TaxTMI 
TaxTMI 
2022 (3) TMI 986
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....or reimbursement of Service Tax in respect of certain services availed by the respondent (hereinafter 'CEC') and entered an award for a sum of Rs. 1,38,58,095/- in respect of Claim no. 1. The Arbitral Tribunal also accepted CEC's claim for reimbursement of Environmental Compensation Cess (hereinafter 'ECC') and awarded a sum of Rs. 3,14,06,709/-, in its favour. In addition, the Arbitral Tribunal awarded interest at the rate of 10% per annum on the aforesaid awarded amounts. The Arbitral Tribunal also awarded costs for arbitral proceedings quantified at Rs. 15,00,000/-. 3. At the outset, it is material to note that the petitioner has accepted the impugned award in respect of CEC's claim for reimbursement of ECC (Claim no. 2) and has confined its challenge to the award relating to reimbursement of Service Tax (Claim no. 1) and interest (Claim no.3) 4. The controversy in the present case arises in the following context: 5. On 06.03.2013, the petitioner issued an electronic Notice Inviting Tender (NIT) for the works regarding "Comprehensive Development of Corridor (Outer Ring Road) between Mukarba Chowk to Wazirabad Chowk, SH: C/o Flyovers, Loops, Bridges across supplementary drain,....
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....nt of Service Tax. The petitioner responded by a letter dated 04.01.2014 informing CEC that if the contractor (CEC) has already paid the Service Tax to the concerned Service Tax Department on demand, then the Service Tax is deemed to be reimbursed to the contractor and therefore, no Service Tax is payable to the contractor in the instant case. Thereafter, CEC sent a letter dated 12.03.2014, claiming a sum of Rs. 3,97,244/- on account of reimbursement of Service Tax and requested the petitioner to process its bill for release of payment at the earliest. 13. Further, by a letter dated 01.06.2015, CEC also requested the petitioner to refund a sum of Rs. 15,05,524/- deposited as Service Tax from the period October, 2013 till March, 2015, in accordance with Clause 37(i) of the GCC and Clause 14 of the Instructions to Bidders. The petitioner responded by a letter dated 27.07.2015 rejecting CEC's claim by relying on a circular [Circular no. 147/16/2011 dated 21.10.2011] issued by Department of Revenue, Ministry of Finance, Government of India. The petitioner claimed that the services provided by the sub-contractors for the infrastructure project were also exempted from Service Tax. 14. ....
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.... ground that Clause 37(i) of the GCC and Clause 14 of Instructions to Bidders provide for reimbursement of Service Tax levied on the services provided by the main contractor and it had nothing to do with the levy of Service Tax on the input services received by the main contractor - that is, CEC - from its various sub-contractors/service providers. 20. Thereafter, CEC, by a letter dated 10.08.2017, filed an appeal as contemplated under Clause 25 of the GCC, with the Principal Chief Engineer (Projects) for pursuing its claim. In terms of Clause 25 of the GCC, the Chief Engineer was under an obligation to communicate its decision within a period of thirty days, however, no such decision was rendered by the Chief Engineer within the stipulated period. By a letter dated 14.09.2017, CEC, once again, requested the Chief Engineer to expedite the process and communicate its decision. But, the Chief Engineer failed to do so. 21. Dissatisfied with the decision of the aforesaid authorities, CEC by a letter dated 31.10.2017, preferred an appeal before the Disputes Redressal Committee (hereinafter 'DRC'). However, the DRC failed to take a decision in respect of the aforementioned claim within....
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....by CEC. Out of the said amount, an amount of Rs. 1,38,58,095/- was directly deposited with the Department of Service Tax and the remaining balance, that is, Rs. 3,63,89,858/-, was deposited with the Department through CEC's sub-contractors and vendors. The Arbitral Tribunal found that CEC had duly satisfied the above three conditions in respect of the sum of Rs. 1,38,58,095/- paid by it to the Department of Service Tax and therefore, awarded reimbursement of the aforesaid amount in respect of Claim No.1. However, the claim for the remaining amount of Rs. 3,63,89,858/- was rejected. 29. The Arbitral Tribunal also allowed Claim nos. 2 and 3 of CEC and held that that the burden to pay the ECC arose pursuant to a Notification dated 20.10.2015 issued by the Department of Environment, Government of NCT of Delhi in compliance with an order dated 09.10.2015 passed by the Supreme Court in I.A. no 345 and 365 of 2015 in W.P. (Civil) 13029 of 1985 captioned as MC Mehta v Union of India and Ors. The Arbitral Tribunal further referred to Clause 38 of the GCC, which specifically dealt with the statutory liability of the petitioner, in terms of any taxes/levies/cess imposed by any statute after ....
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.... Construction Workers Welfare Cess or any other tax or Cess in respect of this contract shall be payable by the contractor and Government shall not entertain any claim whatsoever in this respect. However, in respect of service tax, same shall be paid by the contractor to the concerned department on demand and it will be reimbursed to him by the Engineer-in-Charge after satisfying that it has been actually and genuinely paid by the contractor. Clause 14 of the Instructions to Bidders: Sales Tax, Excise-Duty as applicable shall be paid by the contractor himself Whereas Contract Tax, DVAT, Labour Cess and Income Tax etc. as applicable shall be deducted by the department from the WA bills. The contractor shall quote his rates considering all such Taxes. However regarding the Service Tax, the same shall be reimbursed by the department on production of proof of actual payment of Service Tax in the concerned department made on demand." 35. It is important to note that the Agreement was, essentially, an Item Rate Contract, whereby CEC had submitted all inclusive rates for various BOQ items. CEC claimed that during the course of execution of the works in question, it had paid Service T....
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....aid by CEC as a recipient of certain input services, in respect of which the Service Tax was payable on a Reverse Charge Mechanism. In respect of claim for reimbursement of Service Tax in respect of other input services - where the Service Tax was assessed and levied on the service provider and not CEC - the Arbitral Tribunal denied the claim on the ground that no demand was raised by the Service Tax Authorities on CEC. Concededly, CEC was not an Assessee in respect for such services as the Service Tax was assessed in the hands of the service provider that had provided the services to CEC. 40. CEC was registered as a service provider "in respect of commercial or industrial buildings and civil structure". It is important to note that there was no Service Tax payable in respect of the works executed by CEC under the Agreement as such works were specifically exempted from the levy of Service Tax. By a Notification dated 20.06.2020 issued by the Government of India, Ministry of Finance (Notification No.25/2012 - Service Tax), inter alia, following services were exempted from levy of service tax: "12A. Services provided to the Government, a local authority or a governmental authority....