High Court sets aside bank account attachment under Finance Act, 1994. Stay on recovery proceedings emphasized.

The High Court allowed the petition, setting aside the order attaching the petitioner's bank account under Section 87(c) of the Finance Act, 1994. The Court emphasized the stay on recovery proceedings as the petitioner had filed an appeal with the mandatory pre-deposit, in accordance with Circular provisions and Bombay High Court precedent. The respondent was directed to permit the petitioner to operate its bank account, noting that coercive recovery should have been avoided upon knowledge of the appeal with pre-deposit.

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Issues:
Quashing of order attaching bank account under Section 87(c) of the Finance Act, 1994 | Demand of service tax confirmed by Assessment Order | Benefit under Amnesty Scheme | Extension of limitation period for appeal | Coercive recovery proceedings | Applicability of Board Circulars | Maintainability of writ petition vs. appeal before Appellate Authority

Analysis:

The petitioner, a Private Limited Company, sought the quashing of an order attaching its bank account under Section 87(c) of the Finance Act, 1994, based on a demand of service tax confirmed by an Assessment Order. The demand arose from commissions received on account of incentive/sale promotion, deemed liable to service tax under Business Auxiliary Services, for the periods 2014-15 to 2016-17. The petitioner, registered with the Service Tax Department, failed to deposit the assessed tax under the Amnesty Scheme, rendering the declaration meaningless. Subsequently, the respondent initiated recovery proceedings by attaching the petitioner's bank account.

Taking advantage of an extension of the limitation period by the Supreme Court, the petitioner filed an appeal before the First Appellate Authority against the assessment order. The petitioner contended that coercive recovery proceedings were improper, citing a Circular by the Central Board of Excise & Customs and a judgment of the Bombay High Court in a similar matter.

The respondent did not dispute the factual and legal positions but argued that the impugned order was appealable, making the writ petition not maintainable. However, the High Court found that the petitioner had already filed an appeal with the mandatory pre-deposit, as required under the Circular, which stayed the tax liability intended to be recovered. The Court noted that the respondent should have refrained from coercive recovery upon learning of the appeal with the pre-deposit. Consequently, the Court rejected the respondent's contention and set aside the impugned order, directing the respondents to allow the petitioner to operate its bank account.

In conclusion, the Court allowed the petition, emphasizing the stay on the recovery proceedings due to the filed appeal with the mandatory pre-deposit, in line with the Circular's provisions and the precedent set by the Bombay High Court.

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