The Karnataka High Court has directed the defreezing of the bank account of the assessee in a service tax dispute upon the furnishing of security by the assessee.
The decision came in response to the writ petition filed by M/s. Guard India Secure Services Pvt Ltd, a company registered under the Companies Act, 2013 seeking the quashing of a recovery notice issued by the Assistant Commissioner of Central Tax.
The Petitioner Company’s director, Sri Gopinath challenged the recovery notice issued by the Assistant Commissioner of Central Tax, demanding payment of arrears of service tax under Section 87 of the Finance Act, 1994.
The main contention raised by the petitioner was against the freezing of their bank account by the revenue authorities, causing serious prejudice to their business operations.
The petitioner, represented by Sri Rajesha Shettigara argued that they had been cooperating with the enquiry proceedings and that the blanket debit freezing of their account was unwarranted.
The respondents represented by Madanan Pillai, Hema Kumar and Jeevan J. Neeralgi contended that the amount payable by the petitioner was yet to be quantified and the attachment of the bank account was a precautionary or protective measure to safeguard the interest of the revenue even before the completion of the adjudication process.
The respondents stated that the amount payable by the petitioner was approximately Rs.4,66,275/-, subject to final adjudication and argued that the freezing of the bank account was a measure taken to protect the interest of revenue pending quantification of the amount owed.
The single bench of Justice S Sunil Dutt Yadav directed the petitioner to appear before the authorities for a reconciliation of payment challans and to furnish security to the satisfaction of the Assistant Commissioner of Central Tax within one week.
Once the security is provided in compliance with this order, the attachment of the State Bank of India (SBI) bank account of the assessee shall be defreezed, the court held.
The bench also clarified that its decision to defreeze the account was limited to the specific issue of the bank account attachment and would not be binding in other proceedings. All other contentions raised by both parties shall be kept open for future consideration, the court held.
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