Appeal not withstanding, Property can be attached to recover tax dues - Under Non-existing Rules
IT is the responsibility of the tax administrator to understand and implement the tax laws properly. In case of any disputes, where the tax payer thinks the tax administrator is not correct, the issues are agitated in higher courts. Often, the taxpayer is assisted by their counsels who are supposed to possess better expertise in the field than an ordinary citizen. So, it is the responsibility of the counsel to appraise the courts and help the court in arriving at proper interpretation of the statutory provisions. The courts, after hearing both sides, should shoulder the responsibility of explaining the disputed provisions in proper perspective and there is no room for any carelessness. That is why often the findings part in any order starts with "I/We have examined the issue carefully". The importance of a decision in a particular case cannot be undermined as it sets a precedent.
Unfortunately, when all the three fail in doing justice to their respective roles, it results in a catastrophe. Here is an example.
The issue relates to attachment of property under Section 87(c) of the Finance Act, 1994 for recovery of service tax. The appeal of revenue against waiver of pre-deposit by the Tribunal was allowed by the AP High Court with a direction of pre-deposit of Rs. 80 crores. Since the assessee did not pre-deposit the amount, the jurisdictional officers attached the property of the assessee under Section 87(c) of the Finance Act, 1994. The Writ Petition filed by the assessee against the said attachment order was dismissed by the High Court.
Everything is fine except the fact that as of now no Notification has been issued under Section 87(c) of the Finance Act, 1994 which means that the provisions of recovery under Section 87(c) have not been given effect to so far.
Section 87(c) of the Finance Act, 1994 reads:
(c) the Central Excise Officer may, on an authorisation by the Commissioner of Central Excise, in accordance with the rules made in this behalf , distrain any movable or immovable property belonging to or under the control of such person, and detain the same until the amount payable is paid; and in case, any part of the said amount payable or of the cost of the distress or keeping of the property, remains unpaid for a period of thirty days next after any such distress, may cause the said property to be sold and with the proceeds of such sale, 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;
No rules have been made to give effect the provisions of Section 87(c) of the Finance Act, 1994. However, the Ld. departmental officers have attached the property (God knows in accordance with what rules), the Ld Counsel for the petitioner appears to have not urged the non-issue of Notification under Section 87(c) and the Hon'ble Judges have ignored the above provisions and dismissed the petition. While examining the scope of Section 87(c), the High Court held:
Section 87 of the Act in plain terms empowers the Central Excise Officer to proceed to recover the amount of demand by one or more modes mentioned therein. Section 87 (c) empowers the Central Excise Officer to distrain any movable and immovable property until the amount payable is paid.
Apparently, the words "in accordance with the rules made in this behalf" have been lost sight of in PLAIN TERMS!
The second issue is the High Court in earlier order directing the pre-deposit of Rs. 80 crores, did not specify any time limit. The assessee urged before the High Court that if no time limit is mentioned in the order, and as per Rule 21 of the Writ Proceedings Rules, 1977, if no time is prescribed by the Court, it is presumed that the petitioner has two months time from the date of receipt of the order, and the notice of attachment even before the expiry of the period granted by this Court is highly arbitrary and illegal.
The High Court observed:
The fact that the petitioner has got some more time to comply with the order passed by this Court or that he has other remedies to avail against the order passed by this Court cannot be a mitigating factor in favour of the petitioner.
So, now the properties of all the manufacturers and the service providers who have obtained stay of the orders passed by the lower authorities against the payment of pre-deposit within a stipulated time period can be attached as the time limit to comply with the pre-deposit cannot be a mitigating factor!
Now, if a court/tribunal orders pre-deposit, the assessee has to run straight from the Court to the bank and the Central Excise officer can run equally fast to the assessee's premises to detain property!
Doing business in India is really a Herculean task!
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