2016 (3) TMI 488 - HC - Service Tax

Writ petition - Seeking a writ of mandamus - Assessment of correct liability of Service tax - Held that - the matter is still under investigation and the process to issue a notice for making an assessment under the Act is under contemplation. Also there is no assessment order against the petitioner. Therefore, the petitioner cannot be forced to pay the amount as per the statement recorded. - Writ petition disposed of

Summary

Issues:
Petitioner seeks mandamus for correct service tax assessment. Allegation of liability from 01.07.2012. Arrest for non-deposit of service tax. Compliance with interim order disputed. Dispute over liability for service tax on material supplied free of cost. Department's investigation ongoing without assessment order.

Analysis:
The petitioner filed a writ petition seeking a mandamus for the correct assessment of service tax liability. The petitioner provides labor for building construction under a works contract and is alleged to be liable for service tax from 01.07.2012. The Service Tax Department conducted an investigation and recorded statements admitting liability from the petitioner and another individual. Subsequently, the petitioner was arrested for non-payment of service tax under the Finance Act. The petitioner was granted bail with conditions related to service tax deposit. A time extension application was rejected, leading to a Section 482 Cr.P.C. application before the High Court, resulting in an interim order to pay 25% of the outstanding amount.

The petitioner claims compliance with the interim order by depositing 25% of the outstanding amount, disputed by the respondent. The petitioner argues that despite admitting liability earlier, legal advice suggests no service tax is due on material supplied free of cost. The petitioner alleges that the authority is not addressing this objection and is resorting to coercive recovery measures. The Department, through a short-counter affidavit, stated that the matter is under investigation without an assessment order against the petitioner.

The Court opined that the petitioner cannot be compelled to pay based solely on the recorded statement. If the correct service tax amount is not deposited, the Department can initiate proceedings for adjudication and recovery. The Court highlighted that if the petitioner breaches bail or interim order terms, the Department can seek bail cancellation and order vacation. The writ petition was disposed of with these observations, emphasizing the need for a formal adjudication process before enforcing service tax payment.