M/S Scorpio Event Management PVT LTD vs. Joint Commissioner Of Central Tax

Held

The Court held that the recovery notice issued by the respondent No.4 (Assistant Commissioner) directing the petitioner to pay Rs. 17,29,765/- prima facie appeared to be incorrect. The Court found that the computation of interest by the respondent No.4 ran contrary to Section 110 of the Service Tax Voluntary Compliance Encouragement Scheme, 2013. The reasoning was that the interest should have been computed on the unpaid dues and not on the declared amount, especially when partial payments were made towards the declared amount. The Court noted that the impugned notice indicated interest levied without accounting for partial payments. Therefore, the order under challenge was not sustainable and needed to be quashed. The Court directed respondent No.4 to re-compute the interest by taking into account the payments made by the petitioner on various dates towards the declared amount. The recovery notice (Annexure-M) was quashed. The Bank was directed to permit the petitioner to operate the bank account over and above Rs. 5 lakhs, with Rs. 5 lakhs to be withheld pending re-computation.

Facts

The petitioner, M/s. Scorpio Event Management Pvt Ltd., challenged a recovery notice (Annexure-M) dated January 22, 2020, issued by the Joint Commissioner of Central Tax. The petitioner had applied under the Service Tax Voluntary Compliance Encouragement Scheme (VCES), 2013, declaring an amount of Rs. 23,20,007/-. While the initial 50% was paid, the petitioner failed to pay the balance 50% within the stipulated time due to financial constraints, though subsequent payments were made. The impugned notice proposed recovery of Rs. 17,29,765/- towards interest on the declared amount. The petitioner also sought directions for personal hearing and refund of Rs. 4,06,781/- recovered via demand draft. The Court focused on the validity of the recovery notice.

Key Issues

1. Whether the recovery notice dated January 22, 2020 (Annexure-M) issued by the Joint Commissioner of Central Tax is illegal, arbitrary, and an abuse of powers conferred under Section 87 of the Finance Act, 1994, considering the payments made by the petitioner? Petitioner's arguments: The petitioner contended that the recovery notice is illegal and arbitrary. They argued that the interest was computed on the declared amount rather than the unpaid dues, which is contrary to Section 110 of the VCES, 2013. They also submitted that the total amount due, after considering admitted payments, would not exceed Rs. 5 lakhs, and the interest computation itself came to Rs. 7,03,733.58/-. They further stated that Rs. 4,06,781/- had already been recovered. Revenue's arguments: The Revenue, represented by the learned counsel, did not object to the petitioner maintaining an amount of Rs. 5 lakhs towards recovery and did not object to the bank account being operated above that amount, pending re-computation.