is the bank with which the Merchant Establishment has a contract to honour the credit cards by using its infrastructure. The acquiring bank makes .....

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ch has been agreed to be paid by the Merchant Establishment to the acquiring bank for receiving payment against the use of the credit card at its establishment. The acquiring bank pays service tax on the gross MSF collected from Merchant Establishment. After making the payment to the Merchant Establishment, the acquiring bank submits the transaction details to the Card Association (viz. VISA/Master Card) for settlement of the dues including the merchant service fees. The Card Association then su .....

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er contention of the Petitioner that on the basis of the communication addressed by the Revenue Authorities, the payments have been made by the Petitioner albeit under protest. It is the case of the Petitioner that though they are not liable to pay service tax on interchange fees, under duress and coercion, they have paid the said tax. It is submitted that though from the communications placed on record, it is clear that taking into consideration the complicity of the transactions, guidance was .....

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he liability of the Petitioner to pay the service tax on interchange fees is not decided by the respondent authorities, the Petitioner is coerced to make payment towards service tax as well as the interest on the delayed payment. The learned Senior Counsel submits that on the demand made by the respondent authorities, service tax was paid under protest. It is categorically submitted by the learned Senior Counsel that in the return filed by the Petitioner for the relevant years, the petitioner ha .....

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, the Petitioner is not liable to discharge its liabilities, as required, as per the provisions of the said Act. It is further contended that unless there is an adjudication under Section 73 of the said Act, no amount can be said to be due to revenue, so as to permit them to take coercive action under Section 87 of the said Act. 7. The learned Senior Counsel relies on the Judgment of the Constitution Bench of the Apex Court in the case of State of Rajasthan v/s. Ghasilal reported in AIR 1965 SC .....

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& ors., decided on 16/12/2014 arising out of almost similar facts. 8. Learned Senior Counsel submits that unless the liability of the Petitioner to pay either tax or interest is determined, the Petitioner cannot be coerced by taking recourse to Section 87 of the said Act to make payment. The learned Senior Counsel further submits that if the respondent authority adjudicates as to the liability of the Petitioner, the Petitioner cannot run away with the liability to make payment, subject to st .....

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essee understanding the law, as laid down by the learned Tribunal, has himself paid the taxes. It is therefore, submitted that the assessee having admitted the liability to pay the service tax, cannot be heard to run away from the liability to pay the interest charges. The learned Counsel submits that the Petitioner is not filing refund application, as is provided to them under Section 11B of the Central Excise Act, 1944. It is submitted that this is being done with dishonest intention by not pa .....

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ched this Court. 10. The learned Counsel further submits that in case of Petitioner, there has been adjudication in so far as the liabilities of the Petitioner for a period post 2006 is concerned and as such when there is adjudication in the case of Petitioner itself, no errors could be found with the action taken by the respondent in taking recourse to section 87 of the said Act. He submits that the Petitioner having paid the service tax for the relevant period, the amount of interest is an amo .....

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of the department, the Petitioner having paid service tax, it does not now fall in the mouth of the Petitioner, to contend that they are not liable to pay the interest on delayed payment. 12. At the outset, though Shri Shridharan strenuously argued in support of his submission, as to how the Petitioner is not liable to pay service tax on the interchange service fees, we do not find it necessary to go into that aspect. We are of the considered view that in so far as the liability of the Petition .....

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ible in law or not. 14. For appreciating rival controversies, it will be necessary to refer to certain provisions of Chapter 5 of the Finance Act, 1994, by virtue of which, provisions of Service Tax came to be introduced for the first time. Section 66A is charging section. Since we have already observed that we do not find it necessary to go into the question as to whether contention of the Petitioner that the Petitioner is not liable to pay service charges on "interchange fees", it wi .....

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be paid by such person and in such manner as may be prescribed at the rate specified at the rate specified in section 66 and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service. Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the r .....

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urn in such form and in such manner and at such frequency as may be prescribed.] 70. Furnishing of Returns (1) Every person liable to pay the service tax shall himself assess the tax due on the services provided by him and and shall furnish to the Superintendent of Central Excise, a return in such form and in such manner and at such frequency [and with such late fee not exceeding 6[twenty thousand rupees], for delayed furnishing of return, as may be prescribed.] [(2) The person or class of perso .....

