November 2013
I High Court – 2013 (31) STR 515 (Mad) Chitra Builders P. Ltd. vs. Addl. Commr. Of C., C. E. & S. T., Coimbatore
By Puloma Dalal, Jayesh Gogri, Mandar Telang, Chartered Accountants
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Recovery during search cannot be held valid in absence of a proper assessment order and due procedures established under service tax laws.
Facts:
The Revenue conducted search and collected a sum of Rs. 2 Crore from the petitioner. The petitioner contested that since they were not registered with the department and were not carrying out any activities within their jurisdiction, the search and collection of Rs. 2 Crore was arbitrary and illegal and thus they were entitled for the refund of amount paid.
The respondents argued that the petitioners collected Rs. 17 Crore which was further claimed as CENVAT by the service recipients and that the amount so paid voluntarily should not be returned and should be adjusted against service tax liability to mitigate the offence committed u/s. 73(3) of the Finance Act, 1994.
Held:
Directing the respondents to return the amount paid, the Hon. High Court held that the collection of Rs. 2 crore during the search was not valid in the eyes of law. Although the collection was voluntary, the respondents did not prove that the petitioners were liable to pay service tax and that the tax cannot be collected without appropriate assessment order and without following the procedures established by the Law.
