Service tax
prachiojha
(Querist) 21 March 2013
This query is : Resolved
A Banking Company has sanctioned working capital limit against book debts to its customer "Company A" which is engaged in the business of erection of Hoardings, a serice taxable for service Tax. The said working capital loan is sanctioned against the book debts of Company A. The bank has allowed fiancé on book debt and a charge on book debts duly registered with the ROC.
Now, the bank has come to know that the Company A has defaulted in payment of service tax and hence as per the provisions of Section 87 of Finance Act, the Service Superintendent Service Tax has sent notices to a "Company B" who is the Debtor of "Company A" (the Bank's customer).
Now, the Taxation Department is seeking to recover the unpaid service tax of Company A by instructing Company B that owes money to Company A to deposit its dues to Company A to the Service Tax Department.
However, since the Bank had sanctioned loans against book debts of Company A, the bank claims that it has the first right to recover the dues from Comopany B.
Kindly enlighten if bank can enforce its first right to recover as against the Service Tax authorities. If not then how doees the bank protect its rights??
prachiojha
(Querist) 21 March 2013
Sir, could you please elaborate more on this?