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oduce such accounts, documents or other evidence as he may deem necessary and after taking into account all the relevant material which is available or which he has gathered, shall by an order in writing, after giving the person an opportunity of being heard, make the assessment of the value of taxable service to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment. 72A. Special audit (1) If the Commissioner of Centr .....

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e; or (b) by means of fraud, collusion, or any willful misstatement or suppression of facts; or (iii) has operations spread out in multiple locations and it is not possible or practicable to obtain a true and complete picture of his accounts from the registered premises falling under the jurisdiction of the said Commissioner, he may direct such person to get his accounts audited by a chartered accountant or cost accountant nominated by him, to the extent and for the period as may be specified by .....

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pay tax shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit under sub-section (1) and proposed to be utilised in any proceeding under the provisions of this Chapter or rules made thereunder. Explanation: For the purposes of this section,- (i) "chartered accountant" shall have the meaning assigned to it in clause (b) of sub-section (1) of section 2 of Chartered Accountants Act, 1949 (38 of 1949); (ii) "cost accountant" sha .....

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tax which has not been levied or paid or which has been short-levied or short-paid or the person to whom such tax refund has been erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. PROVIDED that where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of - (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of .....

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as the case may be. [(1A) Notwithstanding anything contained in sub-section (1), (except the period of eighteen months of serving the notice for recovery of service tax), the Central Excise Officer may serve, subsequent to any notice or notices served under that sub-section, a statement, containing the details of service tax not levied or paid or short-levied or short-paid or erroneously refunded for the subsequent period, on the person chargeable to service tax, then, service of such statement .....

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such person shall pay the amount so determined. ([2A)Where any appellate authority or tribunal or court concludes that the notice issued under the proviso to sub-section (1) is not sustainable for the reason that the charge of,- (a) fraud; or (b) collusion; or (c) wilful misstatement; or (d) suppression of facts; or (e) contravention of any of the provisions of thisChapter or the rules made thereunder with intent to evade payment of service tax. has been established against the person chargeabl .....

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een made, may pay the amount of such service tax, chargeable or erroneously refunded, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the [Central Excise Officer] of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid. PROVIDED that the [Central Exci .....

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terest under section 75 shall be payable on the amount paid by the person under this sub-section and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the [Central Excise Officer] but for this sub-section. [Explanation 2]: For removal of doubts, it is hereby declared that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of service-tax under this sub-section .....

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, where during the course of any audit, investigation or verification, it is found that any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, but the true and complete details of transactions are available in the specified records, the person chargeable to service tax or to whom erroneous refund has been made, may pay the service-tax in full or in part, as he may accept to be the amount of tax chargeable or erroneously refunded along with int .....

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deemed to have been concluded. PROVIDED that the Central Excise Officer may determine the amount of service tax, if any, due from such person, which in his opinion remains to be paid by such person and shall proceed to recover such amount in the manner specified in sub-section (1). Explanation: For the purposes of this sub-s and section 78, "specified records" means records including computerised data as are required to be maintained by an assessee in accordance with any law for the ti .....

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t of cases falling under the proviso to sub-section (1) or the proviso to sub-section (4A);] (5) The provisions of sub-section (3) shall not apply to any case where the service tax had become payable or ought to have been paid before the 14th day of May, 2003. (6) For the purposes of this section, "relevant date" means, - (i) in the case of taxable service in respect of which service tax has not been levied or paid or has been short-levied or short-paid - (a) where under the rules made .....

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sionally assessed under this Chapter or the rules made there under, the date of adjustment of the service tax after the final assessment thereof; (iii) in a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund.] 73C. Provisional attachment to protect revenue in certain cases (1) Where, during the pendency of any proceeding under section 73 or section 73A, the Central Excise Officer is of the opinion that for the purpose of protecting the interests o .....

