TMI Blog2015 (7) TMI 593X X X X Extracts X X X X X X X X Extracts X X X X ..... unts due from the service provider by issuance of garnishee notices to respondents-5 to 8. Though the respondents have sought to defend such action on the ground that these amounts had been collected by the service provider and same had not been remitted to the department or to the account of the Central Government, the course left open to respondents-2 to 4 is as provided under Section 73(1) namely, adjudicating the show cause notices and thereafter on such adjudication, resort to recover the amount so determined to be due from the service provider by taking steps as provided under Section 87. It cannot be gain said by the respondents that on the strength of the investigation conducted by them by enquiring with the service recipients, they are recovering the amounts reflected in the show cause notice dated 22.04.2015 by issuance of garnishee notices to respondents-5 to 8 and if such contention or plea is accepted, it would render the adjudication process itself otiose or nugatory, in as much as, in all cases the respondents can take a stand and contend that the investigation conducted by them is sufficient to recover tax even before adjudication is complete or even before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held with Respondent No. 8 and order payment interest on ₹ 39,86,126/- and ₹ 10,031/-from the date of recovery. 2. Facts in brief which has led to filing of this writ petition can be crystallized as under:- Petitioner is wife of Late. Sri. P.S. Harsha, who was the Proprietor of M/s - Rapid Marine Suppliers, Mangalore, (for short, 'M/s.RMS'), and said Firm which was a proprietary concern was registered with the Service Tax Department under section 69 of the Finance Act, 1994, under the category of Port services and Supply of Tangible Goods for use Service . The said Sri. P.S. Harsha namely, petitioner's husband is stated to have expired on 05.01.2015 leaving behind the petitioner and two children to succeed to his estate. On the death of her husband, petitioner is said to have approached the bank which her husband was conducting business, namely, the fifth respondent to claim the amount available in the Savings Bank Account as well as Current Account of the deceased as well as Firm. It is contended by the petitioner that officers of respondents 2 to 4 had entered the business premises of the Firm belonging to her husband on 11.03.2015 at 5.54 PM and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Rule 6(1) of Service Tax Rules, 1994 came to be initiated and amount of ₹ 39,96,157/- has been recovered towards service tax and interest liability of M/s. RMS amounting to ₹ 47,50,000/-. It is also stated that fifth respondent-Union Bank of India, Hunnur Branch, has paid the amount which was in the current Account of the Firm. Respondents have further contended that M/s, RMS failed to respond to the letters and summons issued since 06.07.2011 till April 2015 and investigation has been concluded on the basis of documents furnished by the service receivers of petitioner, as such, show cause notice has been issued on 22.04.2015 and it is at the stage of adjudication and there is no impediment for the petitioner to appear in the said proceedings. The petition averments have been traversed in the statement of objections and except to the extent expressly admitted in the statement of objections, all other averments made in the writ petition has been denied. Respondents have sought for dismissal of the writ petition. 4. I have heard the learned Advocates appearing for parties and perused the records. 5. It is the contention of Sri K.S. Naveen Kumar, learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing conducted and after verification of the invoices and ledgers submitted by the service receivers, quantification has been done and as such the amounts have been recovered which is in consonance with the provisions of Finance Act, 1994 and particularly Section 87 and there is no infirmity what so ever committed by the respondents as such he prays for dismissal of the writ petition. 9. Having heard the learned advocates appearing for the parties and on perusal of the case papers as well as the case laws cited at the bar, this Court is of the considered view that only point that arises for consideration in this writ petition; Whether respondents 2 to 4 could have initiated recovery proceedings under Section 87 of Finance Act when there is no adjudication or quantification of the amount due and payable by the registered service tax provider? In order to adjudicate the point formulated hereinabove, it would be necessary to extract the relevant provisions of Finance Act, 1994 which have bearing and impact on the said point namely Section 73 and 87 of the Finance Act. They read as under:- 73. Recovery of Service tax not levied or paid or short-levied or short-paid or er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reupon such person shall pay the amount so determined: PROVIDED that where such person has paid the service tax in full together with interest and penalty under sub-section (1A), the proceedings in respect of such person and other persons to whom notices are served under sub-section (1) shall be deemed to be concluded: PROVIDED FURTHER that where such person has paid service tax in part along with interest and penalty under sub-section (1A), the Central Excise Officer shall determine the amount of service tax or interest not being in excess of the amount partly due from such person, (3) Where any service tax has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person chargeable with the service tax, or the person to whom such tax refund has erroneously been 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case where any