By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether, order u/s. 87 freezing bank accounts of the assesse can be passed pending adjudication against him? Held – No.
Facts
The petitioner was served with Show Cause Notice dated 27-11-2012 alleging liability to pay huge demand of service tax and file a reply within 30 days. The assessee replied to the said SCN vide letters dated 04-01-2013 and 11-02-2013 which were pending adjudication. Without deciding the matter finally and without calling for any hearing, the respondent authority issued order dated 06-02-2013 directing the bank to freeze the accounts of the petitioner, invoking power u/s. 87 Clause (b) of the Finance Act, 1994. The petitioner challenged legality of this order passed u/s. 87 of the Finance Act, 1994.
On behalf of the Revenue, it was contended that, the petitioner is merely trustee to hold the amount and this amount is due and payable by him, therefore, adjudication, so to say, is a mere formality as the amount has already been adjudged by the respondent. It was further contended that, even provisional adjudication is good enough to invoke the provision of section 87 of the Finance Act.
Held
The High Court held that, the amount mentioned in the Show Cause Notice is merely a demand and not even the tentative adjudication. Referring to section 87 (b) of the Finance Act, it held that, any amount payable referred in that section means such amount adjudged after hearing the Noticee and the provision of section 87 is one of the methods of recovery of the amount due and payable after adjudication is done. It further held that, from the language of Clause (b), it can be said that there is no power to freeze the bank account. At the most, if it is applied, the money can be claimed from the bank itself. Such claim can be made only when the final adjudication has been done after quantifying the amount due and payable by the assessee. The High Court therefore set aside the impugned order holding the same as not sustainable in the eyes of law.
However, in the interest of justice, the petitioner was directed to file reply within 15 days and the assessing authority was directed to decide the matter in four weeks. Further, order restraining the petitioner from transferring, alienating, disposing of the fixed asset and properties save in usual course of business till the final adjudication is completed, was also passed by the High Court.