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(1): PROVIDED that the Chief Commissioner of Central Excise may, for reasons to be recorded in writing, extend the aforesaid period by such further period or periods as he thinks fit, so, however, that the total period of extension shall not in any case exceed two years.] 75. Interest on delayed payment of service tax Every person, liable to pay the tax in accordance with the provisions of section 68 or rules made there under, who fails to credit the tax or any part thereof to the account of th .....

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of the financial years covered by the notice or during the last preceding financial year, as the case may be, such rate of interest, shall be reduced by three per cent. per annum] [76. Penalty for failure to pay service tax Any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under this Chapter, who fails to pay such tax, shall pay, in addition to such tax and the interest on that tax amount in accordance with the provisions of section 75, a pe .....

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vice tax payable. [87 Recovery of any amount due to Central Government.- Where any amount payable by a person to the credit of the Central Government under any of the provisions of this Chapter or of the rules made thereunder is not paid, the Central Excise Officer shall proceed to recover the amount by one or more of the modes mentioned below:- (a) the Central Excise Officer may deduct or may require any other Central Excise Officer or any officer of customs to deduct the amount so payable from .....

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e, not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount; (ii) every person to whom a notice is issued under this section shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other .....

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may, on an authorisation by the Commissioner of Central Excise, in accordance with the rules made in this behalf, distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the procee .....

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s succeeded in such business or trade by any person, all goods, in the custody or possession of the person so succeeding may also be attached and sold by such officer empowered by the Central Board of Excise and Customs, after obtaining the written approval of the Commissioner of Central Excise, for the purpose of recovering such service tax or other sums recoverable or due from such predecessor at the time of such transfer or otherwise disposal or change.] (d) the Central Excise Officer may pre .....

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equired to pay service tax at the rate specified in Section 66 in such manner and within such period, as may be prescribed. sub-section 2 which is a non-abstante clause provides that the service tax in respect of such taxable service, as may be notified by the Central Government shall be paid by such a person in such a manner, as may be prescribed at the rate specified in Section 66 and all provisions of the said Chapter shall apply to such person as if he is the person liable for paying the ser .....

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ithin such time and in such manner and in such form, as may be prescribed, make an application for registration to the Superintendent of Central Excise. sub-section 2 there of provides that the Central Government may, by notification in the Official Gazette, specify such other person or class of persons, who shall make an application for registration within such time and in such manner and in such form, as may be prescribed. 17. Section 70 deals with furnishing of returns. sub-section thereof pr .....

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endent of Central Excise, a return in such form and in such manner and at such frequency, as may be prescribed. 18. Section 72 of the said Act provides for best judgment assessment. It provides that if any person liable to pay service tax, fails to furnish the return under Section 70, or having made a return, fails to assess the tax in accordance with the provisions of this Chapter or rules made thereunder, the Central Excise Officer, may require the person to produce such accounts, documents or .....

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that if the Commissioner of Central Excise, has reasons to believe that any person liable to pay service tax has failed to declare or determine the value of a taxable service correctly; or has availed and utilised credit of duty or tax paid, which is not within the normal limits having regard to the nature of taxable service provided etc. or by means of fraud, collusion, or any willful misstatement or suppression of facts; or has operations spread out in multiple locations and it is not possible .....

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duly signed and certified by him to the said Commissioner mentioning therein such other particulars as may be specified by him. sub-section 4 of said section provides that the person liable to pay tax shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit under sub-section (1) and proposed to be utilised in any proceeding under the provisions of the said Chapter or rules made thereunder. 20. Section 73 of the said Act deals with the recovery of .....

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een erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice. The proviso thereto increases the limitation period to 5 years instead of 18 months in case of fraud or collusion or willful misstatement or suppression of facts or contravention of any of the provisions of this Chapter or of the rules made thereunder with intent to evade payment of service tax. The explanation thereto provides that the period during which the service of notice is sta .....

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des that then service of such statement shall be deemed to be service of notice on such person, subject to the condition that the grounds relied upon for the subsequent period are same as are mentioned in the earlier notices. sub-section 2 of the said section provides that the Central Excise Officer shall after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of service tax due from, or erroneously refunded to, such p .....

