2016 (2) TMI 810 - HC - Service Tax

Reverse charge - GTA services - it was contended that the FCI has wrongly deducted the service tax from the contractual amount and the same should be ordered to be refunded to the petitioners. - scope of the contract / agreement - Held that - the note as incorporated clearly indicates the intention of the parties that the rate to be quoted by the contractor should be inclusive of all taxes, levies, cesses etc. which would obviously include service tax. The contractor cannot be heard to urge that service tax is not part of the taxes which arises out of the contract. The liability to pay the tax may have been on the FCI under law but while quoting the rate a contractor can very clearly state what is the rate being quoted by him. This Court can take notice of the fact that in many such tenders or contracts where sales tax etc. are to be taken into consideration, the contractors are asked to quote rates either inclusive of tax or exclusive of tax. If they are inclusive of tax then the contractor is liable to pay all the taxes therein. - No merit in the writ petition of the appellant - Decided against the appellant.

Summary

Issues:
Interpretation of liability for payment of service tax in contracts with Food Corporation of India.

Analysis:
The judgment by the Tripura High Court involved the interpretation of liability for the payment of service tax in contracts with the Food Corporation of India (FCI). The petitioners contended that the liability to pay service tax lies with the service receiver, which is FCI, and not the service provider. On the other hand, FCI argued that the contractors had agreed to pay all liabilities, including service tax, as part of the contractual rate. The court noted that the Finance Act of 2000 amended the Service Tax Act, making the service receiver the assessee for goods transport services. Citing the Gujarat Ambuja Cement case, the court emphasized that the liability to pay tax ultimately rests with the FCI as the service receiver.

The court also referred to the Rashtriya Ispat Nigam case, where it was held that the intention of the parties in a contract determines the liability for taxes. In that case, the Apex Court clarified that even though the service provider becomes the assessee due to legal amendments, the contractual agreement can still shift the tax burden to the service receiver. The court highlighted a clause in the contract that required tenderers to quote rates inclusive of all taxes, indicating the intention that the contractor should bear the tax liabilities. This clause was interpreted to show that the contractor's quoted rate should cover all taxes, including service tax.

Drawing from the Numaligarh Refinery case, the court emphasized that clauses in contracts specifying the responsibility for taxes can shift the tax liability from the assessee to the other party. In the present case, the court analyzed a similar clause that required contractors to quote rates inclusive of all taxes. The court concluded that this clause clearly indicated the intention that the contractor should bear the tax liabilities, including service tax. Therefore, the court dismissed the writ petitions, affirming that the liability for service tax payment rested with the Food Corporation of India, as per the contractual terms and the legal framework.

In conclusion, the judgment provided a detailed analysis of the contractual clauses, legal amendments, and precedents to determine the liability for service tax payment in contracts with the Food Corporation of India. The court's interpretation emphasized the importance of contractual intentions and the legal framework in assigning tax liabilities between parties involved in service provision contracts.