M/S. NITESH RESIDENCY HOTELS PVT.LTD V. THE DEPUTY COMMISSIONER OF CENTRAL EXCISE

WP/6483/2015

AI Insights

The case involves M/s. Nitesh Residency Hotels Pvt. Ltd. (petitioner) challenging notices issued by the Deputy Commissioner of Central Excise Service Tax Cell, Pune (first respondent) under Section 87 of the Finance Act, 1994, for recovery of dues confirmed against M/s Shamrock Facility Management Services Pvt. Ltd. (respondent No.2). The petitioner contested the recovery actions, arguing that the amounts were not crystallized through due process and that the notices were arbitrary. The court examined whether the petitioner was entitled to a personal hearing and whether the recovery amount was correctly determined.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 726665 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 20-01-2023
• Assessment Year: misc
• Other Referred Cases: Automotive Tyre Manufacturers Association v. Designated Authority and Others, Surinder Nath Kapoor v. Union of India
• Laws Referred To: Finance Act 1994
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: JEEVAN NEERALGI; V B RAVI SHANKAR
• Assessee Lawyers: RAVI RAGHAVAN; MEGHNA LAL; SYED PEERAN
• Keywords: Deemed defaulter; Recovery of dues; Service tax; Voluntary Compliance Encouragement Scheme; Writ of Mandamus
• Section: 87; 87

Judgement Text

" - 1 - WP No. 6483 of 2015 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF JANUARY, 2023 BEFORE THE HON'BLE MR JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 6483 OF 2015 (T-RES) BETWEEN: M/S. NITESH RESIDENCY HOTELS PVT.LTD # 25-A, IMPERIAL COURT, 2ND FLOOR, CUNNINGHAM ROAD BANGALORE-560052 …PETITIONER (BY SRI. RAVI RAGHAVAN., ADVOCATE AND MISS. MEGHNA LAL ADVOCATE AND SRI. SYED PEERAN, ADVOCATE) AND: 1. THE DEPUTY COMMISSIONER OF CENTRAL EXCISE SERVICE TAX CELL, PUNE-I COMMISSIONERATE PUNE-411044. 2. M/S SHAMROCK FACITLITY MANAGEMENT SERVICES PVT LTD SHOP NO. 9, GROUND FLOOR KUNAL RIVERSIDE BRIDGE CHINCHWAD PUNE-411033. Digitally signed by NARASIMHA MURTHY VANAMALA Location: HIGH COURT OF KARNATAKA - 2 - WP No. 6483 of 2015 3. THE SENIOR MANAGER CORPORATION BANK NO.114, M G ROAD BANGALORE-560001. …RESPONDENTS (BY SRI. JEEVAN J NEERALGI FOR R1.,ADVOCATE FOR R1; SRI. V.B. RAVI SHANKAR, ADVOCATE FOR R3; R2 SERVED) THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DIRECT THE R-1 THROUGH A WRIT OF MANDAMUS, NOT TO INITIATE ANY ACTION OR TO ENFORCE ACTIONS WHICH HAVE ALREADY BEEN INITIATED AGAINST THE PETITIONER THROUGH NOTICES DATED 20.3.2014 VIDE ANN-G, AND 9.2.2015 VIDE ANN-N, UNDER SECTION 87 OF THE FINANCE ACT 1994, FOR RECOVERY OF THE DUES CONFIRMED AGAINST M/S SHAMROCK MANAGEMENT SERVICE PVT. LTD. [RESPONDENT NO.2]. THIS PETITION, COMING ON FOR HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: O R D E R The petitioner, while impugning the notice dated 20.03.2014 [Annexure-G] issued under Section 87(b)(i) of the Finance Act, 1994 [for short, ‘the Finance Act’] and another notice dated 09.02.2015 (Annexure-N) issued under Section - 3 - WP No. 6483 of 2015 87(b)(ii) of the Finance Act to its banker [M/s Corporation Bank, Bengaluru], has sought for declaration that the Service Tax Department cannot recover any amount in dispute between an assessee and another from such another unless the disputed amount is crystallized through the due process of law. 2. The first respondent has issued the notice dated 20.03.2014 [Annexure-G] under Section 87(b)(i) of the Finance Act informing the petitioner that the tax due of Rs.74,13,745/- from M/s Shamrock Facility Management Services Private Limited [the second respondent] along with interest at the appropriate rate would be recovered from the petitioner and in case the petitioner fails to make the payment of the aforesaid amount, it would be deemed to be an assessee in default. Next, the first respondent has issued the notice dated 09.02.2015 (Annexure-N) to the petitioner’s banker (the third respondent) informing that the petitioner, as a deemed assessee, is liable to pay a sum of - 4 - WP No. 6483 of 2015 Rs.1,09,47,211/- and that this amount should be recovered from the petitioner’s account. 3. On 13.02.2015, the petitioner’s banker has informed the petitioner that there is a lien in favour of the Deputy Commissioner of Central Excise, Pune [the first respondent] for a sum of Rs.1,09,47,211/-, and it is undisputed that subsequently the first respondent has recovered this money for the Central Government. The notices and the subsequent recovery as aforesaid is admittedly in the following circumstances. 