TaxTMI 
TaxTMI 
2025 (5) TMI 1534
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....els and/or launches. 5. Following acceptance of the tenders by the defendant, 8 separate agreements with similar terms and conditions have been executed between the parties. 6. Clause 3.12 of the agreements provides that: "The rate quoted by the bidders shall be inclusive of all taxes and duties. However, Service Tax and Educational Cess, if applicable, will be reimbursed by KoPT at actual on production of documentary evidence. Service Tax and Educational Cess will not be considered for the evaluation of the Tender". (emphasis supplied) 7. Initially the plaintiff was under the impression that service tax was payable only in respect of the daily maintenance charges of the vessels and on that basis the plaintiff raised bills on the defendant together with the bills for reimbursement of service tax restricted to daily maintenance charges. These bills were duly accepted and paid by the defendant from time to time. All the eight contracts were initially entered into by Corporated Shipyard Private Limited (hereinafter referred to as the 'said company') with the defendant. However, during the pendency of the said contracts the control and management of the said company w....
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....inal discharge certificate issued by the service tax department in Form VCES-3 to the defendant and relegated the plaintiff to suit with regard to other claims. 11. In terms of the aforesaid order the defendant reimbursed the aforesaid sum to the plaintiff on 10th March, 2017. In view of the fact that the defendant had failed and refused to reimburse service tax prior to 10th March, 2017 and only after an order was passed in the writ proceeding on 24th February, 2017, following the liberty granted by the learned Single Judge in the writ proceeding, the suit was filed claiming interest for delay in reimbursement of the service tax. 12. The learned Single Judge dismissed the suit on the ground that the defendant was not responsible for the delay as reimbursement of the service tax is dependent upon the plaintiff furnishing original discharge certificate issued by the service tax department in Form VCES-3. The learned Single Judge in this regard relied upon the affidavit filed by the service tax department in the writ proceeding, the order passed by the learned Single Judge in the writ proceeding on 9th December, 2016 and Circular no. 176/2/2014-ST dated 20th January, 2014 issue....
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....to be made of the tax dues within the period prescribed therein and on furnishing of details of payment of declared tax dues and the interest if any, the designated authority issues an acknowledgement of discharge in VCES-3. The said scheme has no manner of application with regard to the reimbursement of the service tax paid by the plaintiff. 19. It is submitted that the entitlement of the petitioner to receive such service tax is also justified on the basis of the decisions of the Allahabad High Court, Calcutta High Court and Delhi High Court. Mr. Chowdhury has relied upon the decision of the Delhi High court and Calcutta High Court in Pearey Lal Bhawan Association v. Satya Developers Pvt. Ltd. 2010 SCC Online Del 3660: ILR (2011) 1 Del 604: 2010(173) DLT 685, and Bengal Shrachi Housing Development Limited & Anr. V. Union of India & Ors. W.P. No. 4085(w) of 2014, decided on 15th May, 2014 respectively and submits that it has been accepted by all the High Courts that service tax is a statutory liability and it is a tax which is required to be collected by the service provider from the person to whom service is provided. The service provider is merely a collecting agency. 20. ....
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....5/- the plaintiff had to pay interest of Rs. 13,97,767/- levied by the service tax authorities towards interest calculated at the rate of 18% per annum on the remaining balance amount being the rate of interest fixed under Section 75 for the period of delay from 1st July, 2014. 21. Mr. Chowdhury has referred to the Notification no. 12/2014 dated 11th July, 2014 issued by the Government of India, Ministry of Finance in exercise of power conferred by Section 75 of the Finance Act, 1994 to show that the Central Government has fixed simple interest @18% per annum for delayed payment of Service Tax up to six months. It is submitted that if the reimbursement were made by 30th June, 2014 the plaintiff could have paid the remaining tax dues within the extended period i.e. 31st December, 2014 without any interest. 22. As the defendant was responsible for the delay the plaintiff is entitled to such rate of interest as was charged by the revenue authority for delayed payment. It is submitted that in any event, the plaintiff is entitled to interest from the respective due dates of the debit notes raised by the plaintiff for reimbursement of service tax till 10th March, 2017 at the rate o....
