payment of service tax on renting of immovable property by main company.

[samiuddin ansari]

Dear panel members,

My friends company "A" engaged in manufacture of ball bearing and more 80% are of export. During the course of audit of company "A", Audit team has observed that the said company were in lease agreement with company "B" ( having same Board of Director's of "A" company) inlcuding plant and machinery especially for job-work process for "as is where is basis" with a condition to pay ₹ 15 lakhs quarterly to company "B". Hence, Audit team, has instructed to pay up the service tax on such amount. Since, accounting of the said "B" company is being handled at company "A". The company "A" had shown his willingness to pay up the same and accordingly they paid the same on behalf of company "B". My point is whether company "A" can pay up the tax dues of company "B" , where in fact status of the company "B" is closed in official web site of Ministry of Company affairs. The Govt. is receiving revenue irrespective of whether from company "A" or company "B". Since, the payment has already been made by company "A" on behalf of company "B" due to shortage of fund, again, the audit team is stressing upon to pay up the same from Company "B" only. Please through some light with supportiveTribunal judgements or Board's circular or clarification on such issue.

AI Summary

Service provider liability requires the named provider to bear service tax obligations, third party payments do not discharge statutory liability.
The service provider remains the primary person liable to discharge service tax; third party payments do not substitute for statutory liability. Recovery provisions permit the department to pursue the registered provider for unpaid dues even if a related party has paid on its behalf, and administrative closure or lack of registration does not automatically negate the provider's liability.