M/S.Abs And Company vs. The Executive Engineer

Facts

The petitioner, M/s. ABS and Company, a firm awarded contracts by the Executive Engineer, Public Works Department, was issued a show cause notice on 04.06.2018 by the Assistant Commissioner of GST & Central Excise. The notice alleged non-payment of service tax liability amounting to Rs.43,53,427/- for services rendered to the Public Works Department, Thanjavur, between 01.04.2015 and 31.08.2016, despite receiving Rs.58,95,227/-. The petitioner appeared for a personal hearing and stated that they would pay the service tax upon receiving the amounts from the Public Works Department, as they had not received service tax amounts from the department and were executing works with minimal profit or at a loss. The impugned order of assessment was passed subsequently. The petitioner filed a writ petition challenging this order.

Held

The Court held that the petitioner's reliance on the cited precedents, Nandhini Constructions and Rajat Pharmachem Ltd., was misplaced. In Nandhini Constructions, the petitioner contested the levy of service tax itself, whereas the present petitioner admitted the liability. The Rajat Pharmachem case was distinguishable on facts as it involved a bar under the Sick Industrial Companies (Special Provisions) Act, 1984, which was not applicable here. The Court found that the petitioner's sole ground for non-payment was the contingent receipt of funds from the Public Works Department, which does not absolve them of their statutory obligation to pay service tax. Therefore, the writ petition was dismissed as not maintainable. However, the petitioner was granted liberty to file an appeal before the first appellate authority within two weeks, which would be taken on file without reference to limitation, with all contentions on merits left open.

Key Issues

1. Whether the petitioner's plea for time to pay service tax, contingent upon receiving payment from the Public Works Department, constitutes a valid ground to justify non-payment of statutory dues under the Finance Act, 1994? Petitioner's arguments: The petitioner contended that they admitted their liability but sought time to pay the service tax until they received the amounts from the Public Works Department. They relied on Nandhini Constructions Vs. the Government of India and Rajat Pharmachem Ltd., Vs. Union of India. The petitioner argued that other districts were not taking similar steps regarding service tax from works contractors, and they were facing financial constraints. Revenue's arguments: The judgment does not explicitly record arguments made by the revenue. However, the court's reasoning implies that the revenue's position was that the liability was due and payable irrespective of the petitioner's payment from the department.