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, on the basis of his own ascertainment thereof, or on the basis of tax ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of such service tax, and inform the Central Excise Officer of such payment in writing, who on receipt of such information shall not serve any notice under sub-section (1) in respect of the amount so paid. The proviso thereto provides that the Central Excise Officer may determine the amount of short payment of service tax .....

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lso on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the Central Excise Officer, but for this sub-section. The explanation 2 further provides that no penalty under any of the provisions of this Act or the rules made thereunder shall be imposed in respect of payment of service-tax under the said sub-section and interest thereon. 22. Perusal of sub-section 4 of the said section would reveal that in case of eventualities mentioned th .....

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om erroneous refund has been made, may pay the service-tax in full or in part, as he may accept to be the amount of tax chargeable or erroneously refunded alongwith interest payable thereon under Section 75 and penalty equal to one per cent of such tax, for each month, for the period during which the default continues, upto a maximum of twentyfive per cent. of the tax amount before service of notice on him and inform the Central Excise Officer of such payment in writing, who on receipt of such i .....

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f the Act provides that the Central Excise Officer shall determine the amount of servicetax due under subsection( 2) within six months from the date of notice where it is possible to do so, in respect of cases whose limitation is specified as 18 months. In the rest of the cases, it is required to be done within one year. 25. Subsection 5 would not be relevant for the purpose of this petition in as much as it deals with the situation prior to 14th May, 2003. Subsection 6 provides as to what would .....

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ssing order in writing and with the previous approval of the Commissioner of Central Excise. 27. Section 75 deals with interest on delayed payment of service tax. The said section provides that a person who is liable to pay tax in accordance with the provisions of section 68 or rules made thereunder, fails to credit the tax or any part thereof to the account of the Central Government within the period prescribed, shall pay simple interest at such rate not below 10 per cent, and not exceeding 36 .....

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st, shall be reduced by three per cent per annum. 28. Section 76 deals with penalty for failure to pay service tax. It provides that any person, liable to pay service tax in accordance with the provisions of section 68 or the rules made under the said Chapter, who fails to pay such tax, shall pay, in addition to such tax and the interest on the tax in accordance with the provisions of section 75, a penalty which shall not be less than one hundred rupees for every day during which such failure co .....

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rson to the credit of the Central Government under any of the provisions of the said Chapter or of the rules made thereunder is not paid, the Central Excise Officer shall proceed to recover the amount by one or more of the modes mentioned therein. Various modes of recovery are provided including the recovery of land revenue, causing movable or immovable property to be sold. 30. Perusal of the aforesaid provisions would reveal that the same are complete Code in the matter of imposition of service .....

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pecified in Section 66 in such manner and within such period as may be prescribed. Not only that the person who is liable to pay service tax is required to himself assess the tax due on the services provided by him and is required to furnish to Superintendent of Central Exercise, return in such form and in such a manner and within such period as is prescribed. Section 72 provides that a person who is liable to pay service tax and who is required to file return, if he fails to file the return or .....

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equired to make assessment of the value of taxable service, to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment. 31. Section 72A would not be of much relevance for the purpose of this Petition in as much as the Commissioner of Central Excise is empowered to direct the person who is liable to pay service tax to get his account audited by chartered accountant or cost accountant nominated by the Commissioner, if the .....

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rson, in any proceedings under the said act. 32. Section 73 of the said Act will be most relevant for the purpose of the present petition. The said provision enables the Central Excise Officer to serve notice on the person chargeable with the service tax within 18 months from the relevant date, where any service tax has not been levied or paid or shortlevied or short paid or erroneously refunded, requiring him to show cause why he should not pay the amount specified in the notice. Proviso theret .....

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by the person to whom notice is served and determine the amount of service tax due or erroneously refunded and thereupon such person is required to pay the amount so determined. Subsection 3 thereto deals with the situation where the assessee may voluntarily pay the amount of service tax on the basis of the tax ascertained by the Central Excise Officer or on the basis of his own assessment thereof before the service of notice in respect of the such service tax and in such eventuality, inform the .....