3.1 The petitioner has entered into a Service Contract dated 01.03.2012 with the second respondent, and according to the petitioner, this contract is terminated with effect from 31.10.2012 because of certain deficiencies in the service rendered. The petitioner and the second respondent have not reconciled their accounts and settled the claims inter se. The petitioner asserts that it is holding back a sum - 5 - WP No. 6483 of 2015 of Rs.40,62,147/- and performance guarantee amount subject to its right to forfeit this amount. 3.2 The second respondent has applied under Voluntary Compliance Encouragement Scheme [VCE Scheme] declaring a sum of Rs.84,13,745/- as service tax due and making a pre-deposit of Rs.10,00,000/-. It is admitted that the second respondent’s application under the scheme would be accepted if the second respondent had deposited a total sum of Rs.42,06,873/- [that is 50% of Rs.84,13,745/ declared as service tax due] on or before 31.12.2013. However, the first respondent, because the second respondent has not deposited this amount, has rejected the application by the order dated 28.02.2014 declaring that this respondent was ineligible for the benefit under the VCE Scheme directing that the amount declared as due under the Scheme be recovered under the provisions of Section 87 of the Finance Act. - 6 - WP No. 6483 of 2015 3.3 After this order dated 28.02.2014, the first of the notices viz., the notice dated 20.03.2014 is issued to the petitioner to recover a sum of Rs.74,13,745/-. It must be observed that this amount is mentioned after giving deduction for the sum Rs.10,00,000/- that is deposited by the second respondent while filing application for the benefit of the VCE Scheme. Initially, the petitioner has responded by its letter dated 22.03.2014, but later has filed a detailed response on 25.03.2014. 3.4 The petitioner, by this detailed response, has informed the first respondent that a sum of Rs.44,78,499/- payable to the second respondent is retained for this respondent’s failure to perform its part of the contract, and that under no circumstance, the petitioner can be called upon to pay any amount higher than Rs.40,62,147/-. The petitioner, while asserting the right to forfeit this amount, has also stated that it cannot be made liable unless the - 7 - WP No. 6483 of 2015 second respondent provides necessary documents of statutory compliances and other documents. 3.5 The next impugned notice is issued to the petitioner’s banker [the third respondent] on 09.02.2015 stating that the second respondent is due in a sum of Rs.1,09,47,211/- [along with interest] towards service tax dues, that the petitioner, who holds money payable to the second respondent, has not complied with the notice under section 87(b)(i) of the Finance Act and therefore, this amount must be recovered from the petitioner’s account under Section 87(b)(ii) of the Finance Act. 4. Sri Ravi Raghavan, the learned counsel for the petitioner, submits that the first respondent should have extended an opportunity to the petitioner to effectively consider the petitioner’s response dated 25.03.2014. The petitioner is able to demonstrate that the contract with the second respondent is terminated on 31.10.2012, a point in time when there could not have been any claim against the - 8 - WP No. 6483 of 2015 second respondent by the Central Government. The petitioner is entitled to forfeit all the amounts due to the second respondent viz., the amount retained as performance security as also a sum of Rs.40,62,147/- indicated as due according to his books of account. However, Sri Ravi Raghavan relying on the following submissions contends that the petitioner cannot be made liable for any amount in excess of Rs.40,62,147/-: 4.1 The first respondent, while considering the response in terms of the letter dated 25.03.2014 and issuing notice dated 20.03.2014, which has resulted in the petitioner being deemed to be assessee in default [hereafter referred to as, ‘the deemed defaulter’] under Section 87(b)(i) of the Finance Act, should have ascertained the indisputable amount that the petitioner was in due to the second respondent. The first respondent’s decision to deem the petitioner a defaulter for the amount beyond the admitted - 9 - WP No. 6483 of 2015 liability is arbitrary. The first respondent should have been extended a personal hearing to the petitioner. 