Tax Authorities Should Not Act As Extortionist, Act Like Business Facilitator; Patna High Court Imposes Cost On Officer

The Patna High Court has imposed a cost of Rs. 5,000 on officers for surreptitiously making tax recoveries contrary to GST enactment.

The bench of Chief Justice K. Vinod Chandran and Justice Partha Sarthy has laid down the guidelines and observed that the tax authority should also act as a facilitator of business and the economy and not merely as an extortionist, always looking to have the pound of flesh to satisfy his or her hierarchical superiors and push his or her personal agendas. The action complained of was highhanded and arbitrary.

The appellant/assessee carries on the business of manpower supply, including security and cleaning services, to different establishments, including government polytechnic institutions.

The issue arose as to whether the services provided to government polytechnic institutes would fall under the exemption, clarifying that they would be services provided by or to educational institutions up to higher secondary school or equivalent.

Reliance was also placed on the memo issued by the Department of Education, Government of Bihar, which considered polytechnics to be equivalent to intermediate, i.e., senior secondary.

The assessee contended that the recovery was done in a most arbitrary manner, especially when there was no Appellate Tribunal constituted and there were notifications issued, both by the Central Government and the State Government, providing for and extending the period of limitation to commence only from the date of constitution of such Tribunals. The Court in such matters has been consistently directing payment of 20 per cent, as provided for in Section 112(8) of the Bihar Goods and Services Tax Act, 2017, and staying recovery till the Tribunal is constituted and the limitation of three months from that date is crossed.

The department contended that Section 78 of the BGST Act and its proviso, which enables recovery even within the period of three months if the proper officer considers it expedient in the interest of revenue, there are reasons recorded in writing by the Recovery Officer, and hence, the recovery has been made well within the contours of the statute.

"We cannot but express our deep anguish and dissatisfaction with the reasons recorded by the officer. The imminent bank holidays of 2 or 3 days and the close of the financial year, we are afraid, cannot be termed valid reasons to justify an expedient recovery under the proviso to Section 78, and it is not clear as to how the interest of the revenue would suffer if the recovery is kept in abeyance for three months or at least a notice is issued to the assessee before the recovery is effectuated from the banks, behind the back of the assessee," the court said.

The court has laid down various guidelines.

Firstly, there shall be no recovery of tax within the time limit for filing an appeal and when a stay application is filed in a properly instituted appeal before the stay application is disposed of by the Appellate Authority.

Secondly, even when the stay application in the appeal is disposed of, the recovery shall be initiated only after a reasonable period so as to enable the assessee to move to a higher forum.

Thirdly, however, in cases where the Assessing Officer has reason to believe that the assessee may defeat the demand or that it is expedient in the interest of Revenue There can be a recovery, but only with notice to the assessee, which shows the reasons for initiating it and specifies the lesser time within which the assessee is directed to satisfy the dues.

Lastly, though, a bank account could be attached. Before withdrawing the amount, reasonable prior notice should be furnished to the assessee to enable the assessee to make a representation or seek recourse to a remedy in law.

Case Title: Sita Pandey Versus The State of Bihar

LL Citation: 2023 LiveLaw (Pat) 111

Case No.: Civil Writ Jurisdiction Case No.5407 of 2023

Date: 23-08-2023

Counsel For Appellant: Saket Tiwary

Counsel For Respondent: Vivek Prasad

Click Here To Read The Order