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2015 (10) TMI 1307 - GUJARAT HIGH COURT

2015 (10) TMI 1307 - GUJARAT HIGH COURT - 2015 (40) S.T.R. 888 (Guj.) , [2016] 88 VST 16 (Guj) - Demand under Section 87 from debtors of Petitioner Recovery order issued within two days of SCN No final adjudication in case of Service Tax liability Held That:- Claim under Section 87 can be made only when final adjudication has been done after quantifying the amount due and payable by the assessee Liability of Petitioner yet to be crystallised; Resorting to Section 87 is not permissible .....

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ay Buch, learned senior standing counsel waives service of notice of rule on behalf of the respondents. 2. Having regard to the controversy involved in the present case which lies in a very narrow compass, the matter was taken up for final hearing. 3. The petitioner, a partnership firm is engaged in providing services of industrial and civil work to various clients and is registered with the Service Tax Department under Works Contract Service and Construction of Industrial Building and Civil Str .....

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titioner s registered office at Dahej and corporate office situated at Delhi. According to the first respondent, there were several irregularities in the payment of service tax on the part of the petitioner firm and it was alleged that the total service tax liability of the petitioner firm for the period from October 2009 to December 2013 was ₹ 4,25,74,611/-. However, such figure was arrived at unilaterally, without affording any opportunity of hearing to the petitioner and it was directly .....

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on or about 06.04.2015, the first respondent issued notices under section 87 of the Finance Act, 1994 (hereinafter referred to as the Act ) to the debtors of the petitioner, with a direction that monies payable by the clients of the petitioner, instead of being paid to the petitioner, be deposited in the treasury of the Central Government. Thereafter, on 17.04.2015 (i.e. after issuance of the garnishee orders), the petitioner was served with a show cause notice. 6. Having regard to the fact tha .....

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or direction in the nature of mandamus and quash and set aside the impugned Notice dated 06.04.2015, at Annexure-A issued by the respondent No.1 and other notice as may be issued by the respondent No.1 from time to time, including the notices marked and annexed at ANNEXURE-E Colly. to this petition which at the relevant time was not available to us as all these notices were produced by the respondents. 7. Mr. Jaimin Dave, learned advocate for the petitioner submitted that there is no final asse .....

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issued to the petitioner, the action of the respondent in issuing garnishee orders to the clients of the petitioner, is a drastic, highhanded and arbitrary measure which could be resorted to only in exceptional and extraordinary circumstances. In the facts and circumstances of the case, when no demand has been raised from the petitioner, there was no warrant for resorting to such a drastic measure. Mr. Dave, learned advocate, however, submitted that over and above the amount already deposited, t .....

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t), wherein the court, in similar set of facts and circumstances, had observed that when the show cause notice was issued by the department to which the petitioners have raised their objections, recoveries without adjudication of such disputed taxes was simply not permissible in law. The court noticed that section 73C of the Finance Act, 1994, allows the department to make provisional attachment of the properties of the assessee during the pendency of the proceedings under section 73 or 73A of t .....

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s opinion, was not simply permissible. Mr. Dave submitted that the above decision would be squarely applicable to the facts of the present case and as such, the petition deserves to be allowed. 8. Mr. Hriday Buch, learned senior standing counsel for the respondents, on the other hand, has reiterated the contents of the affidavit-in-reply filed on behalf of the respondents. 9. This court has considered the submissions advanced by the learned counsel for the respective parties and has perused the .....

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petitioner by issuing any demand notice in this regard. However, the respondents have resorted to the drastic measure of issuing notices under section 87 of the Act to the debtors of the petitioner. Section 87 of the Finance Act, 1994 provides for recovery of any amount due to Central Government and lays down that where any amount payable by a person to the credit of the Central Government under any of the provisions of that Chapter or the rules made thereunder is not paid, the Central Excise O .....

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g by the language of section 87 of the Finance Act, any amount payable means the amount adjudged after hearing the show cause notice and this provision of section 87 is one of the methods of recovery of the amount due and payable after adjudication is done. Such claim can be made only when the final adjudication has been done after quantifying the amount due and payable by the assessee. 11. This court is in agreement with the aforesaid view expressed by the Uttarakhand High Court, namely, that r .....

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