TMI Blog2017 (11) TMI 1808X X X X Extracts X X X X X X X X Extracts X X X X ..... case in hand, it is the specific assertion of the writ Court after getting necessary instructions from the Standing Counsel for the revenue that, no assessment order had been passed against the assessee i.e., M/s. Service care, which was the proprietorship concern. There was no facilitating answer from the Revenue before the writ Court as to whether the clients of the erstwhile proprietorship concern including the one L & T Valves Ltd. against whom the garnishee order had been issued, owe to pay any money to the proprietorship concern - When these two issues were made clear before the writ Court that there was no assessment order on the erstwhile proprietorship concern and there was no observation that there were clients of the proprietorship concern who had conducted their business subsequently with the petitioner company, of course with separate agreement in this regard, who had due of service tax payable to the erstwhile proprietorship concern, the provisions of Section 73(A) cannot be invoked against the petitioner company. Recovery of amount due to the Central Government as contemplated under Section 87 of the Act - Held that:- Here in the case in hand, there is no assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... father, one Mohammed Jalaludin was running a proprietorship concern by name Service Care at Chennai. The said proprietorship concern engaged in providing manpower and house keeping services. The petitioner company also was doing the manpower and house keeping services at Bangalore. It had registered with the Commissionerate of Services Tax at Bangalore with centralized Service Tax Registration No. AAPCS7846ESD002 on 1-8-2011 at Bangalore and had been running the business there. 4. In the month of October, 2011, the said Jalaluddin, the sole proprietor of Service Care Chennai, died. Since it was the sole proprietorship concern of the said Jalaluddin, the Service Care at Chennai , had ceased to exist. Some of the clients, who had been served by the said proprietorship concern at Chennai after the closure of the said concern, had started entering into an agreement with the petitioner company at Bangalore for similar services. Accordingly, pursuant to the separate contracts entered into between the petitioner company and some of the clients, who were of course the erstwhile clients of the proprietorship concern at Chennai, the petitioner company had started rendering services w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner company has no connection whatsoever and neither the property nor the liability was inherited by the Managing Director of the petitioner company from the proprietorship concern and therefore, there was absolutely no dues on the part of the petitioner company by way of Service Tax payable to the Revenue. 9. In this context since garnishee notice had been issued, in spite of reply to the aforesaid issues made unambiguously by the petitioner company to the Revenue, challenging the said action on the part of the Revenue in issuing garnishee notices to some of the clients of the petitioner company and also seeking for a prohibition in acting in such a manner by the Revenue, the petitioner company had filed two writ petitions before the Writ Court with the aforesaid prayer namely, one is for prohibiting the Revenue authority from acting upon and second one was for a writ of mandamus directing the Revenue to refund the amount collected coercively from the clients of the petitioner company. 10. While taking up consideration of these two writ petitions, the Learned Judge of this Court at the initial stage since wanted to get some factual matrix from the Revenue had directed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue would further submit that, one of the clients of the proprietorship concern namely, M/s. L T Valves Ltd., who became the client of the petitioner company, had informed that, it had transactions with M/s. Service Care, Chennai till July, 2011 and from 31-7-2001 they had transactions with petitioner company at Bangalore and this itself would show that the contract given to the proprietorship concern M/s. Service Care by the said client had now been continued by the petitioner company therefore, whatever the assets and liability like the Service Tax due payable by the proprietorship concern, could have been inherited by the petitioner company, therefore, the demand made from the petitioner company and its clients are justifiable. 13. It was the further arguments of the Learned Standing Counsel for the Revenue that, Smt. Shany Jalal, who is the Managing Director of the petitioner company is none other than the daughter of the said late Mohammed Jalal, who was the proprietor of the Chennai concern which was having the tax liability for a sum of ₹ 54,00,844/- as per the account for the year ending 31-3-2010. Suppose the Managing Director of the petitioner company M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y as it is incorporated under the provisions of the Companies Act, 1956 and also there is no business connection whatsoever between the petitioners company and the erstwhile proprietorship concern. 18. Learned Counsel for the writ petitioner/respondent would further submit that, merely because the Managing Director of the petitioner company is the daughter of the proprietor of the erstwhile proprietorship concern it cannot be presumed that the said proprietorship concern with all its liability and assets had been merged with the petitioner company. Therefore in that context, the Revenue could not have acted upon for recovering the alleged Service Tax dues of the said erstwhile proprietorship concern from the petitioner company. 