M/S Guard INDIA Secure Services PVT LTD vs. Union Of INDIA

Facts

The petitioner, M/s Guard India Secure Services Pvt Ltd, filed a writ petition before the Karnataka High Court seeking to quash a recovery notice dated August 7, 2019, issued by the Assistant Commissioner of Central Tax (Respondent No. 3). The notice was issued under Section 87 of the Finance Act, 1994, for arrears of service tax. The petitioner's primary grievance was the freezing of its bank account by the revenue authorities, which it contended was causing serious prejudice. The petitioner stated it was cooperating with the ongoing enquiry proceedings. The respondents argued that they were authorized to attach the bank account even prior to adjudication to protect the interest of revenue, as the amount was yet to be quantified.

Held

The Court noted that the amount of Rs. 4,66,275/- was an approximate potential demand that would be raised during further proceedings. The Court directed the petitioner to furnish security to the satisfaction of Respondent No. 3 within one week from the date of the order. Consequently, the attachment of the petitioner's SBI Bank account bearing No. 62333234860 (Current Account) was to be defreezed immediately upon furnishing of the security. The Court clarified that all contentions of both sides were kept open and that the observations made were for the limited purpose of disposing of the petition and would not amount to conclusive findings binding in other proceedings. The Court disposed of the petition on these terms.

Key Issues

1. Whether the revenue authorities are empowered to attach a bank account for recovery of service tax prior to the final adjudication and quantification of the tax liability, under Section 87 of the Finance Act, 1994? Petitioner's contention: The petitioner argued that the blanket debit freezing of its bank account was causing serious prejudice and that it was cooperating with the enquiry proceedings. The petitioner sought to confine the present petition to the grievance regarding the attachment of the bank account, keeping other contentions open. Revenue's contention: The revenue authorities (Respondents 3 and 4) contended that they are authorized to protect the interest of revenue by resorting to attachment of a bank account even prior to adjudication, as the amount is yet to be quantified. They stated that the amount yet to be payable by the petitioner was approximately Rs. 4,66,275/-, which was tentative.