Can service tax recover twice from both parties ?

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amar Pratap

Professional

28 Points Posted on 21 July 2013

There is a situation where service receiver has made an agreement on the condition that service receiver themselves will pay the service tax contrary to the law i.e (Liability of paying service tax is cast on service provider by law)

Service provider is ready to provide service on the said terms and conditions. Service comes under "Business Auxilary Service". There is no case of reverse charge.

Service Receiver has paid tax on the said duration and given written confirmation to the service provider for service tax paid.

Now Service provider has got Demand Notice from Service Tax Department saying that service provider can't escape statutory liability of paying service tax, even though servicer receiver has paid the disputed tax.

Now my question is that can service tax department recover twice the service tax from both the parties i.e. service provider as well as service receiver ?

Please also provide some case laws in support of your answers, if possible.

Replies (3)

Dipjyoti Majumdar

CA in service & CS. dipmaj@

2879 Points Posted on 21 July 2013

Well, I think even if the receiver has paid tax to Government as per internal understanding with provider, the provider is liable to remit the same separately.

I would advise you to insist on the receiver to pass on the tax amount to provider and let the provider pay in turn to Revenue.Then the provider does not need to pay from his own pocket. It appears the provider does not have any STC number.

Wait for further responses.

Thanks,

Sweta agarwala

student

48 Points Posted on 22 July 2013

Legally a statutory liability cannot be shifted to another by mutual private agreement.Mutual private agreement has no validity in law.However,in Vantage Security V.CCE(2007)7 STT300(CESTAT SMB),service tax was paid by service receiver,though it was was payable by service provider.It was held that the payment is invalid and demand of service tax from service provider is valid.

so you have to pay tax.you may collect the tax amount from service receiver as per your agrrement and pay the said amount to the govt. under your own registration.

Prabhat Kumar

Advocate & Consultant

1820 Points Posted on 25 July 2013

of course any agreement contrary to law is a void agreement.But on a particular service Service Tax can not be paid twice.Your mistake should be treated as procedural mistake.