Service tax reimbursement, limitation and interest rules govern recovery where tax was paid without an express contractual clause.

Service tax reimbursement from a recipient may be claimed even without an express reimbursement clause, because the indirect tax scheme and the parties' contract are read together to determine ultimate liability. A claim for tax paid by one party for another is treated as money paid for the defendant and is subject to the three-year limitation period from the date of payment, so deposits made earlier than that are time-barred. Interest may be awarded without a contractual clause under the Interest Act where a written demand exists, but only on amounts that had become due when the demand was made.

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Issues: (i) Whether, in the absence of an express contractual stipulation, the service provider could recover service tax from the recipient of the service; (ii) Whether the claim for recovery of service tax paid more than three years before the suit was barred by limitation; (iii) Whether interest could be awarded on the recoverable amount.

Issue (i): Whether, in the absence of an express contractual stipulation, the service provider could recover service tax from the recipient of the service?

Analysis: The lease deed did not expressly cover service tax. However, the levy was an indirect tax and the statutory scheme applied the principles underlying Section 12A and Section 12B of the Central Excise Act, 1944 through Section 83 of the Finance Act, 1994. Those provisions indicated that the service tax burden is ultimately intended to fall on the recipient of the service. The contract between the parties was relevant to determine ultimate liability, and the absence of an express clause shifting the burden to the lessee did not defeat the provider's right to recover the tax paid by it.

Conclusion: The service provider was entitled to recover service tax from the recipient, despite the absence of an express reimbursement clause.

Issue (ii): Whether the claim for recovery of service tax paid more than three years before the suit was barred by limitation?

Analysis: The claim was treated as one for money paid for the defendant, attracting Article 23 of the Limitation Act, 1963. The period of limitation ran from the date on which the tax was paid. Amounts deposited more than three years before institution of the suit were therefore time-barred, and a subsequent change in legal position did not stop limitation once it had begun to run, in view of Section 9 of the Limitation Act, 1963.

Conclusion: The claim was barred to the extent of service tax deposits made beyond the three-year limitation period.

Issue (iii): Whether interest could be awarded on the recoverable amount?

Analysis: In the absence of a contractual stipulation, interest could be granted under Section 3 of the Interest Act, 1978 where written demands had been made. Since a demand for interest was shown in the notice dated 02.05.2011, interest was allowable only on the amount that had become due by that date, and not on later deposits for which no such demand had been made.

Conclusion: Interest was awarded only on the amount falling due on or before 02.05.2011, at 6% per annum.

Final Conclusion: The suit succeeded in part. Recovery of service tax was permitted to the extent not barred by limitation, and limited interest was also granted, resulting in a money decree in favour of the plaintiff.

Ratio Decidendi: Where service tax is levied on a service, the contractual terms and the statutory scheme determine whether the service provider may recover the tax from the recipient, and a recovery claim for tax already paid is subject to the limitation period applicable to money paid for another.

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