2013 (11) TMI 649 - HC - Service Tax

High Court orders B.S.N.L. to reimburse service tax, emphasizing statutory obligation

The High Court of Allahabad allowed the writ petition, directing B.S.N.L. to reimburse the service tax to the petitioner. The court emphasized that ... Statutory liability of service tax - service provider as collecting agent - reimbursement of service tax - contractual omission not bar to statutory reimbursementStatutory liability of service tax - service provider as collecting agent - reimbursement of service tax - contractual omission not bar to statutory reimbursement - Whether respondent is liable to reimburse the service tax paid by the petitioner despite the service agreement not providing for such reimbursement. - HELD THAT: - The Court examined the agreement and the relevant statutory scheme and held that service tax is a statutory liability which is required to be collected from the person to whom the service is provided and deposited with the Government. The service provider functions as a collecting agency under the statute. Consequently, omission of an express reimbursement clause in the contract does not defeat the statutory incidence and the liability to bear the tax falls on the recipient of the service. Applying these principles to the facts, the petitioner, having paid the statutory tax, is entitled to reimbursement from the respondent.Writ petition allowed; respondent directed to reimburse the service tax to the petitioner without further delay.Final Conclusion: The Court directed the respondent to reimburse the service tax paid by the petitioner, holding that service tax is a statutory liability borne by the service recipient and the service provider is only a collecting agent; contractual silence does not relieve the recipient of that statutory obligation. Issues:Reimbursement of service tax under a service agreement.Analysis:The judgment by the High Court of Allahabad involved a dispute regarding the reimbursement of service tax under an agreement between the petitioner and the respondent, B.S.N.L. The petitioner was providing security services to B.S.N.L. as per the terms of their agreement, which included provisions for payment. Subsequently, service tax was demanded from the petitioner, which was paid by the petitioner. However, when the petitioner requested reimbursement of the service tax from B.S.N.L., it was denied based on the reasoning that service tax was not contemplated in the service agreement.Upon reviewing the agreement and relevant statutory provisions, the court observed that service tax is a statutory liability imposed on the service provider to collect from the recipient of the service and deposit it with the government treasury within the specified time. The court emphasized that the service provider acts as a mere collecting agency for the government in this regard. Therefore, the court concluded that the denial of reimbursement by B.S.N.L. solely on the grounds of it not being mentioned in the service agreement was not valid.Consequently, the court allowed the writ petition filed by the petitioner and directed B.S.N.L. to reimburse the service tax to the petitioner without any further delay. The judgment clarified the nature of service tax as a statutory obligation and the responsibility of the service provider to collect and remit it to the government, emphasizing that such tax liability cannot be shifted onto the service provider through contractual agreements.