TaxTMI 
TaxTMI 
2019 (2) TMI 1868
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioner. Upon performance of requisite formalities, the work order for the said contract was issued to the petitioner. Accordingly, the petitioner had completed the contract work. In course of the execution of the contract work, the petitioner had submitted four running amount bills for Rs. 20,33,996/-, Rs. 10,85,745/-, Rs. 20,98,573/-, and Rs. 24,79,837/- respectively. In this petition, it is projected that as per law, 50% of service tax liability was to be borne by the petitioner, being the service provider and, as such, in the bills raised, the petitioners had deducted 50% of the service tax component from the said bills. Therefore, the respondents were liable to bear only 50% service tax liability. Yet, while releasing the payment against the said four running account bills, the respondents had shifted 100% liability of service tax upon the petitioner. This is one dispute between the parties. 3. It is projected that the contract works executed by the petitioner would amount to an original work of replacing the damaged AC/CGI sheets with new ones and, as such, it was contended that in terms of Notification No. 24/2012-ST dated 06.06.2012, service tax was determinable and payabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ills of the petitioner and for further directions to refund the amount of service tax already deducted from the running bills of the petitioner. 5. By filing their affidavit- in- opposition, while denying that any wrong was committed, the respondents had stated that the claim of the petitioner was not tenable. It was stated that by letter dated 04.03.2016, the respondents had informed the petitioner that his work was for modification of structures, which come under the capital cost and therefore, the contract work awarded to the petitioner would come under "repair and maintenance" and therefore, the respondents had justified the deduction of service tax on the ground that the expenditure of work was booked in ARMO fund. It was also stated that as the works was covered by contract between the parties, where all the works was inclusive of all taxes, therefore, the entire service tax liability was to be borne by the petitioner. Hence, by denying that the respondents had acted illegally, it was prayed that the present writ petition be dismissed. 6. The learned senior counsel for the petitioner has referred to the Conditions of Contract and it is submitted that under as per Clause....
X X X X Extracts X X X X
X X X X Extracts X X X X
....olling Industries Vs. State of Gujarat, (1982) 50 STC 305 (para-11 and 12) has been relied upon. 7. It is also submitted that mere treatment of a particular work in the books of the accounts of the respondents in a particular manner would not determine the service tax liability of the respondents under the scope of the contract work awarded to the petitioner. In this connection, by referring to the provisions of Clause (A) and Clause (B) of Sub- Rule (ii) of Rule 2A of the Service Tax (Determination of Value) Rules, 2006 it is submitted that while service tax on original works was payable on 40% of the total amount charged for the works contract, for maintenance or repair or reconditioning or restoration or servicing of any goods service tax shall be payable on 70% of the total amount charged for the works contract. It is further submitted that under Explanation-1 appended to Sub- Rule (ii) of Rule 2A of the said 2006 Rules, the words "original works" was defined to mean (i) all types of new constructions; (ii) all types of additions and alterations to abandoned or damaged structures on land that are required to make them workable; and (iii) erection, commissioning or installati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of Value) Rules, 2006it is submitted that the original works only meaning and included any additions and alterations to "abandoned" or "damaged" "structures" on land that are required to make them workable and in this regard, it is submitted that the works-site were the petitioner had replaced old CI/CGC roof with Profile Sheet, was a running and working godown and it was not an abandoned site or a damage structure, as such, under the said 2006 Rules, the scope of such contract work would fall within the scope and ambit of an "original work". Accordingly, it is submitted that the scope of work awarded to the petitioner was only a "repair work", but not an "original work". 10. By referring to clause 36A of the Conditions of Contract, it is submitted that as the tendered rates included all taxes, any taxing liability arising out of the contract would shift on the petitioner, who was contractually bound to pay such money. In this connection, it is submitted that notwithstanding the onus to pay tax, as provided by the Service Tax Act, under the contract agreement with the petitioner, all taxes and levies payable in connection with the entire contract work was to be borne by the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion given by the learned Senior Counsel for the petitioner was that the roof formed a part of the structure standing on the land, as such, this was a case where old roofing material, being part of the structure was abandoned by the respondents, and therefore, the installation and/or erection of a fresh roofing material constituted an "original work". No doubt that at the outset this argument appears to be highly attractive, because in order to carry out the said work, the petitioner would have to purchase new roofing material, but then, even for the purpose of carrying out any conceivable contract work involving maintenance, repair or renewal, falling within the scope of Explanation (A) appended to Rule 2A(ii) of the 2006 Rules, some material or the other has to be purchased and/or procured because the contract in question was not a contract which permitted re-using only the existing CI/CGI roofing materials after repairs. The present contract was not a contract that had been bifurcated in two parts, first part being an independent contract for removing existing roofing materials and the second part, being an independent contract