Service tax reimbursement under policy circular prevails over contrary administrative directions, with claims to be considered under contract terms.

A governing policy circular providing reimbursement of service tax against a service tax invoice could not be displaced by communications directing the petitioners to bear the tax from their commission. The court held that the administrative directions were unsustainable because they ignored the contractual arrangement and the applicable reimbursement framework. The impugned communications were set aside, while the petitioners were required to pay the tax demanded and seek reimbursement in accordance with the circular, and the corporation was directed to consider that claim strictly within the policy terms and stipulated time.

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Issues: Whether the communications requiring the petitioners to bear service tax from their commission could stand, and whether the petitioners were entitled to reimbursement of the service tax paid in terms of the policy circular.

Analysis: The petitioners and the Indian Oil Corporation were governed by the maintenance and handling contract and the policy circular governing permanent COCO operations. The circular contemplated reimbursement by the Corporation of the applicable service tax charged by the service provider against a service tax invoice, subject to the contractual arrangement and eligibility. The impugned communications directing the petitioners to bear the tax without reference to the circular were issued without considering the applicable policy. The Court also noted the concession that the petitioners would pay the tax demanded and thereafter seek reimbursement in accordance with the circular.

Conclusion: The impugned communications were set aside. The petitioners were directed to pay the service tax demanded and submit the invoice for reimbursement, which the Corporation must consider strictly in accordance with the policy circular within the stipulated time.

Final Conclusion: The writ petitions succeeded to the limited extent of nullifying the impugned directions, while preserving the petitioners' right to seek reimbursement under the governing policy framework.

Ratio Decidendi: Where a governing policy circular provides for reimbursement of service tax against invoice, an administrative communication inconsistent with that policy cannot be sustained, and reimbursement must be considered in accordance with the circular and the contractual terms.

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