2020 (10) TMI 1107 - HC - Service Tax

Liability of Service Tax - business of providing washing and cleaning bedrolls and linen - non-receipt of payment of the amount of tax from the recipient of the services - non-compliance with the statutory provisions or not - maintainability of appeal under Section 85 of the Act, challenging the order(s) of the appropriate authority constituted under the Act - HELD THAT - Language of the statute is simple, clear and unambiguous. The service provider, so defined, is mandatorily required to register and make payment of component of tax with receipt to the services so rendered. The Act does not stipulate payment only on receipt thereof - petitioner has not registered itself under the statute; nor paid any tax. The order passed was after affording an opportunity of filing response; all contentions allowed to be raised, considered and dealt with; fair opportunity of hearing afforded; reasons for assessing the liability stands assigned; statutory provisions correctly appreciated and applied to the attending facts and circumstances. There is no violation of principles of natural justice. There is no misconstruction or misappreciation of fact or misapplication of the law - Petitioner has been providing service to the Government authority. The service does not fall within the specified services contained in the negative list. The amount received from the Railway Authorities is not in dispute, and the incidence of taxation stands correctly determined. The defence taken by the petitioner of persuading the service recipient to pay the amount or having initiated proceedings seeking appointment of an Arbitrator for settlement of disputes rightly stands rejected by the Assessing Authority, for compliance of the statutory provisions are not subject to or dependent upon the contractual terms governing the parties - Arbitral proceedings would only determine obligations inter se the parties to the agreement and not the liability or factum of compliance of statutory provisions. The statute mandates timely payment of component of tax. There is no provision for deferment, either till the time of its receipt or payment only subject to that. Hence, the contentions raised by the learned counsel at the time of the hearing, being untenable stands rejected. The liability to pay the tax in terms of Chapter V and VA of the Finance Act, 1994 rests solely upon the petitioner, being the service provider - Such liability cannot be deferred. It is not subject to receipt of any amount, be it a tax or otherwise, from the service recipient - Failure on the part of the service recipient to pay the amount under the service provider agreement cannot be a reason sufficient enough for non-compliance of the statutory provisions by the service provider. Equally, it also cannot be set up as a defence in the adjudicatory proceedings - The Act provides for a complete mechanism for adjudication of all issues of fact or law before different forums.

Issues Involved:
1. Liability of the petitioner to pay tax under the Finance Act, 1994 for services rendered.
2. Whether non-receipt of payment from the service recipient can be a defense for non-compliance with statutory provisions.
3. Appropriateness of filing an appeal under Section 85 of the Act.
4. Legality and correctness of the order dated 02.04.2018 passed by the Joint Commissioner, CGST & Central Excise Patna-I.

Issue-wise Analysis:

1. Liability of the Petitioner to Pay Tax:
The court examined whether the petitioner, as a service provider, is liable to pay tax under Chapters V and VA of the Finance Act, 1994. The court referred to Sections 65, 66, 66B, 66D, 68, 69, 71A, 72, 72A, 73, 75, and 76 of the Act, which collectively mandate that every service provider must register, pay the applicable service tax, and file returns. The court emphasized that the statutory language is clear and unambiguous, stating that the service provider is mandatorily required to register and make payment of the tax component for services rendered.

2. Non-receipt of Payment as a Defense:
The court addressed whether non-receipt of payment from the recipient of the services can be used as a defense for non-compliance with statutory provisions. The court held that the liability to pay tax is not subject to the receipt of payment from the service recipient. The statutory provisions mandate timely payment of the tax component, and there is no provision for deferment until receipt of payment. The court cited several judgments, including Laghu Udyog Bharati and another Vs. Union of India and others, T. N. Kalyana Mandapam Assn. Vs. Union of India & others, and Gujarat Ambuja Cements Ltd. and another Vs. Union of India and another, which affirm that the service provider is responsible for paying the service tax.

3. Appropriateness of Filing an Appeal:
The court considered whether the petitioner should have preferred an appeal under Section 85 of the Act, challenging the order(s) of the appropriate authority. The court noted that the Act provides a complete mechanism for adjudication of all issues of fact or law before different forums, and errors both of fact and law can be corrected by such statutory authorities. However, given that the matter pertains to the year 2011-12, the court decided not to relegate the petitioner to exhaust such remedies and chose to decide the issue on merits.

4. Legality and Correctness of the Order Dated 02.04.2018:
The court examined the legality and correctness of the order dated 02.04.2018 passed by the Joint Commissioner, CGST & Central Excise Patna-I. The court found that the impugned order was passed after affording an opportunity for filing a response, considering all contentions, and providing a fair hearing. The order assigned reasons for assessing the liability, correctly appreciated and applied statutory provisions, and did not violate principles of natural justice. The court concluded that the order was not perverse, illegal, or erroneous, and the petitioner's defense of non-receipt of payment from the Railways was rightly rejected by the Assessing Authority.

Conclusion:
The court answered the questions as follows:
(a) The liability to pay tax under the Finance Act, 1994 rests solely upon the petitioner, being the service provider.
(b) Such liability cannot be deferred and is not subject to receipt of any amount from the service recipient.
(c) Failure on the part of the service recipient to pay the amount cannot be a sufficient reason for non-compliance with statutory provisions by the service provider, nor can it be set up as a defense in adjudicatory proceedings.
(d) The Act provides a complete mechanism for adjudication of all issues of fact or law before different forums.

The petition was disposed of, and the impugned order dated 02.04.2018 was upheld.

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