2021 (2) TMI 987 - HC - Service Tax

Liability of service tax - reverse charge mechanism - case of applicants is that the writ-applicant is a cooperative society and not association of the individuals. Therefore, the liability to pay the service tax would be of the recipient of the services and that would be the ONGC - HELD THAT - By amendment, which has been permitted to be carried out, it is brought to the notice of this Court that the service recipient being ONGC Ltd. had already deposited the requisite service tax with the concerned authority and the payments were then made to the writ-applicant society. This writ-application is not entertained as the impugned order is appealable under Section 107 of the Act. However, we would like to seek the responsibility of the respondent no.2 as regards the case put up by the writ-applicant that the service recipient being ONGC Ltd. and ONGC having deposited the requisite service tax, the liability could be fasten upon the writ-applicant once again towards the service tax. Let Notice be issued to the respondents returnable on 8th March 2021.

Summary

Issues:
1. Liability of service tax on a registered cooperative society supplying manpower to ONGC.
2. Show-cause notice under Section 73(1) of the Finance Act, 1994 and Sections 142 and 174 of the Central Goods & Services Tax Act, 2017.
3. Arguments regarding the liability of the service tax recipient, ONGC.
4. Entertaining the writ-application despite appealability under Section 107 of the Act.

Analysis:
1. The judgment addresses the issue of the liability of a registered cooperative society providing manpower services to ONGC for service tax. The society received a show-cause notice under various sections, demanding payment of service tax, interest, and penalties for non-payment or short payment. The society argued that as a cooperative society, the liability to pay service tax should rest with the service recipient, ONGC, which had already deposited the tax with the authorities before making payments to the society.

2. The show-cause notice required the society to explain the non-payment of service tax amounting to a significant sum for a specific period. The society responded to the notice, presenting its arguments and challenging the demand based on the nature of its entity and the tax liability of the service recipient, ONGC. The judgment highlights the importance of examining the responsibility of the service recipient in such cases to determine the correct party liable for the service tax.

3. The judgment delves into the principal argument presented by the society's counsel, emphasizing the distinction between a cooperative society and an association of individuals concerning service tax liability. The court allowed a draft amendment to the petition to include information about ONGC having already paid the service tax, potentially shifting the liability away from the society. Despite the appealability of the impugned order under Section 107 of the Act, the court decided to entertain the writ-application to further investigate the matter and assess the responsibility of the service recipient, ONGC, in the tax payment process.

4. In a procedural aspect, the court issued notices to the respondents, returnable on a specified date, and permitted direct service through email and regular modes. The decision to notify the matter prominently indicates the court's intent to thoroughly examine the case and potentially determine the correct party liable for the service tax in question. The judgment showcases a meticulous approach to analyzing the complexities of service tax liability in the context of a registered cooperative society providing services to a government-approved contractor like ONGC.