Contract price inclusive of taxes bars recovery of an exempted service tax component where payment would cause unjust enrichment.

A contractor who quoted a tender price inclusive of all taxes and levies could not recover the service tax component from the Municipal Corporation after a later exemption removed the tax liability. The court noted that service tax was leviable when the tender was submitted and accepted, so the contractor had already factored that liability into its price. Once the service became exempt, the amount could no longer be retained as tax, and payment of that component would have given the contractor an unintended benefit. The claim therefore failed, and the petition was dismissed.

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Issues: Whether the petitioner was entitled to recover the service tax component from the Municipal Corporation after the service became exempt from service tax, where the tendered price had been stated to include all taxes and levies.

Analysis: The tender conditions required the quoted amount to include all taxes and levies. At the time of floating and acceptance of the tender, service tax was leviable and the petitioner had factored that liability into its offer. Although a later notification exempted the service with effect from 1.7.2012, the exempted amount remained only one component of the contractual price offered by the petitioner. Since that amount was meant to be received for onward payment to the tax department, payment of the same by the Municipal Corporation to the petitioner would result in the petitioner retaining money that was no longer payable as tax and thereby securing an unintended benefit.

Conclusion: The petitioner was not entitled to the claimed service tax component, and the claim against the Municipal Corporation failed.

Final Conclusion: The petition was dismissed as the contractual price already included taxes and levies, and the petitioner could not retain the exempted service tax amount for itself.

Ratio Decidendi: Where a contract price is quoted inclusive of taxes and a subsequent exemption removes the tax liability, the contractor cannot claim the tax component from the payer if doing so would amount to unjust enrichment.

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