2009 (11) TMI 238 - HC - Service Tax

Court orders B.S.N.L. to pay service tax directly to petitioner, quashes penalty proceedings

The court directed B.S.N.L. to pay service tax directly to the petitioner without requiring upfront payment to the Central Excise Department. B.S.N.L. ... Liability to pay service tax for provision of security services - mandamus to pay tax and interest - deposit of tax by service receiver with direction to service provider to remit - quashing of penalty on account of sufficient cause for non-depositLiability to pay service tax for provision of security services - B.S.N.L. was required to pay the service tax amount to the petitioner in respect of security services provided during the period demanded by the Central Excise Department. - HELD THAT: - The Court found that respondents No.1, 2 and 4 (B.S.N.L.) did not dispute their liability to pay the service tax demanded by the Central Excise Department for the period April, 1999 to June, 2000. The respondents' insistence that the petitioner must first deposit the tax with Central Excise before receiving payment was held to be an unjustified precondition. On the admitted liability of B.S.N.L. to discharge the service tax component payable to the petitioner, the Court issued a writ of mandamus directing B.S.N.L. to make the payment to the petitioner so that the petitioner could comply with the excise demand. [Paras 6, 7, 12, 13, 14]B.S.N.L. directed to pay the service tax amount to the petitioner for the period April, 1999 to June, 2000.Mandamus to pay tax and interest - deposit of tax by service receiver with direction to service provider to remit - B.S.N.L. was directed to pay the service tax along with interest at the rate of 18%, and the petitioner was directed to deposit the tax with the Central Excise Department. - HELD THAT: - Having concluded that B.S.N.L. accepted liability, the Court ordered that the respondents pay the service tax amount to the petitioner and also pay interest for late payment at the prescribed rate of 18%. The Court further directed the petitioner, upon receipt of such payment, to deposit the service tax amount with the Central Excise Department, thereby structuring the mechanism for compliance while removing the respondents' conditionality. [Paras 12, 14]Respondents to pay service tax and interest at 18%; petitioner to deposit the amount with Central Excise.Quashing of penalty on account of sufficient cause for non-deposit - The penalty proceedings initiated by the Central Excise Department against the petitioner were set aside on the ground that the petitioner was prevented by sufficient cause from depositing the service tax in time. - HELD THAT: - The Court examined the circumstances leading to non-deposit and concluded that the petitioner had been prevented by sufficient cause from depositing the demanded service tax within time. In consequence, the penalty notice issued by the Central Excise Department was set aside and the penalty proceedings were quashed. [Paras 15, 16]Penalty notice set aside and penalty proceedings quashed for sufficient cause.Final Conclusion: Writ petition allowed: B.S.N.L. directed to pay the service tax due for April, 1999 to June, 2000 together with interest at 18% to the petitioner, who shall deposit the amount with the Central Excise Department; penalty proceedings against the petitioner quashed for sufficient cause. 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.