University not liable to reimburse service tax paid for Library Building construction; petition dismissed.

The court dismissed the writ petition, ruling that the respondent University is not liable to reimburse the service tax paid by the petitioner for the construction of a Library Building. The court found that in the absence of a specific contractual agreement, the petitioner, as the service provider, is responsible for paying the service tax. Additionally, the court held that the writ petition is maintainable despite a contractual clause stipulating that claims over a certain amount should be decided by a Civil Court, as the service tax claim is a statutory obligation, not a contractual matter.

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Issues Involved:
1. Liability of the respondent University to reimburse the service tax to the petitioner.
2. Maintainability of the writ petition in view of the contractual clause requiring claims above Rs. 50,000 to be decided by a Civil Court.

Detailed Analysis:

Issue 1: Liability of the respondent University to reimburse the service tax to the petitioner

The petitioner, a Class-I contractor, completed the construction of a Library Building for the respondent University. The Works & Buildings Committee recommended the payment of service tax as a statutory requirement, and the petitioner paid the service tax on multiple bills. Despite this, the respondent University did not reimburse the service tax, leading to the writ petition.

The court examined the sequence of events and relevant statutory provisions. Initially, the service tax exemption for educational institutions was in force but was withdrawn by a subsequent notification. The agreement between the petitioner and the respondent University did not specify who would bear the service tax liability. According to Section 68 of the Finance Act, 1994, the service provider is generally liable to pay the service tax unless otherwise agreed upon in the contract.

The court noted that the Building Committee's recommendation for reimbursement was not ratified by the Executive Council. The petitioner argued that service tax is an indirect tax and should be borne by the service recipient, but the court held that in the absence of a contractual clause, the petitioner is primarily responsible for paying the service tax. Therefore, the respondent University is not obligated to reimburse the service tax paid by the petitioner.

Issue 2: Maintainability of the writ petition in view of the contractual clause requiring claims above Rs. 50,000 to be decided by a Civil Court

The agreement included a clause stating that claims exceeding Rs. 50,000 should be decided by a Civil Court. The respondent University argued that this clause rendered the writ petition non-maintainable. However, the court distinguished the claim for reimbursement of service tax from other contractual claims, stating that the service tax claim is not a contractual amount but a statutory obligation. Therefore, the writ petition is maintainable.

Conclusion:

The court concluded that the writ petition is devoid of merits and dismissed it, stating that the petitioner cannot claim reimbursement of the service tax as a matter of right due to the absence of an express term in the contract and the non-ratification of the Building Committee's recommendation by the Executive Council. The court also held that the writ petition is maintainable despite the contractual clause requiring claims to be decided by a Civil Court.

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