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....rit proceeding on 24th February 2017 and thereupon the defendant immediately reimbursed the service tax. On a meaningful reading of the contract, it would appear that the plaintiff would be required to submit suitable documentary evidence in original for claiming reimbursement. Moreover, the witness of the plaintiff during cross examination has accepted that under Clause 2.13 the plaintiff would be required to submit documentary evidence of service tax so as to enable the defendant to avail of CENVAT credit. Mr. Mitra submits that a meaningful interpretation has to be given to the commercial contracts entered into between the parties between 2005 and 2011. He has referred to Clause 2.13 of one of the contracts which reads as follows- "Clause 2.13 The rate quoted by the bidders shall be inclusive of all Taxes and duties. However, Service Tax & Educational cess if applicable will be re-imbursed by KoPT at actual on production of documentary evidence. Service Tax & Educational Cess will not be considered for the evaluation of the Tender." (emphasis supplied). 25. Mr. Mitra submits that the requirement to submit such document was also within the knowledge ....
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....ent Scheme 2013 (part of Finance Act). The aforesaid sections are set out below for convenience. "Section 105(b) "declarant" means any person who makes a declaration under sub-section (1) of Section 107; Section 107 (1) - Subject to the provisions of this Scheme, a person may make a declaration to the designated authority on or before the 31st day of December, 2013 in such form and in such manner as may be prescribed." 28. It is neither the case of the plaintiff nor is it a fact that the defendant has made any such Declaration to the Designated Authority required under Section 107 (1) for making the defendant "a declarant". 29. Mr. Mitra submits that so far as pre-suit interest is concerned, it is settled law that in the absence of an agreement for payment of interest, interest can be claimed under the provisions of any substantive law like, inter alia, Section 80 of the Negotiable Instruments Act, Section 23 of Trust Act, and Section 61 of Sale of Goods Act. In this regard he was referred to the following decisions: (i) Vithal Dass Vs. Rup Chand AIR 1967 SC 188, paragraph 4. (ii) Central Bank of India vs Ravindra & Ors. (2002) 1 SCC 367....
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....he service tax in relation to the contracts in question was paid by the appellant/plaintiff irrespective of normal course or otherwise under VCES, the respondent/defendant was bound to reimburse the same. The Learned Judge has completely erred in referring to the provisions of Sections 107 and 108 of the Finance Act with regard to a declaration becoming conclusive only upon issuance of acknowledgement of discharge. It is submitted that acknowledgement of discharge, as contemplated under Section 107 (7) of the Finance Act, makes the declaration given by the appellant/plaintiff under Section 107 (1) of the said Finance Act absolute. Such declaration given by the appellant/plaintiff is in relation to the entire service tax liability which the declarant i.e., the appellant/plaintiff had, which included also service tax component of the contracts in relation to the respondent/defendant. In other words, the appellant/plaintiff would be entitled to take benefit of the scheme only upon such declaration being conclusive. The scheme did not and could not form part of any documentary evidence vis-à-vis the contract in question. 32. The appellant has clarified in its letter dated 15t....
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....f the aforesaid it is submitted that the contention of the defendant that until and unless Form VCES-3 in original is made over to it, it would not be possible for the defendant to avail of CENVAT credit, is contrary to the express provision of the Cenvat Credit Rules 2004 as well as the specific stand of the service tax authorities taken before the writ court. The entitlement of Cenvat Credit vis-à-vis respondent/defendant and that of the appellant/plaintiff was on completely different footings and parameters. In the affidavit filed by the tax authorities before the Hon'ble High Court, it was amply clarified that the respondent/defendant was entitled to Cenvat Credit on the basis of supplementary invoices issued by the appellant/plaintiff, who was the petitioner in the writ petition. It had also been clarified that applicable rules to ascertain the documents required for availing benefit of CENVAT Credit are Rules 9 (1) (bb) and 9 (1) (e) of the Cenvat Credit Rules, 2004. Under said Rules the only two documents that were required to satisfy the test of "documentary evidence" would be the supplementary invoice, bill or challan issued by the provider of output service and....
