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Kerala HC directs Service Tax Dept. to allow Taxpayer to produce evidence before passing Final order [Read Order]

kerala high court - produce evidence - Taxscan

The Kerala High Court directed the GST Department to allow the petitioner to produce evidence to explain deficiencies pointed out in the show-cause notice and then pass order.

The petitioner, M/s Homestead Projects and Developers registered with the Service Tax Department under the category “Construction of Residential Complex Service”, has been regularly discharging its service tax liability, filing applicable returns.

The respondent authority conducted a service tax audit of the petitioner in the year 2019. There were audit objections. The petitioner filed reply to the objections. However, the petitioner was served with show-cause notice invoking Section 73(1) of the Finance Act, 1994 read with Section 174(2) of the CGST Act, 2017.

The petitioner was required to produce all the evidence upon which they intend to rely in support of their defence.

The petitioner was preparing to respond to the show-cause notice. While so, the petitioner received another notice directing the petitioner to pay Rs.8,62,397 along with interest.

The petitioner filed reply stating that recovery proceedings under Section 87 of the Finance Act, 1994 cannot be initiated without adjudication. However, in spite of submission of reply, respondents authorities served notices on the Bankers of the petitioner invoking Section 87(b) of the Finance Act, 1994 directing the Bankers of the petitioner to debit freeze the current accounts held by the petitioner in their banks.

The bankers were instructed to close all other accounts related to the petitioner and to remit the amount available in the accounts, to the government, within 15 days.

The petitioner seeks to set aside all the notices issued by the respondent authority. A further order is sought to direct the respondent authority not to initiate any proceedings against the petitioner under the Finance Act, 1994 for the period till June, 2017 pending adjudication of show-cause notice.

The court stated that when the writ petition came up for admission, this Court passed an interim order staying the operation of notices addressed to the Banks.

The single judge bench of Justice N.Nagaresh said that before adjudicating the issues raised in show-cause notice, if the respondents proceed under Section 87(b) of the Finance Act and Section 79(1)(c)(i) of the Act read with Section 142(8)(a) of the CGST Act, 2017, the petitioner will indeed be put to hardship. Such proceedings are ordinarily to be initiated only after the adjudication process is over.

Therefore, the court respondent authority to give opportunity to the petitioner to adduce such evidence before the respondent in order to explain the deficiencies pointed out in show cause notice. After considering the reply given by the petitioner to show-cause notice and after considering the materials adduced by the petitioner, the respondent shall pass appropriate orders in accordance with law, within a period of one month.

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