2013 (11) TMI 649 - HC - Service Tax

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

BHAGWATI SECURITY SERVICES (REGD.) Versus UNION OF INDIA

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 ... Claim of Reimbursement of the service tax from the recipient of services i.e BSNL - Assessee provided security services to Respondent No. 2 i.e BSNL - Service tax was demanded from the petitioner which has been deposited by the petitioner - Held that:- service tax is statutory liability. It is a tax which is required to be collected by the service provider from the person to whom service is provided, and thereafter to be deposited with Government treasury within the prescribed time - Thus essentially the statute is being imposing the tax upon the person to whom service is being provided, and the service provider is merely a collecting agency - BSNL (i.e service recipient) directed to make reimbursement of service tax to the petitioner without further delay. 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.