Sections 73,73A to 73D, 87 of Finance Act, 1944 read with the Service Tax (Provisional Attachment of Property) Rules, 2008 and CBEC Circular 103/06/2008-ST dated 01.07.2008 prescribe the legal provisions and procedure for recovery of dues of Service Tax.

Period for which Service Tax can be recovered:

According to Section 73 of the Finance Act, 1994 any Service Tax that is not levied or paid or is short levied or short paid or erroneously refunded can be demanded by a Central Excise Officer, within 18 months.  The period of 18 months is computed with reference to a ‘relevant date’, which is defined in sub-section 73(6) as follow:

(a) the date the prescribed periodical return, showing particulars of Service Tax paid during the period to which the said return relates, is filed;

(b) where no periodical return is filed, the last date on which such return is to be filed under the said rules;

(c) in any other case, the date on which the Service Tax is to be paid; 

(d) in a case where the Service Tax is provisionally assessed, the date of adjustment of the Service Tax after the final assessment thereof; and

(e) in a case where any sum, relating to Service Tax, has erroneously been refunded, the date of such refund.


However, in extreme cases involving non-payment or short payment or incorrect refund on account of (a) fraud; or (b) collusion; or (c) wilful mis-statement; or (d) suppression of facts; or (e) contravention of any of the legal provisions with intent to evade payment of Service Tax either by the person chargeable with the Service Tax or his agent, the time period of 18 months gets extended to 5 years. 

Within the specified time frame the Central Excise Officer must serve a notice on the person required to pay the Service Tax or refund, as the case may be, requiring him to show cause why he should not pay the amount specified in the notice.  It is also provided that where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of 18 months or 5 years.

All determinations by the Central Excise Officer shall be made in adherence to the principles of natural justice i.e. giving the notice adequate opportunity of self defense including personal hearing. 

Encouraging voluntary payment of Service Tax:

In order to encourage voluntary compliance,it is provided that when the 5 year period is invoked the person charged with non-payment of Service Tax (or refund amount) may suo moto pay the amount in full or in part, along with interest and penalty of 25% within 30 days of the receipt of the notice. In this case if it is determined the full amount is paid then all proceedings are deemed concluded. Otherwise the Central Excise Officer shall proceed to determine the part of the amount not paid and take necessary action to recover the same.  


In the normal case (i.e. other than fraud, suppression etc.) any Service Tax not levied or paid or short-levied or short-paid or erroneously refunded, the person chargeable with the Service Tax, or the person to whom such refund is erroneously made, may pay the amount of such Service Tax / refund on his own or on the basis of amount ascertained by a Central Excise Officer before service of notice on him.  In this case no notice shall be served. However, if the Central Excise Officer determines the full amount has not been paid he shall serve notice and the period of “18 months” shall count from the date of receipt of such information of payment.

Payment of Service Tax collected but not paid to Government:  

Section 73A of the Finance Act, 1994 requires any person who has collected excess Service Tax (i.e. over and above the amount legally assessed) shall deposit the same with Central Government.  This will apply even when no Service Tax is due but is collected. If this is not done then the Central Excise Officer shall serve notice on the person liable to pay such amount and determine and recover the amount.


The recovery of the amount determined can also be done by way of adjustment against the Service Tax payable.  Where any surplus amount is left after the adjustment, such amount shall either be credited to the Consumer Welfare Fund or refunded to the person who has borne the incidence of such amount, in accordance with Section 11B of the Central Excise Act, 1944.

Interest payment on Service Tax collected in excess:

Section 73B of the Finance Act, 1994 deals with interest on amount collected in excess of the Service Tax assessed or determined and paid for any taxable service from the recipient of the service.  It is provided that the person who is liable to pay such amount shall also pay interest at a notified rate not below 10% p.a. and not exceeding 24% p.a., from the first day of the month succeeding the month in which the amount ought to have been paid till the date of payment of such amount.

In one situation no interest is payable. This is when the amount due becomes payable consequent to issue of an order, instruction or direction by the Board under Section 37B of the Central Excise Act, 1944, and it is voluntarily paid in full within 45 days.