for installing fresh roof. Therefore, as the work co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... binding on the contractor) attributable to delay in execution of work within the control of the contractor. Service Tax will be Governed as per Circular No.09/2012 of FCI TAXATION CELL. (ii) The contractor shall kept necessary Books of accounts and other documents for the purpose of this condition as may be necessary and shall allow inspection of the same by a duly authorized Representative of the FCI and/or the Engineer-in-charge and further shall furnish such other information/documents as the Engineer-in-charge may require from time to time. (iii) The contractor shall, within a period of 30 days of the imposition of any such further tax or levy, pursuant to the Constitution (forty Sixth Amendments) Act 1982, give a written Notice thereof to the Engineer-in-charge that the same is given pursuant to this condition, together with all necessary information relating thereto." 15. Thus, it is seen that the aforesaid clause-36A is comprised of the following words - "All tendered rates shall be inclusive of all taxes and levies payable under respective statutes." Now, there is no dispute that in all cases, all or any taxes and levies would be payable under one stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... C.S.T., (1971) 2 SCC 559. This case relates to Madhya Pradesh General Sales Ttax Act, 1958. While interpreting the words "turnover" and "sale price" in the context of the charging Section it was observed that the liability to pay tax was on the dealer and the purchaser had no liability to pay tax. If a dealer had to pass the tax burden on to the purchaser, he could only do by adding the tax in question to the price of the goods sold. If that be so, the taxes collected by the dealer from the purchaser became a part of the sale price as fixed. Thus, the amount recovered by the dealer was in reality a part of the entire sale consideration. To appreciate the principle we may usefully reproduce certain passages from the said authority:- '6. Under Section 4 the liability to pay tax is that of the dealer. The purchaser has no liability to pay tax. There is no provision in the Act from which it can be gathered that the Act imposes any liability on the purchaser to pay the tax imposed on the dealer. If the dealer passes on his tax burden to his purchasers he can only do it by adding the tax in question to the price of the goods sold. In that event the price fixed for the goods inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ered by the dealer is really part of the entire consideration paid by the buyer and the distinction between the two amounts, - tax and price - losses all significance.' The relevance of this decision is that it holds that in a given case the tax component may form a part of the sale price and cannot be treated as a separate component. 26. In the case at hand, when the respondent was not liable to pay tax and had not passed on the tax liability, we do not think, sale consideration received should be bifurcated and divided on the basis of any assumption that the sale price received must have included the tax. This fiction has no application in the present case. There is neither such principle nor any precept in law. In any case the finding of fact is to the contrary." 17. The learned counsel for the respondents, on the other hand, has placed reliance on the case of Rashtriya Ispat Nigam Limited Vs. Dewan Chand Ram Saran (2012) 5 SCC 306. Paragraph 3, 4, 34 to 42 are quoted below:- 3. The appellant, a Govt. of India undertaking is engaged in the manufacture of steel products and pig-iron for sale in the domestic and export markets. The respondent is a par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the contract. It appears that the rationale behind Clause 9.3 was that the Petitioner as a Public Sector Undertaking should be thereby exposed only to a known and determined liability under the contract, and all other risks regarding taxes arising out of the obligations of the contractor are assumed by the contractor. 37. As far as the submission of shifting of tax liability is concerned, as observed in paragraph 9 of Laghu Udyog Bharati (supra), service tax is an indirect tax, and it is possible that it may be passed on. Therefore, an assessee can certainly enter into a contract to shift its liability of service tax. 38. Though the appellant became the assessee due to amendment of 2000, his position is exactly the same as in respect of Sales Tax, where the seller is the assessee, and is liable to pay Sales Tax to the tax authorities, but it is open to the seller, under his contract with the buyer, to recover the Sales Tax from the buyer, and to pass on the tax burden to him. Therefore, though there is no difficulty in accepting that after the amendment of 2000 the liability to pay the service tax is on the appellant as the assessee, the liability arose out of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the entire responsibility of the contractor ...' " Reading this clause and the connected documents, this Court held that they leave no manner of doubt that all the taxes and levies shall be borne by the contractor including this countervailing duty." 18. Therefore, on a competitive reading of the ratio laid down by the Hon'ble Apex Court in the case of Hindustan Lever Limited (supra) and Dewan Chand Ram Saran (supra), it is seen that in the later case, the issue related to shifting of the burden service tax liability from statutory assessee to the service recipients and in that context, while interpreting the contract agreement between the parties, Clause 9.3 of the terms and conditions of the said contract was referred to and it was held that the said Clause 9.3 was the contractor's acceptance of the tax liability arising out of his obligations under the contract. As the tax liabilities in respect of the job mentioned in the contract was the entire responsibility of the contractor, it was held in the said case that all taxes and levies was to be borne by the contractor. The Hon'ble Apex Court further held that there was nothing in law to prevent the appellant therein ....