4.2 If the petitioner’s liability as a deemed defaulter can be confined only to a sum of Rs.40,62,147/-, the first respondent could not have issued the second impugned notice on 09.02.2015 under Section 87(b)(ii) of the Finance Act for a sum of Rs.1,09,47,211/- especially when the notice dated 20.03.2014 is issued only for a sum of Rs.74,13,745/- under Section 87(b)(i) of the Act. 4.3 The first respondent is arbitrary in not only issuing the notice dated 20.03.2014 under Section 87(b)(i) for a sum of Rs.74,13,745/- but also in issuing the subsequent notice dated 09.02.2015 for a sum of Rs.1,09,47,211/-under Section 87(b)(ii) of the Finance Act. The first respondent has given precedence to a purported statement by the second respondent in terms of its letter dated 23.01.2014, otherwise there is no basis to conclude that the petitioner is due in a sum of Rs.1,09,47,211/-. - 10 - WP No. 6483 of 2015 5. Sri Ravi Raghavan, relying upon these submissions, submits that the first respondent, who is vested with jurisdiction under Section 87(b)(i) of the Finance Act to decide as to whom notice under Section 87(b)(i) is to be issued and the amount for which notice is to be issued, is enjoined with the responsibility to consider all material circumstances and decide reasonably on the extent to which the noticee could be deemed to be a defaulter for the purposes of Section 87 of the Finance Act. 6. Sri Jeevan J Neeralagi, the learned counsel for the first respondent, submits that the provisions of Section 87(b)(iii) of the Finance Act contemplate deeming a person to be an assessee in default and issuance of further garnishee notice to ensure that the amount due to the Central Government is recovered as the first charge without any delay or protraction because of an inter se dispute between an assessee who is in default and the person who is liable to pay the amount to the assessee. If there is to be a detailed - 11 - WP No. 6483 of 2015 enquiry and an adjudication, the very purpose of the scheme under Section 87 of the Finance Act will be defeated. 7. Sri Jeevan J Neeralagi also submits that the first respondent, after the issuance of notice under Section 87(b)(i) of the Finance Act, has examined the second respondent’s books of account and upon ascertaining that the petitioner is due to pay a total sum of Rs.1,09,47,211/- along with up-to-date interest, has issued notice to the petitioner’s banker as permissible under Section 87(b)(ii) of the Finance Act. As such, the petitioner is not justified in contending that it should be a deemed defaulter only for a sum Rs.40,62,147/- based on its books of account or that there is any arbitrariness in issuing notice for a sum of Rs.1,09,47,211/- under Section 87(b)(ii) to its banker (the third respondent). 8. In the light of these rival submissions, the questions that arises for consideration are: - 12 - WP No. 6483 of 2015 a) Whether the first respondent - an authority under Section 87(b)(iii) of the Finance Act – should have extended a personal hearing to the petitioner before deeming it to be a deemed defaulter for recovery of the amount due from the second respondent. b) Whether the first respondent, in the circumstances of the case, should have deemed the petitioner to be an assessee in default only for a sum Rs.40,62,147/- [the amount admitted by the petitioner as payable to the second respondent, but subject to its right to forfeit ] or for a sum of Rs.1,09,47,211/-, [the amount purportedly ascertained by the first respondent as due by the petitioner to the second respondent from its books of account]; c) If the first respondent could have only held that the petitioner could be a deemed defaulter for a sum of Rs.40,62,147/-, whether the first respondent is justified in issuing the second impugned notice dated 09.02.2015 for a sum of Rs.1,09,47,211/- and if the petitioner’s liability could only be confined to Rs.40,62,147/-, - 13 - WP No. 6483 of 2015 whether the petitioner would be entitled for refund of the difference [the difference being between Rs.1,09,47,211/- and Rs.40,62,147/-] along with statutory interest or any other legally admissible interest. 