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2015 (12) TMI 419 - ALLAHABAD HIGH COURT

2015 (12) TMI 419 - ALLAHABAD HIGH COURT - 2016 (41) S.T.R. 3 (All.) - Attachment of property and bank accounts - Violation of principle of natural justice - Held that:- we find from a reading of the affidavits and impugned notice as well as the order directing attachment of the property and perusal of the satisfaction recorded in the original that without waiting for a reply to the show cause notice, and without giving any opportunity and without giving any notice, the bank accounts were attach .....

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ion of mind and without considering the provision of the Rules and the circular.

No cogent reason has been given justifying the action for attaching the property. Only a cursory remark has been indicated namely that there is fair possibility of the funds getting dissipated. In our opinion, cogent and sufficient justification was found lacking in the satisfactory note. The attachment proceedings could not be initiated on such ground. - action of the respondents was not malafide and con .....

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er : Nishant Mishra For the Respondent : Ashok Singh ORDER We have heard Sri Nishant Mishra, learned counsel for the petitioner and Sri Ashok Mehta, learned Senior Counsel assisted by Sri Ashok Singh, learned counsel for the respondents. The petitioner is a company and is engaged in fabrication, erection and installation of power sub-stations. In the year, 2010, the petitioner undertook a contract for commissioning of 765 KV sub-station at Unnao from U.P. Power Transmission Corporation and also .....

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No. 183 of 2015 was filed questioning the enquiry instituted under Section 14 of the Central Excise Act, which was dismissed by a judgment dated 10th March, 2015. It appears that thereafter the directors of the petitioner's company appeared and their statements were recorded. During the course of the enquiry, it appears that the respondents were insisting that the Cenvat credit availed by the petitioner should be reversed. In spite of these oral directions, the Cenvat credit was not reversed .....

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October, 2015 but before the petitioner could submit a reply, the respondents attached two bank accounts of the petitioner in ICICI Bank and in Central Bank of India on 20th October, 2015. The petitioner, being aggrieved by the action of the respondents in attaching the bank accounts without giving an opportunity to the petitioner has filed the present writ petition. The Court directed respondent nos. 2 and 3, namely, the Commissioner, of Service Tax, Agra and Deputy Commissioner, Agra to file .....

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e Service Tax (Provisional Attachment of Property) Rules, 2008 (hereinafter referred to as the Rules of 2008). Rule 3 provides a procedure for provisional attachment of property and Rule 4 provides what property could be attached. For facility, Rule 3 and Rule 4 are extracted hereunder: 3. Procedure for provisional attachment of property: (1) If the Assistant Commissioner of Central Excise or the Deputy Commissioner of Central Excise, is satisfied that it is necessary or expedient, for the purpo .....

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t annexed to these rules. (2) The Commissioner of Central Excise, on receipt of proposal as specified in sub-rule (1), or on his own, if he is satisfied that circumstances of case justify provisional attachment, may cause service of a notice on such person for provisional attachment, with reasons for initiating action under these rules and the details of property to be attached provisionally, giving opportunity to such person to make submissions in this regard, within fifteen days of service of .....

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st of revenue, that is to say, the value of property attached shall be of value as nearly as may be equivalent to that of the amount of pending revenue against such persons. (2) The movable property belonging to such person shall be attached only if the immovable property available for attachment is not sufficient to protect the interest of revenue. From a perusal of Rule 3, it is clear that the Assistant Commissioner or Deputy Commissioner is required to be satisfied that it is necessary or exp .....

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is required to be given and that a notice of minimum of 15 days is required to be given. From a perusal of Rule 4, it is also clear that in the first instance immovable property is required to be provisionally attached and, in absence of immovable property, attachment of movable property could be done. In furtherance to the Rules of 2008, the Central Board of Excise & Customs, New Delhi issued a circular no. 103 dated 1st July, 2008. Paragraph 2 (i) to Paragraph 2(v) are relevant. The said .....

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necessary to attach the property of the notice, he shall prepare a proposal in the format prescribed under the sub-rule (1) of rule 3 of the Service Tax (Provisional Attachment of Property) Rules, 2008, issued vide Notification No. 30/2008-S.T., dated the 1st July, 2008, and forward the same to the jurisdictional Commissioner of Central Excise for his approval, except in cases where the proceedings under Section 73 or Section 73 A of the Act are pending before such Commissioner of Central Excise .....

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Officer entertains the reasonable belief that the notice would dispose of, or remove, the property and the sources of his information, if any, should be clearly stated while seeking the approval of the Commissioner of Central Excise. Normally, the proposal should be forwarded within one month's period of the issue of show cause notice. It may also be noted that appropriate disciplinary action shall be initiated against the officers who may be found to exercise the powers of provisional atta .....

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fteen days of serving of the notice as to why the property belonging to such person, and as may be specified in the notice, be not provisionally attached. The said notice should also specify the condition that the notice should not sell, transfer, mortgage, charge, lease or otherwise alienate or encumber the property specified in the notice, till the decision of the said notice. In case of proposal for provisional attachment of immovable property, the notice should also be sent to the concerned .....

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grant such approval, or, where proceedings under Section 73 or 73 A of the Act are pending before him, order the attachment of the property, within fifteen days of holding of personal hearing. A copy of the order of provisional attachment should be served by the Central Excise Officer in the same manner as prescribed under Section 37 C of the Central Excise Act, 1944, as made applicable to service tax vide section 83 of the Act. Paragraph 2(iii) of the Circular indicates that the provision for .....

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rward it within one month of the issuance of the show cause notice but where proceedings under Section 73 or 73 (A) of the Act has already been initiated, only the Commissioner would have the power to attach the property. Paragraph 2 (iii) further contemplates that if the power is frivolously exercised and attachment is made without any cogent reasons then appropriate disciplinary proceeding may be initiated against the officers. In the light of the aforesaid, we find from a reading of the affid .....

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before attaching a property. In the instant case, we find that the proposal submitted by the Deputy Commissioner, Respondent No. 3 clearly indicated that first the property should be attached and thereafter notice should be issued. This proposal was approved by the Commissioner without any application of mind and without considering the provision of the Rules and the circular. We also find that proceedings under Section 73 of the Act had been initiated and a show cause notice had already been is .....

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possibility of the funds getting dissipated. In our opinion, cogent and sufficient justification was found lacking in the satisfactory note. The attachment proceedings could not be initiated on such ground. In our opinion the order for provisional attachment was passed without sound reasons. Once, we found that the action of the respondents was done without cogent reasons, the Court issued a show cause to the respondent nos. 2 and 3 to show cause as to why disciplinary proceeding should not be i .....

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