Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  GST registration cancellation without reasons amounts to ‘Economic Death’ of business: Supreme Court. *  No GST refund if appeal before GSTAT is filed late: Gujarat High Court. *  Mere upload of GST notice on portal not valid service, appeal limitation won’t start: Punjab & Haryana High Court. *  Taxpayer can’t be penalised for missing notices hidden under ‘Additional Notices/Orders’: Calcutta High Court allows fresh adjudication. *  State tax officer can’t issue GST SCN beyond CBIC-assigned jurisdiction: Bombay High Court stays recovery proceedings. *  Earlier 7.5% Pre-Deposit must count towards mandatory 10% for Appeal: Uttarakhand high court quashes CESTAT Order. *  Third Parties can’t challenge GST Advance Rulings merely due to financial impact: Karnataka HC *  GST SCN generated using AI tool quashed: Punjab & Haryana High Court *  Bank Attachment Quashed as Madras HC Quashes GST Order Issued Against Deceased Person *  ITC Blocking Order for Failure to Record ‘Reason to Believe’ U/R 86A Quashed: Allahabad High Court *  Govt Extends GSTAT Appeal Filing Deadline From 30 June to July 31, 2026 *  GST Demand on RWA Stayed: Allahabad High Court Questions Taxability of Electricity Distribution to Flat Owners *  CBIC Clarifies Jurisdiction After GST Registration Transfer: Earlier Proceedings Remain Valid, New Officer to Continue Action *  GST authorities’ certification not mandatory for reimbursement, but tax payment must be proven: Karnataka HC *  Contractor can’t seek gst reimbursement through writ when contract has arbitration clause: Karnataka HC *  Unsigned Order Is No Order in Law: AP HC Quashes GST Assessment Order for Want of Officer’s Signature *  Customs Can’t Levy Rs. 1.36 Crore Cost Recovery Charges Without Proof of Full-Day Officer Deployment: CESTAT  *  12% IGST Payable On Imported Dialysis Machine Parts: CESTAT *  Bombay High Court Admits Challenge to GST Limitation Extension Notifications; Grants Protection Against Coercive Recovery *  Criminal Case Can’t Run Parallel to GST Proceedings on Same Facts: Allahabad High Court *  Allahabad High Court Stays GST Detention Order; Directs Release of Vehicle and Goods on Deposit of Rs. 1.44 Lakh *  Service Tax Can’t Be Levied on Loss-Making Contracts: Gujarat High Court *  GSTN Mandates Ship-to GSTIN in e-Invoice and e-Way Bill APIs; Introduces Voluntary e-Way Bill Closure Facility from August 1, 2026 *  GST Appeal Can’t Be Rejected as Time-Barred When Taxpayer Was Pursuing Rectification Remedy: Telangana High Court *  Absence of E-Way Bill and Transport Documents Justifies Customs Seizure U/s 110: Gauhati HC *  Madras High Court Upholds GST Late Fee and Penalty for Non-Filing of Annual Return, Dismisses Challenge  *  GST Records, Purchase Documents Sufficient to Discharge Burden Under Customs Act: CESTAT Orders Release of 3.65 Kg Gold  *  No Sugar Cess Payable on Sugar Exported Out of India: CESTAT *  Road Construction Services Exempt and SCN Time-Barred: CESTAT Quashes Service Tax Demand Based Solely on Form 26AS  *  ITC Freeze Upheld After GST Dept Find Suppliers Were Allegedly Fake Bill-Trading Entities: Madras HC 
Subject News *  Input service benefits can’t be denied: CESTAT allows export refund despite MMTC acting as Canalising agency. *  No service tax demand without proof of service of SCN: CESTAT. *  Service tax demand quashed as dept. fails to prove service of SCN: CESTAT *  GST : Mere allegation of inadequate consideration of reply not enough to invoke writ jurisdiction: Delhi High Court *  Onerous conditions imposed for provisional release of seized imported goods shouldn’t amount to virtual denial of relief: CESTAT. *  GST SCN without alleging fraud cannot invoke sec. 74: Karnataka High Court quashes adjudication order. *  Extended Limitation Can’t Be Invoked Merely on Form 26AS Data: CESTAT *  Revenue-Sharing with Restaurants Not Taxable as Business Support Service: CESTAT *  R. 6(3) Option Can’t Be Forced on Taxpayer; CESTAT Quashes Rs. 12.36 Crore CENVAT Credit Demand *  Excise Duty | Power Consumption Alone Can’t Prove Clandestine Manufacture: Karnataka High Court *  Madras High Court Examines DGGI’s Authority to Issue GST Penalty Orders Under Section 122, Adds DGGI as Party *  Proceedings under omitted r. 96(10) can’t survive without saving clause: andhra pradesh high court quashes gst refund recovery *  Excise duty power consumption alone can’t prove clandestine manufacture: karnataka high court *  Madras high court rules GST show cause notices must disclose grounds for invoking extended limitation *  Court Can’t Direct Extension GST Return Deadlines or Waive Interest and Penalties: Karnataka High Court *  GST Notifications Can’t Go Beyond GST Council Recommendations: Madras High Court Quashes SCN on Branded Pulses *  Appeal Can’t Be Dismissed for Delay When Dept’s Own Order Mis-states Limitation Period: CESTAT *  No Evidence of KYC or Due Diligence Breach By Customs Broker: CESTAT Quashes Licence Revocation in Export Overvaluation Case *  Glucometers Are Chemical Analysis Instruments Classifiable Under Tariff Heading 9027: CESTAT *  Validity of Post-GST Service Tax Proceedings Upheld: Gujarat High Court Dismisses Challenge to S. 73 SCN *  Rectified GST Refund Applications Can’t Be Rejected as Time-Barred If Original Refund Claim Was Filed Within Limitation: Gujarat HC *  Service Tax Refund Can’t Be Denied as Time-Barred When Levy Itself Is Unconstitutional: Gujarat High Court *  Same Officer Can’t Act As Auditor & Adjudicator: Karnataka High Court *  Karnataka High Court Condones 324-Day Delay, Revives Customs Appeal in Jewellery Pilferage Case  *  Madras High Court Quashes GST Assessment Order Passed Ex Parte Despite Prior ITC Reversal; Lifts Bank Attachment *  Tobacco Process Doesn’t Amount to Manufacturing: Madras High Court Quashes Rs. 1.32 Crore Compensation Cess Demand  *  Recovery Notice Unsustainable After Voluntary Reversal of Unutilised Credit: CESTAT  *  GST | ‘System Generated’ SCN Without Officer Details Invalid: Allahabad HC  *  Electronic Records Without Statutory Certification Requirements Can’t Justify Undervaluation Allegations: CESTAT *  Madras High Court Stays GST Order, Finds Prima Facie Merit in Plea Against S. 74 Proceedings Based on S. 73 Intimation  