9. The first question must necessarily be answered in the light of the scheme under the provisions of Section 87 of the Finance Act and the circumstances of the case. These provisions of Section 87 of the Finance Act read as under: \"SECTION 87. Recovery of any amount due to Central Government. — Where any amount payable by a person to the credit of the Central Government under any of the provisions of this Chapter or of the rules made there under is not paid, the Central Excise Officer shall proceed to recover the amount by one or more of the modes mentioned below:— (a) the Central Excise Officer may deduct or may require any other Central Excise Officer or any officer of customs to deduct the amount so payable from any money owing to such person which may be under the control of the said Central Excise Officer or any officer of customs. (b)(i) the Central Excise Officer may, by notice in writing, require any other person from whom money is due or may become due to such person, or who holds or - 14 - WP No. 6483 of 2015 may subsequently hold money for or on account of such person, to pay to the credit of the Central Government either forthwith upon the money becoming due or being held or at or within the time specified in the notice, not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount; (ii) every person to whom a notice is issued under this section shall be bound to comply with such notice, and in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary to produce any pass book, deposit receipt, policy or any other document for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary; (iii) in a case where the person to whom a notice under this section is sent, fails to make the payment in pursuance thereof to the Central Government, he shall be deemed to be an assessee in default in respect of the amount specified in the notice and all the consequences of this Chapter shall follow1.\" 10. The provisions of Section 87 of the Finance Act not only enable the Central Government to recover any amount payable to its credit but also provide for modes in which such amount can be recovered. If the provisions of 1 The subsequent provisions of this Section 87(c) contemplate attachment and sale of the assets of the deemed defaulter. - 15 - WP No. 6483 of 2015 Section 87(a) of the Finance Act contemplate deduction from whom the amount due to a defaulter2 by the Central Excise Officer or an Officer of the customs, the provisions of section 87(b) provide that the Central Excise Officer may require even others who are in to due, or hold money for the defaulter to pay so much of the amount as would be sufficient to discharge the liability to the Central Government with the stipulation that every person to whom notice is issued as aforesaid shall be bound to comply with the terms of the notice and if the person to whom the notice is issued fails to comply, then such person shall be deemed defaulter liable to the consequences contemplated under the provisions of Section 87[c]. 11. The first notice under Section 87(b)(i) of the Finance Act could be issued to even those who hold money on account of the person who is a defaulter or who could come into money on behalf of such person. Further, it would 2The person who is in Tax Arrears to the Central Government. - 16 - WP No. 6483 of 2015 be rather undeniable that a person, who could hold some amount in credit for the defaulter, must be first issued with notice specifying the amount that is due and only if there is non-compliance with the demand, such person can be a deemed defaulter liable to the consequences that are contemplated. 12. The crucial factors are that a person to whom notice could be issued must hold money for or on account for the person3 who is in due to the Central Government, that this person should be made known of the amount due to the Central Government and that the person, to comply with the notice is issued, must pay such an amount as is sufficient to discharge the money owed to the Central Government. The notice contemplated under Section 87(b)(i) of the Finance Act can only be to a person who holds money as aforesaid and to the extent that this person is due to the other who is in default to the Central Government and only to such 3 These persons could even be those who may come into money that is payable to the person who owes money to the Central Government - 17 - WP No. 6483 of 2015 extent as would be necessary to answer the liability to the Central Government. If this third person is made liable for any amount that he may not be due to the defaulter, this person would be vested with consequences beyond the liability and that is contemplated under the scheme of these provisions. 