Arambhan Hospitality Services LTD. vs. The Union Of INDIA Through The Secretary And Ors.

Held

The Court held that instead of adjudicating the disputed issues, it was appropriate to provide the petitioner with an additional opportunity to present their case. The Court noted that the petitioner had raised several grounds, including the non-applicability of the Finance Act, 1994, to their activities in India and the nature of their catering services. The Court found merit in the petitioner's argument that Section 87 of the Finance Act, 1994, should not be resorted to without a determination of disputed issues. The Court accepted undertakings from the petitioner that they would not claim a refund of amounts paid and that any proceeds from released bank accounts would be used solely for business operations, not diverted to personal accounts. The Court directed the petitioner to appear before the Commissioner, CGST, Mumbai West Commissionerate, for a personal hearing, after which the Commissioner would pass a reasoned order by March 10, 2019. The Court clarified that it had not expressed any opinion on the merits of the contentions raised.

Facts

The petitioner, Arambhan Hospitality Services Limited, filed a writ petition challenging communication dated May 17, 2018, and consequential recovery notices issued under Section 87 of the Finance Act, 1994. These notices were directed to the petitioner's bank and debtors, demanding payment of approximately Rs. 2.51 crores along with estimated interest of Rs. 4.47 crores, totaling Rs. 6.98 crores. The petitioner argued that they do not carry out activities in India and thus the Finance Act, 1994, is not applicable, disputing their service tax liability. The department contended that the petitioner had admitted service tax liability and failed to provide reconciliations and justifications for discrepancies. The petitioner's bank accounts were frozen. The petitioner sought de-freezing of these accounts.

Key Issues

1. Whether the provisions of the Finance Act, 1994, are applicable to the petitioner's activities, considering their claim of not carrying out activities in India? (Question of law) 2. Whether the recovery notices under Section 87 of the Finance Act, 1994, are sustainable when the service tax liability is disputed and determination of disputed issues has not taken place? (Question of mixed law and fact) Petitioner's Arguments: - The petitioner argued that they do not conduct any activities within India, rendering the Finance Act, 1994, inapplicable. They disputed their liability to pay service tax and interest. - They contended that Section 87 of the Finance Act, 1994, cannot be invoked without a prior determination of disputed issues. - The petitioner also raised an alternative argument regarding the nature of catering services as a deemed sale, not leviable to service tax. - They highlighted financial difficulties and argued against the appropriation of payments towards alleged interest liability. Revenue's Arguments: - The respondents (Union of India and authorities) contended that the petitioner had admitted service tax liability, citing a statement made by the petitioner's representative. - They pointed to discrepancies between the petitioner's self-assessed returns and declared liabilities, and alleged failure to provide justifications and supporting documents.