M/S Ajay Kumar Through Partner Smt. Mala Sinha vs. The Union Of INDIA And Ors

Held

The Court held that the liability to pay service tax rests solely upon the service provider, the petitioner, under Chapters V and VA of the Finance Act, 1994. The Court rejected the petitioner's contention that non-receipt of payment from the service recipient could be a defence for non-compliance, stating that the statutory liability is not subject to or dependent upon contractual terms between parties. The Court affirmed that arbitral proceedings determine obligations between parties, not compliance with statutory provisions. The Court also found that the petitioner's argument regarding the service recipient's obligation was misplaced, as the primary liability lies with the provider. Regarding the issue of preferring an appeal, the Court noted that the Act provides a complete mechanism for adjudication but, given the matter pertained to older years, it decided the issue on merits rather than relegating the petitioner. The Court found the impugned order was not perverse, illegal, or erroneous, as it was passed after affording an opportunity to respond, considering contentions, providing a hearing, assigning reasons, and correctly applying statutory provisions to the facts. The Court clarified that the Act does not stipulate payment of tax only upon receipt of consideration.

Facts

The petitioner, M/s Ajay Kumar, a service provider engaged in washing and cleaning bedrolls and linen for East Central Railway, challenged an order dated April 2, 2018, passed by the Joint Commissioner, CGST & Central Excise, Patna-I. An investigation revealed the petitioner was not registered, had not paid any tax, and had received substantial amounts (Rs. 54,17,254/- in 2011-12 and Rs. 119,52,63,12/- in 2012-13) for services classified as dry cleaning/washing of bedrolls. A show cause notice was issued for recovery of Service Tax, Education Cess, and Secondary & Higher Education Cess totaling Rs. 1,52,28,429/- for the financial years 2011-12 and 2012-13. The impugned order confirmed a demand of Rs. 1,47,73,452/-, interest, and imposed penalties under Sections 73(1), 75, 78, and 77 of the Finance Act, 1994.

Key Issues

1. As to whether the petitioner, as a service provider, is liable to pay tax in terms of Chapters V and VA of the Finance Act, 1994, for the services rendered (Section 66, Section 66B). 2. If liable, whether non-receipt of payment of tax from the service recipient can be a defence for non-compliance with statutory provisions (Section 65(44), Section 66). 3. Whether the petitioner should have preferred an appeal under Section 85 of the Act challenging the order of the appropriate authority. 4. Whether the order dated April 2, 2018, passed by the Joint Commissioner, CGST & Central Excise Patna-I, is perverse, illegal, or erroneous, warranting interference by the High Court. Petitioner's arguments: (a) The impugned order is perverse. (b) The petitioner has not received any amount from the Railways. (c) A dispute between the petitioner and the Railways is pending arbitration. (d) The service recipient is obliged to comply with statutory provisions. (e) The service provider's obligation is only upon actual receipt of tax amount. Respondent's arguments: Not recorded in the provided text.