13. As such, it would be crucial to the entire process of issuance of notice under Section 87(b)(i) of the Finance Act for the consequences under Section 87(b)(ii), with the deeming under Section 87(b)(iii), to ascertain what would be the amount that this third person holds as due and payable to the other person. Therefore, when a response is issued on receipt of notice as aforesaid4, it would be necessary in law for the concerned Officer to find out what is the admitted amount and whether there is a bona fide dispute about the amount that is due to the defaulter or held on behalf of the defaulter. Next, the obvious question would be, can the 4 The right to respond must be in exercise of the right to opportunity to show cause against the proposed action which flows with the issuance of notice - 18 - WP No. 6483 of 2015 bona fides in presenting a dispute on the amount due or held as contemplated under the provisions of Section 87(b)(i) of the Finance Act be decided without a personal hearing. 14. This Court must answer this question in the light of the enunciation by the Hon’ble Supreme Court in Automotive Tyre Manufacturers Association v. Designated Authority and Others5 in this regard, and the enunciation reads as hereunder: \"It is thus, well settled that unless a statutory provision, either specifically or by necessary implication excludes the application of principles of natural justice, because in that event the Court would not ignore the legislative mandate, the requirement of giving reasonable opportunity of being heard before an order is made, is generally read into the provisions of a statute, particularly when the order has adverse civil consequences which obviously cover infraction of property, personal rights and material deprivations for the party affected. The principle holds good irrespective of whether the power conferred on a statutory body or Tribunal is administrative or quasi- judicial. It is equally trite that the concept of natural 5 (2011) 2 SCC 258 - 19 - WP No. 6483 of 2015 justice can neither be put in a straitjacket nor is it a general rule of universal application. Undoubtedly, there can be exceptions to the said doctrine. As stated above, the question whether the principle has to be applied or not is to be considered bearing in mind the express language and the basic scheme of the provision conferring the power; the nature of the power conferred and the purpose for which the power is conferred and the final effect of the exercise of that power. It is only upon a consideration of these matters that the question of application of the said principle can be properly determined. 15. The scheme under the provisions of Section 87(b) of the Finance Act, as delineated supra, is that when a person is due to the Central Government and it is ascertained that a third person is in due or holds money for such person, a notice can be issued to such third person who must pay the amount ascertained as held by him/her and if there is failure to comply, this third person, by operation of law, is deemed a defaulter liable to consequences as envisaged under Sections 87(b)(ii) and 87(c) which could be rather drastic if, despite a bona fide dispute, - 20 - WP No. 6483 of 2015 excess amount is appropriated to the Central Government with only a long drawn legal proceedings as the recourse. 16. The question of reading the opportunity of personal hearing into Section 87(b)(i) of the Finance Act must also be considered in the broader scheme in the comparable provisions of Section 226 of the Income Tax Act, 1961 and Section 79 of the CGST Act, 2017. These provisions, which are material for the present purposes 6 , read as hereunder: Section 226 (3) of Income Tax Act, 1961. Section 79 (1) c) of the CGST Act,2017 (i) The Assessing Officer or Tax Recovery Officer may, at any time or from time to time, by notice in writing require any person from whom money is due or may become due to the (i) The proper officer may, by a notice in writing, require any other person from whom money is due or may become due to such person or who holds or may 6 The sub sections in these provisions which relate to the manner in which notices can be issued and to whom it can be issued are not extracted - 21 - WP No. 6483 of 2015 assessee or any person who holds or may subsequently hold money for or on account of the assessee to pay to the Assessing