Whether, order u/s. 87 freezing bank accounts of the assesse can be passed pending adjudication against him?

R.V. Man Power Solution vs. CCE [2014] 45 taxmann.com 215 (Uttarakhand)

FACT

The petitioner was served with show cause notice dated 27-11-2012 alleging liability to pay huge demand of service tax and file areply within 30 days. The assessee replied to the said SCN vide letters dated 04-01-2013 and 11-02-2013 which were pendingadjudication. Without deciding the matter finally and without calling for any hearing, the respondent authority issued order dated 06-02-2013 directing the bank to freeze the accounts of the petitioner, invoking power u/s. 87 Clause (b) of the Finance Act, 1994.The petitioner challenged legality of this order passed u/s. 87 of the Finance Act, 1994.

HELD

The High Court held that, the amount mentioned in the Show Cause Notice is merely a demand and not even the tentativeadjudication. Referring to section 87 (b) of the Finance Act, it held that, any amount payable referred in that section means suchamount adjudged after hearing the Notice and the provision of section 87 is one of the methods of recovery of the amount due andpayable after adjudication is done. It further held that, from the language of Clause (b), it can be said that there is no power to freeze the bank account. At the most, if it is applied, the money can be claimed from the bank itself. Such claim can be madeonly when the final adjudication has been done after quantifying the amount due and payable by the assessee. The High Courttherefore set aside the impugned order holding the same as not sustainable in the eyes of law.