M/S. Sabarish Agencies vs. The Assistant Commissioner

Facts

The petitioner, M/s. Sabarish Agencies, a service provider who claims to have closed business in 2017, received a show cause notice (SCN) dated 28.04.2021. The petitioner did not respond, leading the respondent, the Assistant Commissioner of GST & Central Excise, Trichy II Division, to pass an Order in Original No. 36/2022-ST dated 14.06.2022. The petitioner became aware of this order only when their bank account was attached on 20.04.2023. This attachment order, DBS/742/GEN/14/2023-2024 dated 20.04.2023, was passed by the DBS Bank based on instructions. The petitioner contends that the services provided were exempted under Serial Nos. 9 and 29(f) of Mega Exemption Notifications – Notification No. 12/2012-S.T. dated 17.03.2012, and thus the demand and bank account attachment are unjust and wrongful. The petitioner sought to quash the Order in Original and the bank attachment order, and to direct the bank to de-freeze their account.

Held

The Court found that the petitioner appears to have a prima facie case on merits, particularly concerning the applicability of exemptions under Serial Nos. 9 and 29(f) of Mega Exemption Notifications – Notification No. 12/2012-S.T. dated 17.03.2012. While acknowledging that the petitioner could pursue the appellate remedy, the Court noted that an exercise had been undertaken by the Original Authority following the Court's interim order. Under these circumstances, the Court was inclined to set aside the impugned Order in Original No. 36/2022-ST dated 14.06.2022. The case was remitted back to the respondent (Assistant Commissioner of GST) to pass fresh orders on merits and in accordance with law within 60 days. The petitioner was directed to cooperate and file a reply to the show cause notice (treated as a show cause notice and corrigendum) within 30 days of receiving a copy of the order. Consequently, the impugned attachment order dated 20.04.2023 passed by the third respondent (DBS Bank) was also set aside. The Court did not expressly leave any issue undecided.

Key Issues

1. Whether the petitioner, M/s. Sabarish Agencies, is entitled to an opportunity to file a detailed reply to the show cause notice dated 28.04.2021, given that they claim their services were exempted under Notification No. 12/2012-S.T. dated 17.03.2012, and whether the Order in Original No. 36/2022-ST dated 14.06.2022, passed without such an opportunity, is liable to be quashed? (Question of law and mixed fact and law, concerning principles of natural justice and applicability of exemption notifications). 2. Whether the attachment of the petitioner's bank account by DBS Bank on 20.04.2023, pursuant to the Order in Original, is liable to be set aside, considering the petitioner's claim of exemption and potential injustice? (Question of law and mixed fact and law, concerning the validity of recovery proceedings in light of disputed tax liability). Petitioner's arguments: The petitioner argued that they were not aware of the impugned order until their bank account was attached. They asserted that the services provided were exempted under Serial Nos. 9 and 29(f) of Mega Exemption Notifications – Notification No. 12/2012-S.T. dated 17.03.2012, making the demand unjust and the bank account attachment wrongful. They requested an opportunity to file a detailed reply. Respondent's arguments: The respondent contended that the petitioner failed to respond to the show cause notice. They highlighted that pursuant to an interim order from the Court on 13.07.2023, an exercise was carried out, a report generated on 03.08.2023, and a personal hearing held on 18.07.2023, which the petitioner failed to attend. The respondent suggested that the petitioner should pursue the appellate remedy before the Appellate Commissioner under Section 85 of the Finance Act, 1994.