It is also provided that if the amount of Service Tax due is re-determined by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, the interest payable thereon shall be based upon the re-determined amount.

Methods of recovery of Service Tax 

Section 87 of the Finance Act, 1994 provides the mechanism to recover any amount due to Central Government if the same is not paid.  This gives the right to a Central Excise Officer to straightway recover the amount shall proceed to recover the amount by one or more of the modes mentioned below:

(a) By deducting such amount from any money owed to such person, under the control of any Central Excise / Customs Officer.

(b) By recovery from any other person from whom money is due to such defaulting person.

(c) By restraining any movable or immovable property belonging to such person and detain the same until the amount payable is paid. Such property can also be sold if necessary.

(d) By preparing a certificate specifying the amount due and sending it to the Collector of district in which such person owns any property or carries on his business for recovery as if it were an arrear of land revenue.

This provision (also called certificate action) is used when the amount due has been finally determined and is not subject to any stay or judicial proceedings.  It is also provided that if the recovery notice is sent 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 before payment is made.

An important recovery provision is that in case where the person to whom a notice for recovery is sent, fails to make the payment, he shall be deemed to be an assessee in default in respect of the said amount. For instance, if a bank does not honor the recovery certificate the bank will be deemed to be the defaulter and Service Tax can be recovered from the bank. 

Provisional attachment of property for recovery of Service Tax:

In view of the importance of recovery of Service Tax due to the exchequer the law provides for precautionary action to safeguard the revenue’s interest if there is apprehension that during the pendency of the proceedings to finally determine the due amount the person concerned may dispose his property. This was found necessary because proceedings in various quasi judicial and judicial forums takes considerable time before a matter reaches finality. 

Section 73C of the Finance Act, 1994 provides for provisional attachment of property of the person to whom the notice to pay Service Tax is issued to protect revenue in certain cases.  This is done with the previous approval of the Commissioner of Central Excise.  Such provisional attachment is ordinarily valid for six months but the period can be extended by the Chief Commissioner of Central Excise to a maximum of two years.

Service Tax (Provisional Attachment of Property) Rules, 2008 lays down the procedure to be followed for the attachment of property under Section 73C of the Finance Act, 1994. Further, Circular No. 103/06/2008-ST dated 01.07.2008 specifies the following guidelines for provisional attachment of property.

(i) The proceedings for provisional attachment can be initiated only after issue of Show Cause Notice under Section 73 or 73A of the Finance Act, 1994.


(ii) If the Central Excise Officer is of the opinion that, in order to protect the interests of revenue, it is necessary to attach the property of the noticee, he shall prepare a proposal in the format prescribed under rule 3(1) of the Service Tax (Provisional Attachment of Property) Rules, 2008 and forward it to the jurisdictional Commissioner of Central Excise for approval.

(iii) In cases where the proceedings under Section 73 or 73A are pending before the Commissioner of Central Excise he shall himself make the order of attachment.

(iv) There should be sufficient justification that the provisional attachment of property is necessary to protect the interests of revenue since this is an extraordinary remedy. Thus, the grounds on which the Central Excise Officer entertains the reasonable belief that the noticee would dispose of, or remove, the property and the sources of his information, if any, should be clearly stated while seeking the approval of the Commissioner of Central Excise. In terms of the recommendation of the Standing Committee on Finance (Fourteenth Lok Sabha) in its 27th Report appropriate disciplinary action shall be initiated against the officers who may be found to exercise the powers of provisional attachment of property frivolously and without sound reasons. 

(v) Normally, the attachment proposal should be forwarded within one month’s period of the issue of show cause notice. 

(vi) The Commissioner of Central Excise, if satisfied that provisional attachment is justified, may serve a notice on the person on whom a notice is served under Section 73 or 73A of the Act, requiring such person to explain, in writing or in person or both, within 15 days as to why the property specified in the notice should not be provisionally attached. This notice should also specify the condition that the noticee should not sell, transfer, mortgage, charge, lease or otherwise alienate or encumber the property, till a decision is taken. In case of immovable property, the notice should also be sent to the concerned registration authorities with a direction not to allow any sale, transfer, mortgage etc., of the property.

