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2021 Supreme(P&H) 536
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
JASWANT SINGH, SANT PARKASH, JJ.
J.S. Grover Autos Pvt. Ltd., through its Director Sh. Sunil Grover, Pathankot, Punjab - Petitioner
Versus
Commissioner of Central Goods & Services Tax, Central Goods and Service Tax Commissionerate, Jalandhar, Camp at Rishi Nagar, Ludhiana, and others – Respondent
Civil Writ Petition No. 9559 of 2021 (O&M)
Decided On : 28-05-2021
For the Petitioner:Mr. Naveen Bindal, Advocate.
For the Respondent:Mr. Sanjay Bansal, Sr. Advocate (Sr. Standing Counsel, CBIC) assisted by Mr. Amit Parsad, Advocate
The main legal point established in the judgment is that recovery proceedings must adhere to Board Circulars, and coercive recovery should be restrained when an appeal with mandatory pre-deposit is filed.
Headnote:
Finance Act, 1994 - Recovery Proceedings - Circulars Binding on Department - Appeal before Appellate Authority - Coercive Recovery
Fact of the Case:
The petitioner, a Private Limited Company, sought quashing of an order attaching its bank account for recovery of service tax confirmed by an assessment order. The petitioner had filed an appeal before the First Appellate Authority against the assessment order, and the recovery proceedings were stayed in view of Board Circular and a judgment of the Bombay High Court.
Finding of the Court:
The court found that the recovery proceedings initiated by the respondent were contrary to the Board Circular, which is binding upon the respondent. The court also noted that the liability to be recovered stood stayed due to the appeal with mandatory pre-deposit, and thus, the respondent's contention that the petitioner must file an appeal before the Appellate Authority was not sustainable.
Issues: The issues involved the validity of the recovery proceedings, the applicability of Board Circulars, and the necessity of filing an appeal before the Appellate Authority.
Ratio Decidendi: The court held that the recovery proceedings were not sustainable as the liability to be recovered stood stayed due to the appeal with mandatory pre-deposit, and the respondent should have restrained itself from coercive recovery upon knowing of the appeal with mandatory pre-deposit.
Final Decision: The court set aside the impugned order and directed the respondents to permit the petitioner to operate its bank account.
JUDGMENT :
JASWANT SINGH, J.
1. Through instant petition under Article 226 of the Constitution of India, the petitioner – a Private Limited Company is seeking quashing of order dated 23.03.2021 (Annexure P-2), whereby Deputy Commissioner, Central Goods and Service Tax, Pathankot, with respect to demand (service tax) confirmed by Assessment Order dated 14.01.2020 (Annexure P-1), in exercise of power conferred by Section 87(c) of the Finance Act, 1994 has attached current account of the petitioner which is maintained with Union Bank of India, Pathankot.
2. The petitioner, a Private Limited Company, located at Ludhiana and Pathankot, is registered with the Service Tax Department under the categories of “repair, re-conditioning, restoration or decoration or any other similar service of any other motor vehicle”. A Show Cause Notice dated 01.11.2019 raising a demand of service tax alongwith interest and penalty, amounting to Rs. 30,22,888/- for the periods 2014-15 to 2016-17, was issued on the premise that the commissions received on account of incentive / sale promotion were liable to service tax under the category of Business Auxiliary Services (BAS), and thus recoverable under Section 73 of the Finance Act, 1994 alongwith interest and penalty. The aforesaid demand of service tax alongwith interest and penalty was confirmed vide order dated 14.01.2020 (P-1). The petitioner seeking the benefit under the “Amnesty Scheme” filed declaration under Sabka Vishas (Legacy Dispute Resolution) Scheme, 2019, however, by the due date failed to deposit tax assessed by competent authority, thus declaration became meaningless. The respondent to recover tax liability arising out of aforesaid assessment order, in exercise of power conferred by Section 87 of Finance Act, 1994 vide impugned order dated 23.03.2021 (P-2) attached bank account of the petitioner.
3. The petitioner taking advantage of extension of limitation period by Hon’ble Supreme Court vide order dated 08.03.2021 (Annexure P-3) in Suo Motu Writ Petition (Civil) No. 3 of 2020, alongwith mandatory pre-deposit of 7.5% of tax liability as required under Section 35F of the Central Excise Act, 1944 read with Section 83 of Finance Act, 1994, preferred an appeal before first Appellate Authority against the assessment order dated 14.01.2020 (P-1).
4. Counsel for the petitioner contends that as per Para-4.2 of Circular dated 16.09.2014 (Annexure P-6) issued by Central Board of Excise & Customs (for short ‘Board’), no coercive step can be initiated if appeal is filed alongwith pre-deposit of 7.5%, thus, recovery proceedings initiated by respondent are bad and contrary to Board Circular which is binding upon the Respondent. He further relied upon judgment of Bombay High Court in Ramchandra A. Patankar Versus UOI, 2019 (31) GSTL 58 (Bom), where similar question has been answered in favour of the assessee.
5. Per contra, counsel for contesting respondent though did not dispute above stated factual and legal position, however, vehemently opposed present petition on the ground that impugned order is an appealable order, thus, writ petition is not maintainable. The petitioner must be asked to file appeal before Appellate Authority in terms of Section 85 of the Finance Act, 1994.
6. Having heard arguments of both sides and scrutinized record of the case, we find that it is undisputed fact that petitioner has filed an appeal before First Appellate Authority against the assessment order, whereby demand was created. It is also undisputed that Board Circulars are binding on department and as per Circular coercive measures for recovery of balance liability are not permissible if appeal is filed alongwith mandatory pre-deposit of 7.5%. Para-4.2 of the Circular reads as:-
“4.2 No coercive measures for the recovery of balance amount i.e. the amount in excess of 7.5% or 10% deposited in terms of Section 35F of Central Excise Act, 1944 or Section 129E of Customs Act, 1962, shall be taken during the pendency of appeal
