2010 (4) TMI 381 - HC - Service Tax

Recovery of dues- The respondent Deputy Commissioner of Customs, Central Excise and Service Tax, Rajahmundry Division, issued a notice under Sec. 87(b)(i) directing the petitioner to remit service tax amount. Petitioner submits that it does not require to pay the service tax insofar as the payments effected by it to the manpower supply agencies are concerned and further in the absence of any assessment order passed by the assessing authority. Held that- no difficulty in recovery of tax either from agencies or principal employer as adequate funds stated as available - but the notice on recovery of dues without assessment order set aside.

Summary

Issues:
1. Assessment of service tax liability on a government undertaking and its manpower supply agencies.
2. Validity of the notice issued under Sec. 87 of the Finance Act, 1994.
3. Requirement of an assessment order before directing payment of service tax.

Analysis:
The High Court of Andhra Pradesh heard two writ petitions concerning the Oil and Natural Gas Corporation Limited and its manpower supply agencies. The Deputy Commissioner of Customs issued a notice directing the corporation to remit a significant service tax amount for a specific period. The corporation argued against the tax payment, citing lack of assessment order and necessity. On the other hand, the respondent contended that assessment is pending but the corporation is liable due to potential payments to the agencies. The key issue was whether the agencies are liable for service tax assessment. The court ruled that the assessing authority must evaluate the agencies' liability first through proper assessment before directing the corporation to pay. The court emphasized the importance of assessment orders to determine tax liabilities accurately.

The court also considered the corporation's concern regarding potential friction with the agencies if tax amounts are transmitted without assessment orders. The corporation assured the availability of funds for tax payments when necessary. Consequently, the court allowed the writ petitions on the grounds that the notice was issued without a prior assessment order. The respondent was directed to complete the assessment within three months to determine the actual tax liability. The court highlighted the importance of following due process and assessment procedures before enforcing tax payments.