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at the interest as required under Section 75 is required to be payable on the amount paid by the person under said subsection and also on the amount of short payment of service tax or erroneously refunded service tax, if any, as may be determined by the Central Excise Officer but for the said subsection. However, it would be clear from the explanation2 that a person who pays tax and the interest in accordance with the options available to him under the said subsection, is saved from the rigours .....

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correct levy can be ascertained. While paying the tax voluntarily under the said provision, the assessee will also have to pay interest under Section 75 and penalty for each month for the period during which default continued, however upto a maximum of 25 per cent of the tax amount. Even in such eventuality, if an assessee informs the Central Excise Officer of such payment in writing, on receipt of such information, the Central Excise Officer shall not serve any notice under subsection (1) in r .....

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pecified in section 66. The Statute mandates every person who is liable to pay service tax, to assess the tax himself, due on the services provided by him. The Statute casts a duty upon a person who is liable to pay service tax, to himself assess the tax due on the services provided by him and submit to the Superintendent of Central Excise, a return in such form as prescribed. Section 72 enables the Central Excise Officer in case of person who fails to furnish return under section 70 or having m .....

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e best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment. It can thus be seen that the scheme provides that a person who is liable to pay the service tax is required to pay service tax himself on the basis of assessment made by him and furnish a return to the Superintendent of Central Excise. The Central Excise Officer in case such a return is filed or even if when no such return is filed, is empowered to assess the value .....

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sessee. 34. The provisions of section 73 would come into play when the service tax is not levied or paid or shortlevied or shortpaid or erroneously refunded. In this situation, the Central Excise Officer would be empowered to serve notice on the person chargeable with the service tax which has not been levied or paid or which has been shortlevied or shortpaid or erroneously refunded, within 18 months and may call upon him to show cause as to why he should not pay the amount specified in the noti .....

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n 3 and subsection 4A provide for the situation in which the assessee voluntarily makes payment of service tax. Subsection 3 deals with the situation wherein the assessee is entitled to pay the service tax as per either his own assessment or as per the assessment ascertained by the Central Excise Officer, before service of notice under subsection (1). It provides that if such a payment is made, notice under subsection (1) will not be issued to the assessee in respect of the amount paid. However, .....

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thereon. Similarly, subsection 4A would deal with the situation wherein in the course of any audit, investigation or verification, it is found that service tax is not levied or paid or shortlevied or shortpaid or erroneously refunded. The said subsection would deal with an eventuality when true and complete details of transactions are available in the specified records. In this case, an assessee is again having an option to pay service tax in full or in part, as he may accept to be the amount of .....

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by the assessee has not been paid fully and more amount is due and payable by him. 35. It would thus clearly reveal that provisions of section 72 and 73 involve complete adjudicatory process. Under section 72 the Central Excise Officer is required to assess value of taxable services to the best of his judgment and determine the sum payable by the assessee or refundable to the assessee on the basis of such assessment. The said power can be exercised by the Central Excise Officer in either of the .....

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ise Officer is empowered to serve notice on the person chargeable with the service tax, requiring him to showcause why he should not pay the amount specified in the notice. Subsection 2 thereof empowers the Central Excise Officer to determine the amount of service tax due from or erroneously refunded to such person and thereupon requiring such person to pay the amount so determined. However, prior to that, the Central Excise Officer is required to consider representation, if any, made by the ass .....

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s himself from the rigours of penalty. In the first case, no penalty is leviable whereas in the second case penalty is leviable only to the maximum extent of 25 per cent as against 50 per cent in the normal case. Again in either of these eventualities, if the Central Excise Officer is of the opinion that the service tax has not been paid as per the liability which is cast upon such an assessee, again the said Central Excise Officer is empowered to conduct an enquiry as provided under subsection .....

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ice tax, which is disputed by him and not paid is the procedure as required under subsection 1 and 2 is required to be followed. It could thus be seen that prior to determination of the amount of service tax due from assessee or erroneously refunded to such person, an enquiry as contemplated either under the provisions of Section 72 or subsection 1 and subsection 2 of section 73 is required to be conducted. The amount of tax shall be payable, only after the determination by authority either unde .....