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....st, 2015 (being the dates of debit notes) up to the date of actual payment namely, 10th March, 2017 comprising of 578 days on the total amount of Rs 1,54,88,531/- (comprising of 6 contracts for Rs. 9,23,675/- Rs. 22,13,675/- Rs. 48,96,073/- Rs. 65,40,987/- Rs. 25,004/- and Rs. 6,64,117/-). 39. In so far as clause 6.8 is concerned it is submitted that the reimbursement of service tax does not fall under clause 6. The said clause pertains to terms of payment. Clause 6.1 provides in the right-hand marginal note that "All interim payments are advances till issue of Certificate in Form G.C.2." Clause 6.1 further provides that "no sum shall be considered as earned by or due to the Contractor in respect of the work till final and satisfactory completion thereof... given by the Engineer." (emphasis supplied) Therefore, the expression "due to the Contractor" in Clause 6.8 has to be harmoniously read with Clause 6.1 and is in relation to interim and final payments in terms of Clause 6 and not otherwise. Therefore, the clause of interest not being admissible to the contractor envisaged in Clause 6.8 would apply only to such payments if it satisfies two-fold conditions, namely:- ....
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.... supplementary invoice issued by them by way of debit note along with the paid Challan, whether KoPT can take credit based on these documents 2) If not, what other documents are necessary for taking credit by KoPT after reimbursing the -tax to CSPL." 43. The plaintiff objected to furnishing of irrevocable bank guarantee or indemnity bond and challenged the said demand in a writ petition being W.P. No. 948 of 2016. In the said writ proceeding on 9th June 2016, one of us (Soumen Sen, J) on a prima facie opinion that KoPT could not have refused to refund the service tax paid on account of manning, handling and operation, directed the Commissioner of Service Tax to appear and clarify the issue. In the said writ petition the Deputy Commissioner (Legal) Service Tax filed an affidavit in which he has disclosed the stand of the service tax authorities in paragraph 3. The said paragraph is reproduced below. "(a) That the dispute relates to release/ reimbursement of payment to the tune of Rs.4,08,31,202/- to the petitioner no. 1 by the respondent no. 1. (b) That the petitioner no. 1 being the service provider has provided service to Calcutta Port Trust and they ....
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.... and/or the Kolkata Port Trust to pursue their respective legal remedies in respect of any other claims that they may have against each other before the appropriate forum, with liberty to each of the said parties to defend the same. The Service Tax Department will be making available to the Kolkata Port Trust the necessary Cenvat Credit for the said sum of Rs. 3,94,34,035/- paid wards service tax on the basis of the supplementary invoices and the original discharge certificate as aforesaid issued by the Service Tax Department as per the statement made in paragraph 3(e) and 3(1) of the affidavit in opposition affirmed on 22nd day of January, 2017 by and on behalf of the Service Tax authority, and thus shall not demand the original discharge certificate from the writ petitioner No. 1 for any related or other purpose whatsoever." 45. The writ court however did not decide any other claim and disposed of the writ petition with the observation that the parties shall be at liberty to claim any other reliefs before appropriate forum. 46. The plaintiff after receiving the reimbursement has filed a suit claiming interest on the aforesaid sum. Under the contract the defendant i....
