O.N.G.C. Ltd. vs Deputy Commissioner of Customs, Central Excise and Service Tax

Nooty Ramamohana Rao, J.—Both these writ petitions can be disposed of by this common order since the issue involved is one and the same.

The first writ petition i.e., WP No. 28875 of 2009 has been instituted by the Oil and Natural Gas Corporation Limited, a Government of India Undertaking, while the second writ petition i.e., WP No. 14 of 2010 has been instituted by several of the manpower supply agencies of the said Oil and Natural Gas Corporation Limited.

The Respondent Deputy Commissioner of Customs, Central Excise and Service Tax, Rajahmundry Division, issued a notice u/s 87(b)(i) of the Finance Act, 1994 dated 18-11-2009 directing the Oil and Natural Gas Corporation Limited to remit service tax amount of Rs. 2,19,09,650 for the period from 2005-06 to 2009-10 (September, 2009) as per the details furnished in the annexure to the said order.

The grievance of the writ Petitioners is twofold. The Oil and Natural Gas Corporation Limited submits that it does not require to pay the Service Tax insofar as the payments effected by it to the manpower supply agencies are concerned and further in the absence of any assessment order passed by the assessing authority, the question of directing the principal employer namely Oil and Natural Gas Corporation Limited to remit the sum of Rs. 2.00 crores is neither fair nor just.

The learned Standing Counsel for the Respondent Sri A. Rajasekhar Reddy would submit that it is a fact that no assessment order has been passed against the Petitioners in W.P. No. 14 of 2010, but nonetheless they are liable to be assessed and since the principal employer namely Oil and Natural Gas Corporation Limited is likely to pay them substantial amounts, the impugned notice dated 18-11-2009 has been issued in terms of the power available u/s 87 of the Finance Act directing the principal employer namely Oil and Natural Gas Corporation Limited to remit the same.

The short question that engages our attention is this: As to whether the Petitioners in W.P. No. 14 of 2010 are liable to be assessed to service tax amount or not. The answer is, it is for the Assessing Authority to collect the necessary data by putting the Petitioners therein on notice and upon proper and careful assessment of the material so furnished, pass an order of assessment determining the liability of the Petitioners in WP No. 14 of 2010. Only in the event they fail to pay or commit default in such payment, option is always available to call upon the principal employer to pay the service tax component which is liable and outstanding from the bills payable by them to such Assessees. Without the assessment order being passed and without crystallising their liability to pay the service tax amount, the question of directing the Oil and Natural Gas Corporation Limited in terms of Section 87 of the Finance Act does not arise. Therefore, we have no hesitation in directing the Respondent to undertake immediately the task of assessing the seven societies, whose particulars have been mentioned in the notice dated 18-11-2009 and assess their liability to pay the service tax component first. It is needless to observe that the Respondent would provide a fair and reasonable opportunity to the seven societies to place such material as is concerned appropriate by them for consideration of the Respondent and then pass an order of assessment. Only in the event of such societies committing any default in payment of the assessed service tax component, then perhaps, the exercise of power u/s 87 of the Finance Act, 1994 can be invoked, but not until then.

But, however, learned Counsel appearing for Oil and Natural Gas Corporation Limited Sri Kakara Venkata Rao submits that in terms of the contract entered into between the parties, each month the Oil and Natural Gas Corporation Limited is paying manpower suppliers huge sums of money and, therefore, at any time, the assessing authority makes a request pursuant to the order of assessment made by it, the Oil and Natural Gas Corporation Limited would be in a position to transmit the tax liability and there may not be any difficulty in so doing. On the contrary, without there being any assessment order, if the amounts are transmitted to the Respondent, there can be possibility of a friction developing between the manpower supplying societies and the Oil and Natural Gas Corporation Limited adversely affecting the operations of the Oil and Natural Gas Corporation Limited. In view of the assurance held out by the learned Counsel for the Oil and Natural Gas Corporation Limited that adequate money payable to the seven societies would always be available with the Oil and Natural Gas Corporation Limited, we do not visualise any difficulty for the Respondent to recover the assessed amount either from the societies or from the Oil and Natural Gas Corporation Limited. Therefore, we allow the writ petitions for the present only on the ground that the impugned notice dated 18-11-2009 has been issued without being preceded by an order of assessment. The Respondent is, therefore, at liberty to pass an order of assessment within a maximum period of three months from today. No order as to costs.