By TIOL News Service

RANCHI, APRIL 16, 2013: THE petitioner is aggrieved by the liability created against him without notice and the disparaging observations made by the Additional Commissioner, Central Excise, Ranchi in an order-in-original passed recently.

The said authority in the impugned order dated 31 st December, 2012 observed as under -

"Since the Noticee is a very small service provider, it was a major responsibility of the big brother, i.e.; DVC, CTPC, Chandrapura not only to guide their service providers to discharge the proper Service Tax liability but also to pay the due Service Tax on the to their service providers timely. Had they done the payment of Service Tax timely to their Service providers, there was no question of non payment of Service Tax by the Service providers to the Government of India.

Though, surprisingly, the DVC CTPS has not been issued with the Show Cause Notice, though they played important role in non payment of Service, by their Service providers. They cannot escape their responsibilities towards the Government and by guiding their Service providers to discharge the taxes in the legal manner.

For more than abetting the non payment of Service Tax to the Government of India DVC CTPS should set example by making payment of interest for delayed payment of Service Tax, which was required to be paid by them to their Service providers & should compensate for the penalties imposed on their Service providers.

If the penalties and the interest and the Service tax due is recovered from the tiny Service Tax provider, this may amount to killing the small businessmen and their business. While DVC CTPS will clearly escape from their social and fiscal responsibilities completely.

DVC CTPS is the Government of India Undertaking & accordingly, it is a part of Government. The payment of Service Tax for them would be just a book entry, as far as the Government of India is concerned but it will be the question of life and death for the tiny businessman.

If DVC CTPS discharges their responsibility by payment of all the dues to their service providers, they would not only set a creditable example in the industry and the society as well. By doing this act of not ensuring Service Tax payments to their service providers, their working system has been exposed, especially when they have the taxation wing & specialized staff working for taxation and accounting. Such a Unit can not take a plea of not knowing the law and guiding their dependent Service Provider, who simply follow their guidelines/dictates.

Payment of the Service tax due on behalf of their Service providers, the demand of Service Tax from these Service providers would reach the final end. On the other hand, demanding the dues from the tiny Service Providers would only add to only arrears of Service Tax, which is not desirable, especially, when the Service Tax is the tax of indirect nature and gets passed on to the final person. Demanding Service Tax from the beginners of chain would also amount to unjust enrichment of DVC CTPS, which is improper.

Therefore, it is necessary for DVC CTPS not only to pay the entire Service Tax liability with interest and penalty amount to their Service Providers, but also ensure that their Service Providers discharge them as soon as they received the amount from DVC CTPS and pay to the Government of India in the treasury towards payment of Service Tax, interest and penalty dues."

And then in the concluding paragraph, the adjudicating authority confirmed the payment of service tax on noticee M/s T.A. Enterprises as well as interest u/s 75, penalty u/s 77 of the Act and also an equivalent penalty of Rs. 7,49,466/-.

Thereafter, it is also held thus -

"(ii) On DVC, CTPS, as they are fully involved in receiving above referred services from the Noticee and in turn owe the Service Tax dues to the Noticee, to compensate the entire financial loss including interest and penalty to the Noticee, on account of above order, as such loss arose on account of serious mistake and carelessness of DVC, CTPS. Had they paid the Service Tax amount timely to the Noticee, this situation could be avoided."

The adjudicating authority did not end his order at that.

He also directed the Preventive Wing and arrear recovery wing of the Commissionerate of Central Excise and Service Tax, Ranchi to take corrective and punitive measures on the DVC CTPS in case of non compliance of the order passed by the Assessing Officer and secure non recurrence of such incidents in future .

After receiving this out-of-the-world order, the petitioner felt it prudent to knock the doors of the Jharkhand High Court.

The petitioner submitted that in law the petitioner is not liable to pay any service tax and at the cost of repetition submitted that even if noticee is liable to pay service tax, penalty and interest, such liability cannot be fastened upon the petitioner without being any notice of assessment upon the petitioner; that DVC has been condemned for no reason; that the Assessing Officer has shown sympathy to the person who is liable to pay the tax and they have been described as a "tiny service tax provider"and the petitioner is sought to be blamed for "killing the small businessman and their business".

The Counsel for the Revenue was tight-lipped and sought time to file reply on facts as well as the legal aspects of the matter.

The High Court observed -

"8. However, prima facie, we are satisfied that before consideration of the matter in detail, it will be appropriate to give notice to the Assessing Officer-Rajiv Kumar Mishra, Additional Commissioner, Central Excise, Ranchi so that certain allegations may also be examined against the officers whether the order in question has been passed in bonafide exercise of power under the Statutory provision or it is something else, which would be adequately answered by the said officer himself, who has right to be heard before any observation. Therefore, issue notice to Rajiv Kumar Mishra, Additional Commissioner, Central Excise, Ranchi, who may meet with the allegation of the petitioner questioning the passing the order against petitioner without given opportunity of hearing to the petitioner and also passing stricture that too without factual finding of the said authority."

A copy of the petition as well as copy of the instant order was directed to be sent to the assessing officer and in the meanwhile the operation of the impugned order was stayed.

The matter is to be heard shortly and we will keep netizens posted on the same.

In passing : No one can be profoundly original who does not avoid eccentricity - Andre Maurois

(See 2013-TIOL-297-HC-JHARKHAND-ST)