Contractual allocation of later-imposed service tax upheld where bid acceptance predated the tax levy.

Where a bid was accepted before the formal contract and service tax on road maintenance was introduced only afterwards, the contractual wording requiring inclusion of taxes payable under applicable law did not shift later-imposed tax to the respondent. Acceptance of the bid was treated as the point when the contract materialised, and the surrounding correspondence and later circular did not alter that allocation. The court relied on the principle reflected in Section 64A of the Sale of Goods Act and the statutory indication that such tax incidence ordinarily falls on the service recipient unless the contract provides otherwise. The appellant was therefore liable to reimburse the service tax, and the objection to the award failed.

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Issues: Whether the appellant was liable to reimburse service tax imposed after acceptance of the bid and before execution of the formal contract.

Analysis: The contract required the bidder to include all duties, taxes and levies payable under applicable law, but the service tax on road maintenance was introduced only after the bid had been accepted. The acceptance of the bid was treated as the point at which the contract materialised, and there was nothing in the contract to show an intention that the respondent would bear future taxes imposed after that date. The surrounding correspondence and the later circular did not alter the contractual position. The Court also relied on the principle reflected in Section 64A of the Sale of Goods Act, 1930, and on the statutory indication in Section 83 of the Finance Act, 1994 read with Section 12B of the Central Excise Act, 1944, that the incidence of such tax is ordinarily borne by the service recipient unless the contract provides otherwise.

Conclusion: The appellant was liable to reimburse the service tax, and the objection to the award was rightly rejected.

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