Urgent-service tax implication on ssp

Please make your query clear with example

Company Making a agreement with SSP as value of contact including all taxes and at the time of payment to SSP company deducting the ST portion from the invoice (coz SSP didn’t having ST registration no.) and that ST portion not paying to govt and not taking the credit in the books. Has this practice is right as per Finance act, 1994. Plz find below the example of query

For e.g. XYZ ltd. made a Service agreement with M/s B (SSP) for the Rs.10000 which includes all taxes. Later, M/s B raised a invoice of Rs.10000 but at the time of payment XYZ ltd. Paid only Rs.8900 and rest amount of Rs.1100 deducted from invoice as service tax because M/s B did not having ST registration no. and this Rs.1100  not deposited to govt or not accounted in books. Has this is right practice.  

Plz advice me whether company doing right practice or not?? Plz share with me the notification regarding this case.