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....the said supplementary affidavit of the appellant duly affirmed by one Dinesh Arya on 21st March, 2025 he has disclosed the letter dated 12th July, 2016 from Corporated Shipyard Private Limited the predecessor-in-interest of the plaintiff to the Commissioner (Legal) of Service Tax II, Kolkata Commissionerate and the reply dated 20th July, 2016 issued by the Assistant Commissioner. The reply by the Assistant Commissioner has been reproduced below: "Q.22. a) Whether the tax dues amount paid under VCES would be eligible as Cenvat Credit to the recipient of service under a supplementary invoice? b) Whether Cenvat Credit would be admissible to the person who pays tax dues under VCES as service recipient under reverse charge mechanism? Rule 6 (2) of the Service Tax Voluntary Compliance Encouragement Rules, 2013, prescribes that CENVAT Credit cannot be utilized for payment of tax dues under the scheme. Except this condition, all issues relating to admissibility of Cenvat Credit are to be determined in terms of the provisions of the Cenvat Credit Rules. As regards, admissibility of Cenvat Credit in situations covered under part (a) and (b), attention is ....
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....respondent has availed CENVAT Credit to the tune of Rs.3.94 crores. A copy of the said CENVAT Registrar for the month of March, 2017 is annexed hereto and marked with letter "R-2". 10. It is also evident from the service tax return filed under section 70 of Finance Act 1994 read with Rule 7 of Service Tax Rule, 1994 for the period of October, 2016 to March, 2017 that the respondent has availed CENVAT Credit. A copy of the service tax return for the period from October, 2016 to March, 2017 is annexed hereto and marked with letter "R-3". 11. In the facts and circumstances it is submitted that from the aforesaid statement and documents it is evident that respondent has been able to avail of CENVAT credit after payment of Rs. 3.94 crores to the appellant and after receiving the original discharge certificate in the Form VCES-3 from the appellant." 51. The claim for interest in the instant case essentially sounds in damages. The plaintiff is not claiming any interest under any statute. It is on account of alleged delay in reimbursing the service tax paid by the plaintiff as a service provider. The plaintiff has provided service to the KoPT and they have paid the tax....
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....f was prevented from utilizing the said amount for any gainful purposes and had suffered loss and damages. Ordinarily, even in absence of such proof the Court presumes that if the plaintiff is entitled to the money and had received the money belatedly then on equitable consideration the Court may grant interest at the bank rate prevailing at the relevant point of time in exercise of its equitable jurisdiction. However, in the instant case the immediate justification for not releasing the amount cannot be said to be willful or without any basis at least till 20th July, 2016. Although the KoPT could not have insisted for the bank guarantee and indemnity bond cum undertaking as a condition precedent for release of the amount towards reimbursement, the correspondence made with the authorities concerned by the parties independent of each other would show that all of them have been seeking clarifications with regard to the requirement of submitting original discharge certificate in VCES-3. We do not agree with the learned single judge that the original discharge certificate was a pre-requisite for claiming reimbursement. The payment of the service tax through the Scheme of 2013 has compl....
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.... plaintiff. The position would have been simplified and brooks no delay if simultaneously with the payment of service tax the plaintiff along with debit note and challans furnished the discharge certificate and if in spite thereof the defendant had failed to make payment, in which case it can be unhesitatingly said that the defendant is in breach. 56. The plaintiff had made a payment of Rs. 2,40,00,000/- on 31st December, 2013 on account of the service tax out of a total of Rs. 3,94,34,035/- in aggregate in respect of the eight agreements to the Office of the Commissioner of Service Tax-II, Kolkata. Thereafter, the plaintiff had communicated to the defendant about the said payment and requested for reimbursement of the same but the defendant had failed to make payment necessitating the plaintiff to arrange necessary funds and make balance payment on 31st December, 2014. 57. The plaintiff had made balance payment of Rs. 1,54,34,035/- under VCES and a further sum of Rs. 13,97,767/- on account of interest thereon. It was alleged by the plaintiff that the said interest had arisen solely due to the neglect and failure of the defendant to reimburse the first instalment of Rs. 2,40,....