https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=767463 https://www.taxtmi.com/caselaws?id=767463 Reimbursement of service tax component in terms of tender documents followed by contract in the light of subsequent amendment of law relating to Service Tax Regime w.e.f. 1.7.2012 - arbitration clause barring the invocation of writ jurisdiction for the resolution of disputes concerning the reimbursement of the service tax component. Arbitration clause barring invocation of writ jurisdiction - HELD THAT:- The arbitration clause is hit by the Apex Court decision in CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION vs. ECI SPIC SMO MCML (JV) [ 2024 (11) TMI 542 - SUPREME COURT (LB) ]. Therefore, the subject arbitration clause is liable to be ignored for all practice purposes. Secondly, the question is not as to the liability to pay the service tax in respect of services in question; it is essentially as to who should pay this in the light of change of legal regime of taxation post conclusion of contracts - there being no repudiation of liability for discharging the service tax, it cannot be argued that there is an arbitrable dispute merely because a question as to who should pay, eventually arises. An arbitration clause of the kind even otherwise does not constitute a China Wall against exercising writ jurisdiction. In appropriate cases, Writ Court can grant relief when the answering respondent happens to be Article 12-Entity - It is not that the Writ Courts should invariably deny relief merely because the other side disputes the fact matrix, provided that the disputed facts can be ascertained from the pleadings record. Liability of Railways to Reimburse Service Tax - HELD THAT:- On the principle of reimbursement as such, there is no dispute at all. The dispute is the extent of reimbursement in the sense that what is payable by way of service tax because of paradigm shift in the Legal Regime, with effect from 1.7.2012 i.e. post-contract period. Interpretation of Tender/Contract Clauses - HELD THAT:- Section 83 of Finance Act, 1994 read with Sections 12A 12B of Central Excise Act, 1944 raises a presumption that the incidence of duty can be passed on to the buyer unless contrary is proved and therefore, being an indirect tax, has to be borne by the service recipient vide Satya Developers Pvt. Ltd. vs. Pearey Lal Bhawan Association [ 2015 (10) TMI 2667 - DELHI HIGH COURT ] and Meattles Pvt. Ltd. Vs. HDFC Bank Ltd. [ 2012 (10) TMI 685 - DELHI HIGH COURT ] - When the contracts in question were entered into in the year 2011, both the parties had not contemplated change of legal regime with effect from 1.7.2012 from Positive List to Negative List eventually giving rise to new tax liability. It is not just change of rates of tax, but, very taxability. Analogous Application of Section 64A of the Sale of Goods Act, 1930 - HELD THAT:- Section 64A as such cannot be invoked because the case does not relate to tax on goods; however that does not mean that the wisdom of its underlying principle cannot be made use of by analogy - The recipient of services like the buyer of goods has to bear the new levy of service tax occasioned by State action namely the amendment to Finance Act, 1994 w.e.f. 01.07.2012, which obviously is post conclusion of contracts in question. Any other answer or view would strike at reason, at law and at logic. Conclusion - i) The arbitration clause did not preclude the exercise of writ jurisdiction in this case, given the nature of the dispute and the status of the respondent as an Article 12-Entity. ii) The Railways are liable to reimburse the service tax component to the appellant, with interest, due to the change in the legal regime post-contract. iii) New tax liabilities arising from state action should be borne by the service recipient, drawing an analogy to Section 64A of the Sale of Goods Act, 1930. iv) A Writ of Mandamus issues directing the respondent-South Western Railway to reimburse to the appellant all that amount which it has paid by way of service tax, with 9% interest p.a. from the date the amount became payable, within eight weeks. The impugned order of the learned Single Judge is set aside - appeal allowed. Case-Laws Service Tax Fri, 07 Mar 2025 00:00:00 +0530