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either being heard or represented. 37. The Constitution Bench of the Apex Court in the case of State of Rajasthan (supra) had an occasion to consider the provisions of section 7 and 16 of the Rajasthan Sales Tax Act. It was contended on behalf of the Petitioner therein that imposition of penalty in respect of certain periods was not sustainable in law. The Hon'ble High Court accepted the contention of the assessee. The Hon'ble High Court had allowed the Writ Petition. Being aggrieved the .....

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of the words 'time allowed' but we need not decide in this case whether the words 'time allowed' connote time allowed by an assessing authority or time allowed by a provision in the Rules or the Act, or all these things, as we are of the view that no tax was due within the terms of s. 16(1) (b) of the Act. Section 3, the charging section, read with s. 5, makes tax payable, i.e., creates a liability to pay the tax. That is the normal function of a charging section in a taxing stat .....

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ce of section 7(2), unless a return is filed without depositing the tax due on the basis of the return, and as no return was filed earlier than 18th December, 1959, there had been no violation of the requirements of Section 7(2). It was further contended that no further tax was due till assessment is made under Section 10 of the Act. However, it was contended by the learned Advocate General, that the tax becomes due because of the charging sections of the Act i.e. section 3 with section 5. It wa .....

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the assessee under Section 7(2), no tax can be said to be due within section 16(1)(b) of the Act, for till then there is only a liability to be assessed to tax. 38. The Apex Court again in the case of Harshad Shantilal Mehta v/s. Custodian & ors. reported in (1998) 5 SCC 1 had an occasion to consider the following question amongst others. "(1) What is meant by revenues, taxes, cesses and rates due? Does the word "due" refer merely to the liability to pay such taxes etc., or do .....

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er alia, as: "Owing; payable; justly owed. ..... Owed, or owing, as distinguished from payable. A debt is often said to be due from a person where he is the party owing it, or primarily bound to pay, whether the time for payment has or has not arrived. ..... The word due' always imports a fixed and settled obligation or liability, but with reference to the time for its payment there is considerable ambiguity in the use of the term, the precise signification being determined in each case .....

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;s Law Lexicon, 14th Edn. at page 365 defines 'due' as anything owing. It has the following comment: "It should be observed that a debt is said to be due the instant that it has existence as a debt; it may be payable at a future time". 21. Our attention has been drawn to Section 530(1)(a) of the Companies Act where the language used in "taxes, cesses and rates due and payable" and Section 61(1)(a) of the Provincial Insolvency Act, 1920 which refers to all debts due to .....

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under Section 7(2), no tax can be said to be due. For till then there is only a liability to be assessed to tax. A similar view was taken by this Court in its later decision in Associated Cement Co. Ltd. v. Commercial Tax Officer, Kota & Ors. (1981 (48) S.T.C. 466 at page 480) holding that until the tax payable is ascertained by the Assessing Authority or by the assessee, no tax can be said to be due; for till then there is only a liability to be assessed to tax. 22. The Federal Court in the .....

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liability, that is the part of the stature which determines what persons in respect of what property are liable. Next, there is the assessment. Liability does not depend on assessment, that ex hypothesi has already been fixed. But assessment particularizes that exact sum which a person liable has to pay. Lastly, come the methods of recovery if the person taxed does not voluntarily pay." (See in this connection, Kalwa Devadattam and Ors. v. Union of India and Ors. (1963 (49) ITR 165, 171); .....

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e to be actually paid out. Therefore, the phrase 'taxes due' cannot refer merely to a liability created by the charging section to pay the tax under the relevant law. It must refer to an ascertained liability for payment of taxes quantified in accordance with law. In other word, taxes as assessed which are presently payable by the notified person are taxes which have to be taken into account under Section 11(2)(a) while distributing the property of the notified person. Taxes which are no .....

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ng of the words "taxes due" will have to be ultimately depend upon the context in which these words are used. The Apex Court found that the phrase "taxes due" cannot refer merely to a liability created by the charging section to pay the tax under the relevant law. It must refer to an ascertained liability for payment of taxes quantified in accordance with law. It is further held that taxes which are not legally assessed or assessments which have not become final and binding o .....

