2009 (11) TMI 238 - HC - Service Tax

Security Agency Service right of service provider to get reimbursement of service tax from the service receiver Held that The B.S.N.L. is not disputing its liability to pay the service tax. This being so, they are required to pay the service tax amount to the petitioner so that the petitioner may deposit the same with the Excise Department. The contention of the BSNL (service receiver) that first service tax should be deposited by the petitioner with the Central Excise Department and, only thereafter the amount of service tax will be paid by the BSNL to the petitioner, who is providing security service to the BSNL is not acceptable Penalty proceedings under service tax quashed

Summary

Issues:
1. Direction to pay service tax, interest, and penalty to the petitioner.
2. Dispute over payment of service tax between the petitioner and B.S.N.L.
3. Action against B.S.N.L. for not paying service tax to the petitioner.
4. Validity of penalty notice issued by the Central Excise Department.

Analysis:
1. The petitioner sought a direction for the respondents to pay service tax, interest, and penalty as demanded by the Central Excise Department. The petitioner, a registered agency providing security guards to B.S.N.L., Gorakhpur, was asked by the Excise Department to pay service tax for a specific period. The B.S.N.L. authorities required the petitioner to deposit the amount first before releasing the dues, leading to the filing of the writ petition.

2. The respondents, B.S.N.L., did not dispute their liability to pay service tax to the petitioner but insisted that the petitioner deposit the service tax with the Central Excise Department first. The court found this precondition unjustified and directed B.S.N.L. to pay the service tax directly to the petitioner without such conditions. The B.S.N.L. acknowledged its liability to pay the service tax, and the court ordered them to fulfill this obligation.

3. The court considered the submissions and confirmed that B.S.N.L. was liable to pay the service tax amount to the petitioner. Consequently, a writ of mandamus was issued, commanding B.S.N.L. to pay the service tax amount to the petitioner along with interest for late payment. The petitioner was directed to deposit the service tax amount with the Central Excise Department. The penalty notice issued by the Excise Department was set aside due to valid reasons provided by the petitioner for the delay in depositing the service tax.

4. The penalty notice issued by the Central Excise Department was challenged, and the court found that the petitioner had a sufficient cause for not depositing the service tax on time. As a result, the penalty proceedings were quashed, providing relief to the petitioner from the penalty imposed by the Excise Department.