19. The Learned Counsel for the writ petitioner would also submit that, once the proprietorship concern where the father of the Managing Director of the petitioner company was sole proprietor who is no more, the said proprietorship concern became defunct or was closed. Absolutely there is no link whatsoever between the erstwhile proprietorship concern and the petitioner company and therefore the Revenue has no authority to claim anything by way of dues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of this Chapter or of the rules made thereunder with intent to evade payment of service tax, by the person chargeable with the service tax or his agent, the provisions of this sub-section shall have effect, as if, for the words thirty months the words five years had been substituted. Explanation. - Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of [thirty months] or five years, as the case may be. Section 73A reads thus : (1) Any person who is liable to pay service tax under the provisions of this Chapter or the rules made thereunder, and has collected any amount in excess of the service tax assessed or determined and paid on any taxable service under the provisions of this Chapter or the rules made thereunder from the recipient of taxable service in any manner as representing service tax, shall forthwith pay the amount so collected to the credit of the Central Government. .. .. .. Section 87 reads thus : Section 87 - Recovery of any amount due to Central Government. Where any amount payable by a person to the credit of the Central Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , may satisfy the amount payable and the costs including cost of sale remaining unpaid and shall render the surplus amount, if any, to such person : Provided that where the person (hereinafter referred to as predecessor) from whom the service tax or any other sums of any kind, as specified in this section, is recoverable or due, transfers or otherwise disposes of his business or trade in whole or in part, or effects any change in the ownership thereof, in consequence of which he is succeeded in such business or trade by any other 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 purposes 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. The Central Excise Officer may prepare a certificate signed by him specifying the amount due from such person and send it to the Collector of the district in which such person owns any property or resides or carries on his business and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one L T Valves Ltd. against whom the garnishee order had been issued, owe to pay any money to the proprietorship concern. 28. When these two issues were made clear before the writ Court that there was no assessment order on the erstwhile proprietorship concern and there was no observation that there were clients of the proprietorship concern who had conducted their business subsequently with the petitioner company, of course with separate agreement in this regard, who had due of service tax payable to the erstwhile proprietorship concern, the provisions of Section 73(A) cannot be invoked against the petitioner company. 29. Like that insofar as the recovery of amount due to the Central Government as contemplated under Section 87 of the Act, as has been extracted above, here also the words, i.e., may become due to such person or who holds or may subsequently hold money for or on account of such person are important. So, if any person from whom money became due, only against such person, Section 87 proceedings can be initiated. Here in the case in hand, there is no assessment and no determination of tax liability about the erstwhile proprietorship concern namely, M/s. Servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd High Court, namely, that recovery under Section 87 of the Finance Act can be resorted to only after an amount is adjudicated to be due to the Central Government. Under the circumstances, at the stage of show cause notice when the liability of the petitioner is yet to be crystallized, it was not permissible for the respondents to resort to the drastic provisions of Section 87 of the Act. 12. Besides, as the facts reveal, no demand notice in respect of the aforesaid amount had been issued to the petitioner and directly garnishee orders had been issued to the clients of the petitioner. Such course of action adopted by the respondents of resorting to the provisions of Section 87 of the Act was not warranted in the facts and circumstances of the case. The impugned notices, Annexure E collectively to the petition, being contrary to the provisions of Section 87 of the Act, therefore, cannot be sustained. 34. Also in 2015 (38) S.T.R. 907 (Bom.) in the matter of ICICI Bank Ltd. v. Union of India, the Division Bench of the Bombay High Court has held as follows : 35 It would thus clearly reveal that provisions of Section 72 and 73 involve complete adjudicatory process. Under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (2) of Section 73 of the Act and is further required to determine the amount payable by an assessee, upon which the assessee will be liable to pay the said amount. It can thus be seen that though in the aforesaid two eventualities, assessee voluntarily accepts the liability and makes the payment, proceedings under Section 73(1) and (2) cannot be initiated against such assessee, atleast in so far as the duty which is admitted by him and paid. However, even in these eventualities, in respect of service tax, which is disputed by him and not paid is the procedure as required under Talwalkar 45/64 46 2.wp3246.15.sxw sub-section (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 sub-section 1 and sub-section (2) of Section 73 is required to be conducted. The amount of tax shall be payable, only after the determination by authority either under Section 72 or Section 73. Not only that, even in case of voluntary option to pay the service tax as is available under sub-section (3) or (4A) of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with regard to the demand of duty made in the show cause notice dated 12-6-1987. By their reply dated 25-10-1989, the said legal heirs of the deceased stated that none of them had any personal association with the deceased in his proprietorship business and were not in a position to locate any business records. They submitted that the proceedings initiated against the deceased abated on his death in the absence of any provision in the Central Excises and Salt Act to continue assessment proceedings against a dead person in the hands of the legal representatives. The said show cause notice was, therefore, challenged as being without jurisdiction. 4. As the Central Excise Authorities posted the matter for hearing and refused to pass an order on the maintainability of the show cause notice alone, the legal heirs approached the High Court under Article 226 of the Constitution by filing a Writ Petition in January, 1990. The Learned Single Judge of the High Court quashed the proceedings against the legal heirs stating that the Central Excises and Salt Act did not contain any provisions for continuing assessment proceedings against a dead person. Against this, revenue went in appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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