CESTAT Upholds Service Tax Demand Against The Service Provider Based On ONGC’s Reply

The Kolkata Bench Of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has upheld the service tax demand against the service tax provider based on ONGC’s reply.

The bench of Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member), while dealing with the issue of whether the appellant has recovered service tax from ONGC or not, noted that the only evidence available on record is that ONGC has stated in reply to a query made by the respondent department that the amount has been paid inclusive service tax. Therefore, the amount paid to them is inclusive of service tax, and the appellant assessee has not paid the service tax collected from ONGC.

A show cause notice was issued to the appellant, alleging that the appellant neither registered as a service tax assessee nor paid service tax as they had provided taxable service to M/s ONGC under the category of ‘commercial or industrial construction service’.

A communication was made by the department to the management of ONGC, requesting that they submit the details of the list of service providers who have rendered service to them under the category of ‘commercial and industrial construction service, along with copies of the agreements.

The ONGC submitted a list, including the name of the appellant and payment particulars, along with a work order allotted to the appellant. On scrutiny, it was found that the appellant was entrusted by ONGC to render service as per the work order. On thorough verification of the list, it was observed that the service provider rendered the services for the civil construction taking place in the different drilling Oil Fields belonging to ONGC.

The show cause alleged that the services rendered by the appellant against the work orders during the period 2005–06 were covered under the category of ‘commercial or industrial construction services’ and service liability works out to Rs. 6,54,635.

It was clarified by ONGC that the amount paid to the appellant was inclusive of service tax, which was intimated to the department. On the basis of the communication, a show cause notice was issued to the appellant to demand service tax from the appellant, which they have recovered from ONGC. The matter was adjudicated, and the demand for service tax was confirmed.

The appellant contended that being old records, the appellant is not able to ascertain the documents certifying that they have not received any service tax from ONGC for the work executed. Although the work order is inclusive of tax, there was no intent to evade payment of duty by the appellant.

The tribunal held that the appellant is liable for service tax along with interest. As it cannot be ascertained from the documents whether the appellant has deliberately not paid the service tax to the respondent, in those circumstances, by giving the benefit of Section 80 of the Finance Act, 1994, no penalty is imposable on the appellant.

Case Title: Sri Mridul Phukan Versus Commissioner of Central Excise & Service Tax

Case No.: Service Tax Appeal No.335 of 2010

Date: 01.08.2023

Counsel For Appellant: Amit Goyal

Counsel For Respondent: S.S.Chattopadhyay

Click Here To Read The Order