Gujarat High Court
Technomaint Contractors Limited & vs Union Of India & 2 on 13 February, 2014
Author: Akil Kureshi
Bench: Akil Kureshi, Sonia Gokani
C/SCA/504/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 504 of 2014
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TECHNOMAINT CONTRACTORS LIMITED & 1....Petitioner(s)
Versus
UNION OF INDIA & 2....Respondent(s)
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Appearance:
MR PARESH M DAVE, ADVOCATE for the Petitioner(s) No. 1 - 2
MR DARSHAN M PARIKH, ADVOCATE for the Respondent(s) No. 3
NOTICE NOT RECD BACK for the Respondent(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 2
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CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MS JUSTICE SONIA GOKANI
Date : 13/02/2014
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Heard learned counsel for the parties for final disposal of the petition.
Petitioners have challenged the action of the respondents in seeking recovery of service tax dues of the petitioners on the ground that show cause notice proceedings for recovery are pending and the petitioners have several disputes to such recoveries being made as per the show cause notice.
The petitioners are in the business of construction and are subjected to service tax regime. To the various services provided by Page 1 of 4 C/SCA/504/2014 ORDER them to the customers, they are required to recover and deposit with the respondents the service tax at the rates prescribed. It appears that in an investigation proceedings initiated by the respondents, it came to the light of the respondents that the petitioners had not deposited such service tax regularly in the last couple of years. Detailed statement of the representative of the petitioners were recorded. In one of the statements made by Shri Alok Kumar Ashutosh, Managing Director of petitioner No.1 company, he admitted irregular service tax payments. In some cases, service tax was collected from the customers, but not deposited with the department. In some other cases, service tax was not received though required to be collected. Be that as it may, on the basis of the investigation carried out, the competent authority issued a show cause notice dated 23.10.2013, calling upon the petitioners why service tax of Rs.1,86,94,281/- be not recovered with interest and penalties under section 76 and 78 of the Finance Act 1994 be not imposed. The grievance of the petitioners is that even before the issuance of the show cause notice, the department had issued notices for recovery. On 25.10.2013, barely two days after the show cause notice, the department wrote two separate letters to M/s.Reliance Industries Limited and M/s.Essar Oil Limited, both service recipients from the petitioners calling upon them to deposit a sum of Rs.50 lacs and Rs.40,99,114/- respectively since the petitioners had defaulted in making payment of service tax.
The case of the petitioners is that they had in installments already deposited service tax due of Rs.1,16,86,377/- by then. Rest of the amounts of recoveries were highly disputed. No recovery, therefore, could have been made, that too before full adjudication of the show cause notice.
On the other hand, case of the department put forth before us in the form of affidavit in reply and through the contentions of the cousnel is Page 2 of 4 C/SCA/504/2014 ORDER that the petitioners had virtually admitted the service tax liability to the tune of Rs.1.50 crores. Service tax though collected form their clients was not deposited with the department. The department was, therefore, within its right to seek recovery.
Upon perusal of the statements of the Managing Director of the petitioner No.1 company, it emerges that the undisputed liability comes to approximately Rs.1.24 crores. Though in the statement dated 20 th July 2011, he did indicate that the unpaid tax would come to approximately to Rs.1.50 crores, in his letter dated 3.8.11, he clarified it. Accordingly, we have adopted such figure of Rs.1.24 crores as undisputed liability.
The petitioners having already deposited a sum of Rs.1.16 crores (rounded off) with the department by now, at best, they may be called upon to deposit difference amount of Rs.8 lacs. The remaining recovery is highly disputed. The petitioners have raised several disputes including the dispute that some of the services having been provided in the special economic zone areas, service tax is not applicable. We are not judging the validity of such contentions. All that we are suggesting is 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. We notice 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 the Act for the purpose of protecting the interest of the Revenue. Such provision cannot be activated for seeking recovery even before adjudication. Recovery of unpaid tax is to be made as per section 87 of the said Act which provides for the power and procedure for such recoveries.
In the present case, within two days of issuance of show cause Page 3 of 4 C/SCA/504/2014 ORDER notice, the respondents issued recovery orders against the customers of the petitioners, which in our opinion, was not simply permissible.
Under the circumstances, both the impugned communication dated 25.10.2013 by the Additional Commissioner of Service Tax to M/s.Reliance Industries Limited and M/s.Essar Oil limited are quashed. The petitioners shall, however, deposit a sum of Rs.8 lacs with the department towards the service tax liability latest by 28 th February 2014. An undertaking of the Managing Director of petitioner No.1 company to this effect shall be filed during the course of the day.
With the above directions, writ petition is disposed of.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) (vjn) Page 4 of 4