Officer or Tax Recovery Officer either forthwith upon the money becoming due or being held or at or within the time specified in the notice not being before the money becomes due or is held so much of the money as is sufficient to pay the amount due by the assessee in respect of arrears or the whole of the money when it is equal to or less than that amount. (vi). Where a person to whom a notice under this sub-section is sends objections to it by a statement on oath that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then nothing contained in this sub-section subsequently hold money for or on account of such person, to pay to the Government either forthwith upon the money becoming due or being held, or within the time specified in the notice not being before the money becomes due or is held, so much of the money as is sufficient to pay the amount due from such person or the whole of the money when it is equal to or less than that amount; (iii) In case the person to whom a notice under sub- clause (i) has been issued, fails to make the payment in pursuance thereof to the Government, he shall be deemed to be a defaulter in respect of the amount specified in the notice and all the consequences of this Act or the rules made - 22 - WP No. 6483 of 2015 shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Assessing Officer or Tax Recovery Officer to the extent of his own liability to the assessee on the date of the notice, or to the extent of the assessee‘s liability for any sum due under this Act, whichever is less. (x)If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the [Assessing Officer][or Tax Recovery Officer], he shall be deemed to be an assessee in default in respect of the amount specified in the notice and further proceedings may be taken against him for the thereunder shall follow; (vii) Where a person on whom a notice is served under sub-clause (i) proves to the satisfaction of the officer issuing the notice that the money demanded or any part thereof was not due to the person in default or that he did not hold any money for or on account of the person in default, at the time the notice was served on him, nor is the money demanded or any part thereof, likely to become due to the said person or be held for or on account of such person, nothing contained in this section shall be deemed to require the person on whom the notice has been served to pay to the Government any such money or part thereof; - 23 - WP No. 6483 of 2015 realisation of the amount as if it were an arrear of tax due from him, in the manner provided in sections 222 to 225 and the notice shall have the same effect as an attachment of a debt by the Tax Recovery Officer in exercise of his powers under section 222. 17. The provisions of Section 226 of the Income Tax Act, 1961 and Section 79 of the CGST Act,2017 are wider in the opportunity contemplated. If under the provisions of the Income Tax Act, the person to whom notice is issued can file a statement sworn to on oath, under the provisions of CGST Act, the person to whom notice is issued can satisfy the officer concerned about the bona fides in saying that he does hold any money or the entire part of the money. Both these opportunities in extending opportunities as aforesaid incorporate crucial elements of personal hearing i.e., the opportunity to explain circumstances in person before there - 24 - WP No. 6483 of 2015 is deeming by the operation of law with entailing consequences. 18. This Court must also refer to the decision of the Hon’ble Supreme Court in Surinder Nath Kapoor v. Union of India7 where it is held, while considering the provisions of Section 226 of the Income Tax Act, 1961 that the object of issuance of notice is to provide an opportunity to the person to whom the notice is issued, to admit or deny their liability for the amount mentioned in the notice. The relevant portion of the judgment reads as: \"The object of serving a notice under clause (3)(vi) of Section 226 is to give the garnishee an opportunity to admit or deny his liability for the amount mentioned in the notice. Under clause (i) [sic (vi)] of Section 226(3), if the garnishee objects to the notice by a statement on oath that the sum demanded or any part thereof is not due to the assessee, then the garnishee will not be required to pay any such sum or part thereof, as the case may be.