TaxTMI 
TaxTMI 
2014 (1) TMI 457
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....matter was heard finally at the admission stage itself. 3. Mr. Dinesh Mehta, learned counsel for the petitioner-Association, mainly raised the following contentions. (i) that under Clause 36C of the general conditions of the contract, which is quoted below, the respondent-Nigam - awarder of the contract, was liable to pay the Service Tax in question as only the Royalty or other tax on materials were required to be paid by the contractor. "Clause 36C :- Royalty or other tax on materials, issued in the process of fulfilling contract, payable to the government under rules in force, will be paid by the contractor himself." (ii) that w.e.f. 1-7-2007 the works contract services were included within the definition of taxable services under Section 65(105)(zzzza) and in pursuance of the Notification No. 30/2012, dated 20-6-2012 issued under Section 68(2) of the Finance Act, 1994, the Central Government provided the percentage of tax payable by the persons providing services and persons receiving the services. In the said Notification No. 30/2012, dated 20-6-2012, the Central Government has provided that both, the person providing the service and person receiving the serv....
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.... this regard viz. obtaining registration with Central Excise Department, etc. 4. On the other hand, Mr. R.K. Agrawal, learned Senior Advocate assisted by Mr. Manoj Bhandari appearing for the respondent-Nigam raised the following preliminary objections as to the maintainability of the present writ petition. (i) that the petitioner-Association cannot espouse the cause of individual contractors, who are individually liable to be registered under the provisions of the Finance Act, 1994 for discharging their liability to pay Service Tax with the Central Excise Department and the contract terms of each contract is a matter of individual contract and, therefore, no such common cause arises in the matter so as to be adjudicated in the present writ petition. (ii) that several disputed questions of facts are involved in the present case as to the date of contract, nature of payments to the contractors, nature of bills raised by the contractors, whether the component of Service Tax is included in the Bills or charged separately, whether the respondent-Nigam is liable to pay or reimburse the amount of Service Tax to the contractors or not, arc all in....
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.... with this change in law, in the absence of any terms in the contract itself, the respondent Nigam is perfectly justified in deducting 50% of the Service Tax at source while making payment of the bills to the contractors and depositing the same in public exchequer and no challenge can be made to the same. Learned counsel Mr. R.K. Agrawal relied on the decision of Supreme Court in the case of All India Federation of Tax Practitioners & Ors. v. Union of India & Ors. - (2007) 7 SCC 527 = 2007 (7) S.T.R. 625 (S.C.) and decision of Andhra Pradesh High Court in the case of Bhagyanagar Contractors Welfare Association v. The Managing Director M.W.S. & Sewerage Board & Ors. - 2003 (4) ALD 489, which would be referred hereinafter. 6. No case law was relied upon by the learned counsel for the petitioner-Association, Mr. Dinesh Mehta in support of his contentions. 7. I have heard the learned counsels for the parties at length and perused the record and relevant statutes and given my thoughtful consideration to the rival submissions. 8. Section 68 of the Finance Act, 1994 as substituted by Finance Act of 1998 w.e.f. 16-10-1998 reads as under :- "68. Payment of Service Ta....
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.... and (c ), or (e) turnkey projects including engineering, procurement and construction or commissioning (EPC) projects;" 10. Section 66B inserted w.e.f. 1-7-2012 which provides for rate of tax @ 12% is also quoted below for ready reference :- "66B. Charge of Service Tax on and after Finance Act, 2012. - There shall be levied a tax (hereinafter referred to as the Service Tax) at the rate of twelve per cent. on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed." 11. The relevant extract of the Notification No. 30/2012, dated 20-6-2012 in so far as it is applicable to the present case and relevant column Headings is also reproduced hereunder for ready reference : "Government of India Ministry of Finance (Department of Revenue) Notification No. 30/2012-Service Tax                   New Delhi, the 20th June, 2012 GSR..... (E). - In exercise of the powers conferred by sub-section (2) o....