Comments

Print   |    |  Comment

PJ/CASE LAW/2015-16/2829

Whether service tax can be reimbursed from service recipient when the rate quoted is inclusive of taxes?

Case:- M/S OIL & NATURAL GAS CORPORATION LTD. V/S SWAPAN KUMAR PAUL
 
Citation:- 2015 (39) S.T.R. 789 (TRIPURA)
 
Brief facts: - This writ appeal by the Oil & Natural Gas Corporation Ltd. (hereinafter referred to as the ONGC) is directed against the judgment dated 13th August, 2008 passed by a learned Single Judge of this Court in W. P.(C) No. 310 of 2007 whereby he allowed the writ petition filed by Sri Swapan Kumar Paul (hereinafter referred to as the petitioner) and directed the ONGC to reimburse the service tax to the writ petitioner.
 
The petitioner provided motor vehicles as motor cabs to the ONGC on a contract basis. Contract has been entered on the basis of Notice Inviting Tender (NIT) which specifically provides that all relevant taxes i.e. Service / Sales tax shall be responsibility of contractor and he himself be liable to pay those taxes. The whole dispute is regarding whether the service provider entitled to ask ONGC to reimburse the service tax which had been paid to revenue.
 
The whole dispute is whether the writ petitioner who was the service provider in the present case was entitled to ask the consumer i.e. the ONGC to reimburse the service tax which it had paid to the revenue.
 
Appellant’s Contention: - There is no manner of doubt that finally the consumer can be asked to pay service tax. However, when NIT was issued which clearly provides that all tax liability including service tax liability shall be paid by the contractor. This clearly meant that the rate to be quoted by the contractor was to be inclusive of the service tax liability. Even though a service tax provider as an assessee may have a right to claim the tax from the customer, there is nothing in law which says that the service provider cannot quote a rate which is inclusive of service tax. With open eyes the contractor quoted a rate knowing fully well that he would have to bear the service tax liability and therefore after having paid service tax amount he cannot claim reimbursement of service tax.
 
