2014 (7) TMI 665 - HC - Service Tax

Reimbursement of service tax from the recipient of service - mutual contract - refusal of reimburse the service tax on the ground that service tax was not paid actually but was paid through cenvat credit - hiring of Heavy Earth-Moving Machinery for removal of Overburden, extraction and transportation of coal - corrigendum/amendment to contract - Held that - The corrigendum/amendment makes it clear that service tax will be reimbursed only on production of original challan having made cash remittance of such service tax. There is no force in the contention of learned senior counsel for the petitioners that by virtue of corrigendum/amendment to clause in respect of service tax, the contract agreement for different tenders was unilaterally altered - corrigendum/amendment dated 2nd March, 2012 to clause in respect of service tax was issued clarifying that the service tax will be reimbursed only if paid through cash remittance or e-payment. Therefore, the corrigendum/amendment dated March 2, 2012 does not amount to unilateral alteration of the terms and conditions of the contract and is only clarificatory. Payment or non-payment of excise duty by respondent-BCCL on the input material/machinery is a serious disputed question of fact. The respondent-BCCL has taken a stand that the contractor has been submitting bill for reimbursement of service tax including other contracts of other organizations, in which, similar order of transportation contracts are included in the lump-sum CENVAT which the contractor claimed and thus, the respondent-BCCL insisted on furnishing documentary proof of payment of service tax by cash remittance by the contractor. Thus whether the contractor has any CENVAT credit in relation to the present contract agreement with BCCL is also a question of fact which has been seriously disputed by the respondent-BCCL. Since as per terms of the contract, alternative remedy for settling the dispute is available to the parties, and since we have already held that the action of the respondent-BCCL in issuing the corrigendum/amendment is not arbitrary, these writ petitions cannot be entertained and the writ petitions are liable to be dismissed - Decided against the petitioner.

Issues Involved:
1. Unilateral alteration of contract terms by BCCL.
2. Restriction of service tax reimbursement to net payment excluding CENVAT credit.
3. Alleged arbitrary and unilateral decision by BCCL.
4. Applicability of Finance Act, 1994 and CENVAT Credit Rules, 2004.
5. Disputed facts regarding payment of excise duty on input materials.

Detailed Analysis:

1. Unilateral Alteration of Contract Terms by BCCL:
The petitioners argued that BCCL unilaterally amended the contract by issuing a corrigendum/amendment on March 2, 2012, which restricted the reimbursement of service tax to payments made in cash, cheque, or e-payment, excluding those made through CENVAT credit. This action was claimed to be arbitrary and in violation of the original contract terms, which included clause 11(vii) that allowed for the reimbursement of service tax.

2. Restriction of Service Tax Reimbursement to Net Payment Excluding CENVAT Credit:
The corrigendum/amendment specified that service tax reimbursement would be made only for net service tax payment, calculated as service tax on the value of work minus the amount paid through CENVAT credit. The petitioners contended that this restriction was not present in the original contract and was therefore unjustified.

3. Alleged Arbitrary and Unilateral Decision by BCCL:
The petitioners claimed that the unilateral decision by BCCL to amend the contract terms without their consent was arbitrary. They argued that such a significant change should not have been made without mutual agreement and that the corrigendum/amendment should be quashed.

4. Applicability of Finance Act, 1994 and CENVAT Credit Rules, 2004:
BCCL contended that the reimbursement of service tax was governed by the terms of the contract and not by the Finance Act, 1994, or the CENVAT Credit Rules, 2004. They argued that since coal became excisable in March 2011, BCCL had been availing of CENVAT credit and thus, the contractors should only be reimbursed for service tax paid through cash or e-payment to avoid double payment.

5. Disputed Facts Regarding Payment of Excise Duty on Input Materials:
The petitioners disputed BCCL's claim that excise duty on input materials had already been paid to the contractors through their bills. They argued that there was no evidence to support this claim and that the contractors were not required to quote rates for equipment, spares, etc., in their tenders. This, they argued, meant there was no scope for including the cost of these items in their bills.

Court's Findings:

Unilateral Alteration of Contract Terms:
The court found that the corrigendum/amendment issued by BCCL was not a unilateral alteration of contract terms but was clarificatory. It was necessary to ensure that service tax reimbursement was only for payments made by cash or e-payment to avoid double payment due to CENVAT credit.

Restriction of Service Tax Reimbursement:
The court held that the corrigendum/amendment was justified in restricting service tax reimbursement to net payments made in cash or e-payment. This was in line with clause 11(vii) of the contract, which included all duties, taxes, and levies in the quoted rate of the contractor.

Arbitrary and Unilateral Decision:
The court did not find BCCL's decision to be arbitrary. It noted that the corrigendum/amendment was necessary to clarify the terms of the contract in light of the excisability of coal and the use of CENVAT credit.

Applicability of Finance Act and CENVAT Credit Rules:
The court agreed with BCCL that the reimbursement of service tax was governed by the contract terms and not by the Finance Act, 1994, or the CENVAT Credit Rules, 2004. The terms of the contract clearly stipulated the conditions for reimbursement.

Disputed Facts on Excise Duty Payment:
The court acknowledged that there were serious disputed questions of fact regarding the payment of excise duty on input materials. It stated that such issues could not be resolved in a writ petition and should be addressed through the alternative dispute resolution mechanisms provided in the contract.

Conclusion:
The court dismissed all the writ petitions, vacated the interim stay, and disposed of all interlocutory applications. It held that the corrigendum/amendment was clarificatory and justified, and the disputes regarding excise duty payments were not suitable for resolution through a writ petition.

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