M/S. Brahmaputra Tele Productions PVT. LTD. vs. State Bank Of INDIA And Anr.

Held

The Court held that in cases where the assessee admits the service tax dues, adjudication may not be necessary, distinguishing the present case from the Prashanthi decision. Regarding the levy of interest, the Court found that Section 75 of the Finance Act, 1994, provides a range for interest (10% to 36%), indicating flexibility and requiring judicious exercise of discretion. The Court observed that the respondent had imposed the maximum interest rate arbitrarily without application of mind. For installment payments, the Court referred to a circular dated 28.02.2015, which allows Commissioners discretion to grant installments up to 24 months. The Court set aside the interest portion of the garnishee notices and remanded the matter to the respondent to decide the interest rate after hearing the petitioner. The Court directed the petitioner to pay the arrear service tax dues, excluding interest, in 48 equated monthly installments, commencing from 15.09.2019.

Facts

The petitioner, M/s. Brahmaputra Tele Productions Pvt. Ltd., filed a writ petition challenging garnishee notices issued by the Assistant Commissioner, GST (respondent No. 2) to the State Bank of India (respondent No. 1). These notices aimed to recover outstanding service tax dues amounting to ₹ 6,27,45,124.00 for the period April 2013 to September 2016. The petitioner, citing financial constraints, sought to quash the garnishee notices and requested permission to pay the dues in installments. Despite making some payments, the petitioner faced further coercive measures, including instructions to clients not to pay them directly. The High Court had previously issued an interim order preventing further coercive action and directing the respondent to obtain instructions regarding installment payments.

Key Issues

1. Whether the garnishee notices issued under Section 87(b) of the Finance Act, 1994, were valid without prior adjudication of the service tax liability, as contended by the petitioner, relying on Section 73 of the Finance Act, 1994, and the Karnataka High Court's decision in Ms. Prashanthi Vs. Union of India? 2. Whether the levy of interest at the maximum rate of 36% per annum by the respondent was arbitrary and without proper application of mind, as argued by the petitioner? 3. Whether the petitioner should be allowed to pay the outstanding service tax dues in installments, considering the circulars issued by the Central Board of Excise and Customs and the petitioner's financial situation? Petitioner's Arguments: The petitioner argued that recovery proceedings, including garnishee notices, are impermissible without prior adjudication of service tax liability under Section 73 of the Finance Act, 1994. They also contended that the levy of maximum interest was arbitrary. They relied on Section 73 and 75 of the Finance Act, 1994, and the Prashanthi case. Revenue's Arguments: The revenue argued that the notices were issued prior to the interim order and that the petitioner has substantial dues despite having creditworthiness. They suggested that installment payments might not be permissible. The judgment notes that the revenue did not dispute the petitioner's contention regarding the necessity of adjudication in all cases but argued that in cases of admitted dues, adjudication might not be necessary.