Who Faces the Penalty for Service Tax Errors: Contractor or Principal Employer?

If a contractor does not deduct service tax from the principal employer, who is liable for the penalty, the contractor or the principal employer? Kindly reply with legal notification.

Your query is not very clear. Kindly narrate the same with an example.

Example:

ABC Enterprises supplies 10 laborers to XYZ Pvt Ltd with an annual turnover of Rs. 9 Lakhs. The same company (ABC Enterprises) supplies 10 laborers to EFG Pvt Ltd, with an annual turnover of Rs. 9 lakhs. Both companies are in different locations and not related to each other. ABC Enterprises does not charge service tax from each company as it has not crossed the 10 lakh limit. However, ABC Enterprises actually has a turnover of Rs 18 lakhs. In this situation, who is liable in case the contractor receives a notice for the recovery of service tax?

Regards,
Ramakant

Service Tax Responsibility and Penalties

ABC Enterprise is responsible for obtaining the Service Tax Number and must include it when invoicing the contractor. They are also obligated to pay any penalties and interest incurred.