(vii) After due consideration including hearing the person, if such person so desires, the Commissioner of Central Excise may grant approval to the provisional attachment of the property and the Central Excise Officer before whom the proceedings under Section 73 or 73A of the Act are pending, may, by order in writing, attach the said property. The Commissioner shall grant such approval within 15 days of holding of personal hearing. 

(viii) A copy of the order of provisional attachment should be served by the Central Excise Officer in the same manner as prescribed under Section 37C of the Central Excise Act, 1944, as made applicable to Service Tax vide Section 83 of the Act.

(ix) The provisional attachment of the property of the concerned person by arrest or distrain shall be made after sunrise and before sunset and not otherwise.

(x) After provisional attachment of the property, the Central Excise Officer shall prepare an inventory of the property attached and specify in it the place where it is lodged or kept and shall hand over a copy of the same to defaulter or the person from whose charge the property is distrained.

(xi) Where the property consists of the share or interest of the concerned person and another as co-owners, the provisional attachment shall be made by a notice to the concerned person prohibiting him from transferring the share or interest or charging it in any way.

(xii) The order of provisional attachment shall cease to have effect if the noticee pays the entire duty amount along with interest.

Types of offences that qualify for provisional attachment of property:

(a) Provision of a taxable service without the cover of an invoice or any other document, as prescribed, and without payment of tax; 

(b) Provision of a taxable service without declaring the correct value for payment of Service Tax, where a portion of value of taxable service, in excess of invoice price, is received by him or on his behalf but not accounted for in the books of account;

(c) Taking of CENVAT credit without the receipt of goods or services specified in the document based on which the said credit has been taken;

(d) Taking of CENVAT credit on invoices or other documents which a person has reasons to believe as not genuine;

(e) Issue of Service Tax invoice or any other document, without providing or to be providing a taxable service, as specified in the said invoice or other document;

(f) Claiming of refund or rebate in a fraudulent manner such as on invoice or other documents which a person has reason to believe as not genuine.

(g) The provisional attachment of property shall be resorted only in a case where the Service Tax or CENVAT credit alleged to be involved is more than Rs. 25 lakh.

Types of property which can or can not be attached: 

(a) Personal property of a sole proprietor or partners shall not be attached. Personal property means any movable or immovable property which is in personal use of the sole proprietor or partner. However, immovable property/ properties which is/ are used for commercial purpose may be provisionally attached.

(b) Movable property should be attached only if the immovable property available for attachment is not sufficient to protect the interests of revenue. It should also be ensured that such attachment does not hamper normal business of the assessees. Thus, inputs required for provision of a service should not be attached.

Attachment not to be excessive: 

Provisional attachment by arrest or distrain of the property shall not be excessive.  The property provisionally attached shall be of value as nearly as may be equivalent to that of the amount demanded in the proceedings under Section 73 or 73A of the Act.

Obligation of person whose property is attached:

The person on whom a notice for provisional attachment of property has been served or his representative shall not mortgage, charge, lease or otherwise deal with any property belonging to him except with the written permission of the Commissioner of Central Excise. Further, any private transfer or delivery of the property attached or of any debt, dividend or other moneys contrary to such provisional attachment, shall be void as against all claims enforceable under the provisional attachment.

Property exempt from attachment: 

All such property as is by the Code of Civil Procedure, 1908, exempt from attachment and sale for execution of a decree of a Civil Court shall be exempt from provisional attachment. The decision of the Commissioner of Central Excise as to what property is so entitled to exemption shall be final.

Publication of names of defaulters:

Section 73D provides that name of any defaulting person may be published alongwith relevant particulars.  This decision is to be taken by the Central Government. However, such publication shall not be made in relation to any penalty until the time for an appeal to the Commissioner (Appeals) / Appellate Tribunal has expired without an appeal having been filed or the appeal has been disposed of.  In this case the names of the partners of the firm, directors, managing agents, secretaries and treasurers or managers of the company, or the members of the association, as the case may be, may also be published.