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....iation in such matter of levy of tax and sharing of liability to pay or bear such liability of Service Tax depending upon the interpretation of statute, which have to be necessarily read in the light of contractual terms as to who will bear the liability, whether it is reimbursable by the awarder of the contract or not, whether it is included in the gross value of Bill or is separately charged in Bills, etc., are the questions which can be adjudicated in the individual assessment to be undertaken by the competent assessing authority of the Central Excise Department, who implement the provisions of levy of Service Tax, initially introduced by Finance Act, 1994 and as amended from time to time. 14. Learned counsel for the respondent, Mr. R.K. Agrawal also rightly pointed out that in view of arbitration clause available in the contract, in case of a dispute between the parties to the contract as to who will bear the liability of paying Service Tax and to what extent, such a dispute, first deserves to be raised before the arbitrator under the said contract or in the alternative before the assessing authority under the Act and such questions without any material on record in this ....
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....deposited the Service Tax by the contractor to the Government exchequer. Any penalty etc. on the Service Tax will be to the contractors account. (ii) For the contracts awarded after applicability of Service Tax under TN-3558 and TN-3546 the Service Tax may be paid if demanded by the contractors and after obtaining proof of having deposited the Service Tax by the contractor to the Govt. exchequer. Any penalty etc. will be to the contractors account." Therefore, said Resolution dated 10-11-2005 is of no avail to the petitioner-Association or its members, so as to amount to the novation of their contracts or addition of this term in the contract in question executed prior to 1-7-2007 or 1-7-2012 for that matter so as to give any foundation to the petitioner that the respondent-Nigam would reimburse the Service Tax liability to the members of the petitioner-Association. The said Resolution is hedged with the condition of proof of deposit of the same in Govt. treasury, but no such proof has been placed on record by the petitioner Association. 16. The Notification No. 30/2012, dated 20-6-2012 (Annex. 5 on record) vide its Clause 1(v) further provides that ....
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....s being so done is anybody's guess. Section 67(2) of the Act provides for such inclusion of tax in the gross amount. If they are including full Service Tax in their Bills, the respondent Nigam would be justified in deducting 50% of full Service Tax liability @ 12% and paying the same in State Treasury and if Service tax was being separately charged and being reimbursed, for which there is not even a shred of evidence on record, and, therefore, it is only assumptive, then the question of deduction would not have arisen, as the contractors after 1-7-2012 would have charged only 50% of the Service Tax liability of 12% and claimed its reimbursement. The said provision vide Notification No. 30/2012 has been introduced with an object to prevent the pilferage of Service Tax collected by the contractors and reimbursed to them by the awarders of the contract, which ultimately did not reach the public exchequer. Therefore, to ensure the flow of tax revenue to the extent of 50% from the side of awarders of the contract, like the respondent Nigam and other body corporates, such a provision appears to have been introduced and then to realize the payment of remaining 50% of Service Tax from the ....
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....e the present ones, there is no room for invoking the doctrine of fairness and reasonableness against one party to the contract (State), for the purpose of altering or adding to the terms and conditions of the contract, merely because it happens to be the State. In such cases, the mutual rights and liabilities of the parties are governed by the terms of the contracts (which may be statutory in some cases) and the laws relating to contracts." 11. If there is any breach of the terms or dispute as to the interpretation of a covenant of the contract, appropriate remedy is not by way of a writ petition. It is only by way of a common law remedy for breach of a contract or interpretation of a clause. However, if there is arbitration clause, in the agreement, either party can avail the remedy of arbitration/conciliation." 20. Similarly, the Hon'ble Apex Court in All India Federation of Tax Practitioners & Ors. v. Union of India & Ors. - (2007) 7 SCC 527 = 2007 (7) S.T.R. 625 (S.C.) explained the concept of "Service Tax" and its difference from the tax levied on the goods and held as under- "Service Tax is a value added tax. Value addition is on account of the activity like pla....