Issuance of attachment order under the provisions of the Customs Act for recovery of Service Tax dues is not valid

The Madras High Court has ruled that using the Customs Act to recover Service Tax dues is invalid. The court stated that such recovery should be made under Section 142(8)(a) of the CGST Act. Consequently, an attachment order issued under the Customs Act was quashed. The court also granted the assessee an opportunity to file a statutory appeal, even if the time limit had passed, due to the unavailability of the original order.

The Hon'ble Madras High Court in Zest Buildtek Promotors v. Deputy Commissioner of GST and Central Excise[W.P. No. 12349 of 2023 dated February 19, 2024], the Hon'ble High Court quashed the attachment order passed against the Assessee, thereby holding that, the issuance of attachment order under the provisions of the Customs Act for recovery of Service Tax dues is not valid as the same is recoverable under Section 142(8)(a) of the Central Goods and Services Act, 2017 ("the CGST Act") read with Section 174 of the CGST Act. Also, the Hon'ble High Court provided an opportunity to file statutory appeal irrespective of limitation period due to the non-availability of the physical order.

Facts

Zest Buildtek Promotors ("the Petitioner"), filed a writ petition against the attachment order dated February 16, 2023 ("the Impugned order") passed by the Revenue department ("the Respondents") wherein the Petitioner has prayed for setting aside of the Impugned Order passed for recovery of tax under the provisions of Customs Act for recovery of service tax dues and directing the Respondent to provide certified copy of the Impugned Order.

Issue

Whether issuance of attachment order under the provisions of the Customs Act for recovery of Service Tax dues is valid?

Held

The Hon'ble Madras High Court in W.P. No. 12349 of 2023 held as under:

• Observed that, as per Section 65B(37) of the Finance Act, 1994 ("the Finance Act"), wherein the term person has been defined, the partnership firm would be considered as a person for service tax purposes and would be considered as Assessee for filing the writ petition.
• Further observed that, the Impugned Order was passed under Section 142(1)(c)(ii) of the Customs Act, 1962 ("the Customs Act") when the provision of the Finance Act, particularly Chapter V of the Finance Act has been repealed.
• Noted that, the repeal clause under Section 174 of the CGST Act, empowers the Respondent to recover the amount of tax due under Section 142(8)(a) of the CGST Act.
• Further Noted that, Section 142(1) of the Customs Act, makes it abundantly clear that the said provision can be invoked only when a sum of money is payable by any person under the provisions of the Customs Act remains unpaid.
• Opined that, the Respondent is empowered to initiate action for recovery of Service Tax dues under Section 142 of the CGST Act.
• Held that, the Impugned Order is thereby quashed and set aside
• Directed that, the Petitioner is entitled to file the statutory appeal irrespective of the limitation due to the non-availability of the Impugned Order.

Relevant Provisions

Section 142(8)(a) of the CGST Act, 2017

Section 142: Miscellaneous transitional provisions.

(8) (a) where in pursuance of an assessment or adjudication proceedings instituted, whether before, on or after the appointed day, under the existing law, any amount of tax, interest, fine or penalty becomes recoverable from the person, the same shall, unless recovered under the existing law, be recovered as an arrear of tax under this Act and the amount so recovered shall not be admissible as input tax credit under this Act;

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