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determination as required under subsection 2 of section 73 is required to be done. By now it is settled principle of law that when a law requires a particular things to be done, in a particular manner, it has to be done in that manner alone and not at all. Reference could be made to the Judgment of the Apex Court in the case of Dhanajaya Reddy v/s. State of Karnataka reported in (2001) 4 SCC 9. 40. Though in the present case, it is strenuously urged by Shri Pradeep Jetly that there is already ad .....

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essment for the period between 1/6/2002 and 30/4/2006. In the present case, undisputedly the period of assessment is post 30/4/2006. As such we are unable to accept the said contention. In any case, perusal of the order passed by the learned Tribunal in the case of Commissioner of Service Tax, Mumbai (Supra) would reveal that it has disagreed with the view taken by the Tribunal in the case of ABN Amro(supra). However, that would not have much effect in as much as both these cases pertain to the .....

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red by the Petitioners are chargeable to service tax and Petitioner has not paid the same, in exercise of the power vested in him, the Central Excise Officer is very well empowered to make assessment of the value of taxable services to the best of his judgment and determine sum payable by the petitioner or refundable to it. Admittedly, this has not been done. 42. It is contended by Shri Pradeep Jetly that section 73 of the said Act would not be applicable to the present case, in as much as, the .....

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c. and when an assessee succumbs to the said pressure and deposits the sum under protest, innocuous argument is made that since now payment is made, provisions of section 73 cannot be invoked. It is to be noted that the consequences of not paying service tax when assessee is liable to pay service tax are very drastic in nature. Not only that under the provisions of Section 76 of the said Act, the assessee is liable to pay penalty, which can be upto 50 per cent of the service tax payable, the pen .....

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precludes the authority from taking decision on the return filed by the petitioner in accordance with the provisions of section 72 of the said Act. Upon determination of proceedings either under section 72 or 73, not only that the petitioner would be liable to pay tax but will also be liable to pay interest in accordance with the section 75 and also penalty if a case for levy of penalty is made out. However, on one hand, the respondents are not even taking decision on the return filed by the pe .....

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ection 73 of the said Act. We find that neither of that has been done. 44. In so far as the contention of Shri Pradeep Jetley that the Petitioners have not filed an application for refund under Section 11B of the Central Excise Act, which by virtue of section 83 will have to be read as a part of the said Act, is concerned, again we are at pains to say that the said contention atleast at the behest of the revenue does not merit consideration. Perusal of provisions of Section 11B of the Central Ex .....

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atisfaction. However, no such provision of either giving personal hearing as provided under Section 72 or the representation of an assessee being considered as provided in section 73 could be found in Section 11(b) of the said Act. We are again at pains to say that the conduct of the revenue, firstly coercing the assessee to make payment and thereafter not deciding the returns under Section 72 or not taking recourse to section 73, and asking the assessee to take recourse to section 11B can not b .....

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It will be appropriate to refer to paragraphs 3 and 4 of the said judgment, which read as under : "3) Notice was issued on this Writ Petition by the Petitioner's Advocate and Mr. Thorat appearing on behalf of the contesting Respondent Nos. 1 and 2, on instructions, states that the adjudication order will be passed within a period of two months from today. Needless to clarify that the said order shall be passed in accordance with law. 4) We are not concerned as much with the adjudicatin .....

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ce of show cause cum demand notice, copy of which is at Annexure 'B', the bank account could not have frozen and attached. More so, when the Petitioner claims to have made some payments. As a result of the above discussion, the Writ Petition succeeds. Both communications at Annexures 'A1' and 'A2' are quashed and set aside. The bank account of the Petitioner with South Indian Bank shall stand released from the attachment. However, we clarify that it would be open for the .....

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e deciding the present matter only on the basis of interpretation of statutory provisions as aforesaid. No doubt that if the Statute permits an authority to make a demand on the basis of the preliminary assessment made by it, even prior to there being adjudication, the matter would have been different. Though we have made pertinent query to Shri Pradeep Jetly in that regard and asked as to whether there is any provision in the Statute which would empower the authority to make demand of service t .....

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