Bank Account Attachment Eased: Tax Recovery Notice Modified, Partial Relief Granted to Appellant Under Service Tax Regulations

The HC partially allowed the writ appeal challenging a garnishee notice for service tax recovery. The court modified the previous order, permitting the appellant to operate their bank account beyond the demanded amount. The decision addressed issues of notice service and bank account attachment, providing relief to the appellant while maintaining the underlying tax assessment.

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Issues involved: Challenge to garnishee notice for recovery of service tax and penalty, failure of service of notice on appellant, difficulty faced by appellant due to bank account attachment.

Issue 1: Challenge to garnishee notice for recovery of service tax and penalty

The writ appeal was filed against the order of the learned Single Judge in W.M.P.No.18117 of 2023 in W.P.No.18869 of 2023, challenging the garnishee notice seeking to recover service tax and penalty for the period from October 2015 to March 2016 under the Finance Act, 1994. The appellant contended that the notice was never served on them, and they only became aware of the assessment upon receiving the impugned garnishee notice. The interim order directed the attachment of the appellant's bank account to continue, pending the production of records including proof of service.

Issue 2: Failure of service of notice on appellant

The appellant argued that despite references in the garnishee notice to previous proceedings under specific sections of the Central Goods and Services Tax Act, 2017, the notice itself was never served on them. It was only upon receiving the impugned notice that they learned about the assessment made earlier. The interim order had directed the continuation of the bank account attachment, leading to operational difficulties for the appellant in conducting business activities, including salary disbursement to employees.

Issue 3: Difficulty faced by appellant due to bank account attachment

The appellant highlighted the challenges faced in operating their bank account and running their business smoothly due to the attachment. This situation, including the inability to disburse salaries to employees, was brought to the attention of the court. In response to the submissions made by the appellant and the Respondents, the court modified the order of the learned Single Judge to allow the appellant to operate the bank account in excess of the demanded amount specified in the order dated 28.03.2022, including penalty.

This Writ Appeal was disposed of with the modification mentioned above, and no costs were awarded. The connected miscellaneous petition was closed accordingly.

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