Service Tax Burden Falls on Service Recipient: Railways Must Reimburse Contractor After 2012 Legal Regime Change

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....The HC ruled that the arbitration clause barring writ jurisdiction was invalid per the CORE vs. ECI SPIC SMO MCML (JV) precedent. The Court determined that the dispute over service tax reimbursement following the 2012 legal regime change was not about liability to pay tax but about which party should bear the burden. The HC held that Railways must reimburse the service tax paid by the appellant, applying the principle that indirect tax incidence passes to the service recipient. Drawing an analogy to SS64A of the Sale of Goods Act, the Court concluded that new tax liabilities arising from state action post-contract should be borne by the service recipient. A writ of mandamus was issued directing Railways to reimburse the appellant with 9% interest.....