Shri Bhowmik, learned senior counsel appearing on behalf of the original writ petitioner submitted that the clause is hit by Section 23 of the Indian Contract Act, 1872. He further provides that the imposition of service tax has been made with a view to increase the revenue of the State and the service provider is the assessee, whose responsibility it is, to collect the tax from the customer. Even if the service provider fails to collect the tax from customer, he is still liable to pay tax to the Central Government in terms of Section 68(3). If service provider had quoted the rate which is inclusive of service tax does not amounts to fraudulent act and does not violates the provision of Finance Act because the assessee is still liable to pay tax to government.
 
Appellant provides that when the contract was extended, then only for the extended period ONGC refunded the tax at applicable rate which does not provides that it has bound to refund the tax for the earlier period also. Since at the time of extension of contract, both the parties agrees to mutually modifying the terms of the contract. There is no law which lays down that the parties to a contract cannot mutually agree to change the conditions of the contract. Moreover, a new work was issued for the extended contract which specifically says that “The service tax will be reimbursed to contractors @ 12.24% on qualifying amount as per existing guidelines upon production of proof of payment of Service Tax to the concerned Govt. Authorities for this work and all other T&C would be applicable as per previous work order.
 
Respondent’s Contention: -On the other hand, the learned AR reiterated the findings of the impugned order and submitted that the Commissioner has considered the issue in detail and arrived at a decision that finally it is the liability of the consumer to pay service tax, when extension of the contract was granted , the ONGC had reimbursed the service tax paid by the writ petitioner and therefore this meant that the ONGC had admitted that it was liable to reimburse the petitioner in respect of service tax liability which arose prior to the extension of the contract also
 
Reasoning of judgment:-It was held that Service tax was imposed by the Finance Act, 1994 and in terms of Section 65(2) of the Act an assessee is a person responsible for collecting the service tax payable under the provisions of this chapter and includes his agent. Section 68(3) lays down that any person responsible for collecting service tax who fails to collect the tax according to the provisions of law shall notwithstanding such failure to collect tax be liable to pay the tax to the revenue. This means that if the service provider fails to collect tax from the consumer he cannot escape his liability to pay tax to the Government. No doubt a person who is providing services is entitled under law to pass on the tax liability to the customer and is entitled to tell the customers that he is liable to pay the service tax. However, the learned single Judge held that the writ petitioner as a matter of right was entitled to claim the reimbursement of the service tax which he had paid to the revenue pursuant to the contract entered into with the ONGC which does not appear to be correct.
With due respect, High Court did not agree with the reasoning given by the learned Single Judge. There is no manner of doubt that finally the consumer can be asked to pay service tax. However, we are dealing here with a case where an NIT was issued and Clause 10.2 of the NIT which has been quoted hereinabove clearly provided that all tax liability including service tax liability shall be paid by the contractor. This clearly meant that the rate to be quoted by the contractor was to be inclusive of the service tax liability. Even though a service tax provider as an assessee may have a right to claim the tax from the customer, there is nothing in law which says that the service provider cannot quote a rate which is inclusive of service tax. The NIT in no uncertain terms laid a condition that the rate should be inclusive of service tax, sale tax and other liabilities. With open eyes the contractor quoted a rate knowing fully well that he would have to bear the service tax liability. After having paid the service tax he cannot turn around and claim that this liability should be paid by the final customer/consumer.
The new work order clearly provided that service tax will be reimbursed to the contractor @ 12.24% on the contract. This amount on the renewed contract was refunded by the ONGC. This however, by no stretch of imagination, can be said to be an admission on behalf of the ONGC to pay service tax for the period prior to the imposition of the condition on 3-11-2006. If the reasoning which the learned single Judge has applied was to be taken to its logical conclusion then the writ petitioner would also not be entitled to higher rates under the very same order dated 3-11-2006.
For the aforesaid reasons, High Court was of the considered view that the learned single Judge erred in holding that the writ petitioner was entitled as a matter of right to claim refund of the service tax. Accordingly, the writ appeal was allowed and the judgment of the learned single Judge dated 13-8-2008 was set aside.
 
Decision:- The crux of this case is that although service tax is a consumption based tax but it cannot be recovered from the service recipient as a matter of right in all situations. When the contract clearly stated that all taxes are to be borne by the contractor, it implied that the service tax was also included in the rate quoted. When the rates being quoted are inclusive of service tax, the service provider cannot force the service receiver to reimburse the service tax paid by the service provider to the government exchequer.
 
Prepared by: Manish Satyani

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com