Partly allowed

Smt Pushpalatha S v. the Commissioner of Service Tax

Karnataka HC9 Nov 2023WP/2823/2022

Case brief

AI extract

What is this about?

In a writ petition under Articles 226 and 227 of the Constitution, the High Court addressed the issuance of a recovery notice under Section 87 of the Finance Act freezing a joint bank account without prior notice to the petitioner. The Court allowed the petition partially, quashing the notice but providing a temporary stay.

What did the court decide?

Notice of recovery dated 15.07.2019 quashed, effect deferred for 6 weeks during which respondents may issue appropriate notice to petitioner.

Smt Pushpalatha S Vs the Commissioner of Service Tax — Banking and Recovery | Karnataka HC (2023)

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NC: 2023:KHC:40275 WP No. 2823 of 2022

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 9^TH DAY OF NOVEMBER, 2023 BEFORE

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THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 2823 OF 2022 (T-RES)

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BETWEEN:

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SMT PUSHPALATHA S W/O SRI B T SRINIVAS AGED ABOUT 48 YEARS, NO.1279/1 I FLOOR 32^ND G CROSS 26^TH MAIN 4^TH T BLOCK JAYANAGAR BANGALORE-560 041.

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…PETITIONER

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(BY SRI.GOUTHAM BABU P.V., ADVOCATE)

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AND:

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Digitally signed by NARASIMHA MURTHY VANAMALA Location: HIGH COURT OF KARNATAKA

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THE COMMISSIONER OF SERVICE TAX BANGALORE SERVICE TAX-1 TTMC BUILDING ABOVE BMTC BUS STAND DOMBUR, BANGALORE-560 071.

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THE ASSISTANT COMMISSIONER OF CENTRAL TAX, SOUTH DIVISON-1 BANGALORE SOUTH COMMISSIONERATE II FLOOR BMTC BUILDING KANAKAPURA ROAD BANASHANKARI BANGALORE-560 070.

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…RESPONDENTS

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(BY SRI.JEEVAN J NEERALAGI., ADVOCATE; VIDE ORDER DATED 13.07.2023;

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NC: 2023:KHC:40275 WP No. 2823 of 2022

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SRI.SANDEEP HUILGOL IS APPOINTED AS AMICUS CURIES)

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THIS WP IS FILED UNDER ARTICLE 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASHING THE NOTICE OF RECOVERY FOR FREEZING THE CANARA BANK ACCOUNT ORDERED BY THE R2 ASSISTANT COMMISSIONER, CENTRAL TAX DATED 15.07.2019 PRODUCED AT ANNEXURE-A.

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THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, THE COURT MADE THE FOLLOWING:

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ORDER

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The petitioner has impugned the Notice of

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Recovery dated 15.07.2019 issued by the second respondent to the Branch Manager, M/s Canara Bank, Jayanagar 9^th Block, Bengaluru with alternative prayer for directions to the respondents to defreeze the account. Sri Goutham Babu P.V., the learned counsel for the petitioner, Sri Sandeep Huilgol, who is appointed by this Court as Amicus Curiae to assist this Court, and Sri Jeevan J Neeralgi,

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NC: 2023:KHC:40275 WP No. 2823 of 2022

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the learned Standing Counsel for the respondents, are heard for final disposal.

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It is pointed out that the proceedings

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under the Finance Act, 1994 [for short, the ‘ Finance Act ’] against the petitioner’s husband, Sri B.T. Srinivas, who is the proprietor of M/s Kirti Detective Agency, has crystallized with Sri B.T. Srinivas being found liable to pay a sum in excess of Rs.4 Crores. There is a detailed reference to the proceedings in which the demand as aforesaid is crystallized. The petitioner admittedly holds a joint account with Sri B.T. Srinivas with M/s Canara Bank, and because the respondents are not able to recover the dues from the petitioner’s husband, the impugned notice is issued under Section 87 of the Finance Act to recover the amount held in this account.

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It is contended that this impugned notice

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under Section 87 of the Finance Act is issued to M/s

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NC: 2023:KHC:40275 WP No. 2823 of 2022

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Canara Bank without any notice to the petitioner. Sri Jeevan J Neeralgi, responding to the contentions by the learned amicus curiae , canvasses that because the department is unable to verify the assets of the petitioner’s husband, the impugned notice is issued to secure the exchequer’s interest, and if any prior notice to the petitioner is insisted upon, the very exercise of issuance of notice to attach the last known asset would be jeopardized.

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It remains undisputed that the source for recovery of monies payable by the defaulting assessee, or held on behalf of a defaulting assessee, is necessarily under Section 87 of the Finance Act. In the present case, if the account was only in the name of the petitioner’s husband as against being in the joint names of the petitioner and the deceased husband, the issuance of the impugned notice under the Finance Act, freezing the account could perhaps be justified. However, as the account is admittedly

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NC: 2023:KHC:40275 WP No. 2823 of 2022

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held by both the petitioner and her husband, it could be that the petitioner is entitled for some amount in her own right.

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As it is undisputed that no notice is

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issued to the petitioner, the attachment of the joint account, which impacts even the monies that could be payable by the Bank to the petitioner in her own right, cannot be sustained unless the petitioner is extended an opportunity to show cause against the same. In the peculiarities of this case, the respondents must be at liberty to take every such measure as would be permissible in law [including issuing further notice under the Finance Act], and as the terms of the notice have prevailed over a period of 1½ years, the freezing of the account must prevail for a certain reasonable period of time so that the respondents have reasonable time to extend the petitioner an opportunity and decide. Hence, the following

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NC: 2023:KHC:40275 WP No. 2823 of 2022

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ORDER

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The petition is allowed in part. The Notice of Recovery dated 15.07.2019 [ Annexure-A ] addressed to the Branch Manager, Canara Bank, is quashed but the deferring the effect of this quashing for a period of 6 [six] weeks from the date of receipt of a certified copy. The respondents, during this period of 6 [six] weeks, are reserved with liberty to issue appropriate notice to the petitioner and consider the petitioner’s objection to the recovery under Section 87 of the Finance Act.

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Sd/JUDGE

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Smt Pushpalatha S v. the Commissioner of Service Tax

Case brief

What is this about?

What did the court decide?

Smt Pushpalatha S v. the Commissioner of Service Tax

Case brief

What is this about?

What did the court decide?

What the court decided

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Statutes considered

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