No recovery proceedings can be initiated before adjudication of Show Cause Notice, however, Service Tax amount self assessed and declared in the return but not paid shall be recovered under Section 87 of the Finance Act, 1994 without serving any Notice as required under Section 73(1)

/ Abott Law Office
  1. The Hon’ble Karnataka High Court relying upon the decision of GSP Infratech Development Ltd. Vs. Union of India and Others in W.P.Nos. 13781 & 14061/2013 (T-TAR) and held that the words “amount payable by a person” used in Section 87 of the Finance Act will have to be considered in the background of Section 73 of the Finance Act inasmuch as, SCN issued under Section 73(1) of the Finance Act is required to be adjudicated after considering representation of the person, if filed, and thereafter determining the amount payable under the Finance Act. Any deviation in this regard would be in violation of principles of natural justice and doctrine of Audi Alteram Partem would be attracted.
  2. Thus, the Jurisdictional Central Excise Officer would be entitled to recover the amount payable from the person only after adjudication of the SCNs has been done as otherwise, it would amount to putting the cart before horse.
  3. Accordingly, the Impugned Notices were quashed and the Department was directed to remit the amount back to the respective accounts.

Finance Act, 2015

  1. It is relevant to mention here that w.e.f May 14, 2015, new provision has been inserted in the Finance Act that the Service tax amount self-assessed and declared in the Return (ST-3) but not paid (either in part or full) shall be recovered under Section 87 thereof, without service of any notice as required under Section 73(1) of the Finance Act.

Section 73(1B) of the Finance Act is extracted as under:

“(1B) Notwithstanding anything contained in sub-section (1), in a case where the amount of service tax payable has been self-assessed in the return furnished under sub-section (1) of section 70, but not paid either in full or in part, the same shall be recovered along with interest thereon in any of the modes specified in section 87, without service of notice under sub-section (1).”

  1. On perusal of the aforesaid provision, it can be inferred that if the assessee declares amount of Service tax payable by him in his ST-3 Return (on self-assessment), however, not paid, then the recovery proceedings can be initiated under Section 87 of Finance Act, without even issuing any SCN.

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http://judgmenthck.kar.nic.in/judgmentsdsp/bitstream/123456789/63198/1/WP14054-15-29-04-2015.pdf

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