\" 71988 Supp SCC 626 - 25 - WP No. 6483 of 2015 19. In the light of the above, this Court is of the considered opinion that an opportunity of personal hearing to a person who files a response on receipt of notice under Section 87(b)(i) of the Finance Act to establish bona fides of a dispute, if any, over the amount mentioned in such notice must be extended, and this requirement must be read into the provisions of Section 87(b)(i). This opportunity of personal hearing can be an opportunity to appear in person before the officer who has issued the notice and explain, with the assistance of documents, the circumstances which bring forth bona fide. The first question is answered holding that the first respondent, upon receipt of the petitioner’s response, should have extended an opportunity to the petitioner to demonstrate in person that it would not be liable to pay any amount beyond the admitted liability. 20. The petitioner is issued with notice dated 20.03.2014 under Section 87(b)(i) of the Finance Act mentioning that a sum of Rs.74,13,745/- is due from the - 26 - WP No. 6483 of 2015 second respondent towards service taxes, and if the petitioner does not tender this amount, it would be deemed to be a defaulter under Section 87(b)(iii). The petitioner is also issued with another notice on 20.03.2014 calling for audited Balance Sheet and Creditors Balance Sheet showing the parties involved and the balance payable as of 31.03.2013. These notices are issued pursuant to the Second respondent’s Communication dated 23.01.2014 addressed to the first respondent saying that it has to receive a sum of Rs.1,06,80,222/- from the petitioner. The Second respondent has also enclosed its ledger extract. 21. The first respondent, in addition to issuing notice dated 20.03.2014 under Section 87(b)(i) of the Finance Act, has also issued a notice on same day to the petitioner calling for audited Balance Sheet and Creditors Balance Sheet showing the parties involved and the balance payable as of 31.03.2013. In pursuance of which, the petitioner, in his response, has admitted a liability to an extent of Rs.40,62,147/-. The first respondent, without explaining - 27 - WP No. 6483 of 2015 why the Second respondent’s ledger extract must prevail over the details without furnished by the petitioner and without considering the petitioner and the second respondent have not reconciled accounts, has gone ahead to issue the notice dated 09.02.2015 holding that petitioner is due to the tune of Rs.1,09,47,211/-. It is obvious that the figures have varied only because the second respondent has stated that it has to receive a sum of Rs.1,06,80,222/-. 22. The petitioner’s response inter alia is that the contract is terminated for deficiencies in service and that a sum of Rs.40,62,147/- is put on hold until such time the second respondent provides proof of all statutory compliances. However, it is seen from the detailed response that the petitioner has not even mentioned what are the compliances that are violated. This defence is specious and cannot be accepted to prevail over the first charge that the Central Government would be entitled. Further, as the petitioner has not tendered the admitted amount and has - 28 - WP No. 6483 of 2015 put forward a ruse to evade the liability, it cannot be entitled to any interest on the additional amount recovered. 23. The later questions framed are answered holding that the petitioner could only be a deemed defaulter to the extent of Rs.40,62,147/-, and consequentially, the petitioner would be entitled for the refund of the difference between Rs.1,09,47,211/- and Rs.40,62,147/- but without any interest. For the foregoing, the following ORDER [a] The petition is allowed in part declaring that the petitioner would be liable as a deemed defaulter under Section 87(b)(ii) of the Finance Act to a sum of Rs.40,62,147/-, and the impugned notice dated 09.02.2015 (Annexure-N) issued by the first respondent under Section 87(b)(ii) of the Finance Act to the third respondent shall be read accordingly. - 29 - WP No. 6483 of 2015 [b] Consequentially, the petitioner shall be allowed refund of the difference between Rs.1,09,47,211/- and Rs.40,62,147/- but without interest. [c] The first respondent is directed to refund the amount as aforesaid within a period of 8 [eight] weeks from the date of receipt of a certified copy of this order. If there is any delay, the difference amount shall be refunded by the first respondent with statutory interest for the delayed period. Sd/- JUDGE NV "