sum, relating to service tax, has erroneously been refunded, the date of such refund. [87. Recovery of any amount due to Central Government - Where any amount payable by 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 any money owing to such person which may be under the control of the said Central excise officer or any officer of customs; (b) (i) the Central Excise Officer may, by notice in writing, require any other person from whom money is due or may become due to such person, or who holds or may subsequently hold money for or on account of such person, to pay to the credit of the Central Government either forthwith upon the money becoming due or being held or at or within the time specified in the notice, not being before the money becomes due or is held, so much of the money as is sufficient to pay the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Return preparer. Section 72 enables the Central Excise Officer to pass best judgment assessment. Section 73 of the Finance Act enables the jurisdictional Central Excise Officer to demand from the service providers to call upon such service provider to pay such tax where it has not been paid, levied or has been short levied or short paid or erroneously refunded Sections 75 and 76 enables the Jurisdictional Central Excise Officer to impose interest and penalty for non-payment of such amounts. 11. In the aforestated analysis, case on hand is to be examined. It is not in dispute that M/s. RMS which is a proprietary concern is the holder of the Registration Certificate issued by respondents 2 to 4 as per Section 69 of the Finance Act. It would emerge that on account of non-payment of service taxes by M/s.RMS the respondents had issued show cause notices on 05.08.2009 and 19.10.2009 demanding service tax of ₹ 71,48,987/- for the period 2004-05 to 2007-08 and demanding service tax of ₹ 40,27,335/- for the period 2008-09 and undisputedly the said show cause notices is yet to be adjudicated. No reasons are forthcoming from the statement of objections as to why show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding under Section 73 is concluded by an order determining the amount due and payable by the petitioner. In the facts obtained in the said case it came to be held that such a situation had not arisen and there is no conclusion of the proceedings and as such Section 87 was held to be inapplicable. It has been held as under:- 4 - Regarding being had to Section 73(1) of the Act, whereunder show cause notice, Annexure-A was issued to the petitioner, responded by the explanation Anenxure-B, and no order having been passed thereon to conclude the proceeding as required by sub-section (2) of Section 73, while the proceeding, is pending before the 2nd respondent, then Section 73-C of the Act comes into play in the matter of provisional attached of the properties belonging to the petitioner. The contention that Section 87 (b)(iii) of the Act is applicable, in my considered opinion, is without merit, since it applies only after a proceeding under Section 73 is concluded by an order determining the amount due and payable by the petitioner. Such a situation having not arisen as there is no conclusion of the proceeding, Section 87 is inapplicable. 16. Perusal of Section 87 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dication even as on the date of issuance of the show cause notice dated 22.04.2015 referred to herein supra. Even without abovesaid two show cause notices being adjudicated, third show cause notice dated 22.04.2015 came to be issued demanding service tax, interest thereon and proposed to levy penalty which is also yet to be adjudicated. In other words, there is no determination or quantification of the amount due and payable by M/s. RMS. As such the recovery notices issued by respondent No.4 dated 12.03.2015/16.03.2015 Annexure-L, N, P and R would amount to putting the horse before the cart or in other words, even before the adjudication or quantification of the tax amount is being done or concluded, fourth respondent has attempted to recover the amounts from the petitioner through issuance of garnishee notice to respondents 5, 6 7 and 8, Hence, they cannot be sustained. 18. Regard being had to the scheme of the Finance Act, 1994 it does not leave any doubt in the mind of this court that until and unless there is no determination and adjudication either under Section 72 or under Section 73 of the Act, respondents-2 to 4 cannot resort to invoke Section 87 of the Finance Act. When ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not yet been adjudicated and as such, respondents-2 to 4 could not have taken recourse to invoke Section 87 for recovering the amounts due from the service provider by issuance of garnishee notices to respondents-5 to 8. 20. Though the respondents have sought to defend such action on the ground that these amounts had been collected by the service provider and same had not been remitted to the department or to the account of the Central Government, the course left open to respondents-2 to 4 is as provided under Section 73(1) namely, adjudicating the show cause notices and thereafter on such adjudication, resort to recover the amount so determined to be due from the service provider by taking steps as provided under Section 87. It cannot be gain said by the respondents that on the strength of the investigation conducted by them by enquiring with the service recipients, they are recovering the amounts reflected in the show cause notice dated 22.04.2015 by issuance of garnishee notices to respondents-5 to 8 and if such contention or plea is accepted, it would render the adjudication process itself otiose or nugatory, in as much as, in all cases the respondents can take a stand and ..... 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