2015 (7) TMI 1345 - HC - Service Tax

Refund of deducted amount of service tax from bills of the petitioner - Clause 13(a) of the Notification No. 12/2012-Service Tax dated 17th March, 2012 - HELD THAT - It is well settled that under Article 265 of the Constitution of India no tax shall be levied or collected except by authority of law. In view of the exemption it is evident that the respondents have no authority to collect service tax which is not at all leviable under the law. All the writ applications are allowed and the concerned respondents are directed to refund the entire amount of service tax deducted from the bills of the petitioners after the issuance of the aforesaid Notification dated 17.3.2012.

Summary

Issues:
1. Refund of wrongly deducted service tax from bills.
2. Interpretation of Clause 13(a) of Notification No. 12/2012-Service Tax.
3. Authority to deduct service tax despite exemption notification.
4. Legality of collecting tax without authority of law.

Analysis:
1. The petitioners sought a direction for the refund of service tax wrongly deducted from their bills and to restrain future deductions. They were contractors working with the Road Construction Department in Bihar. The authorities deducted service tax at 12.36%, which the petitioners argued was impermissible under the exemption granted by Notification No. 12/2012-Service Tax issued by the Government of India. The petitioners executed contracts for road construction and maintenance, falling under the exemption category.

2. The respondents justified the deduction by including service tax in the Estimated Cost Value (ECV) for the works, based on the total cost including service tax as per the tender documents. However, the petitioners contended that the tender documents did not mention the inclusion of service tax. They argued that tax collection must be lawful, and the exemption notification prohibited the deduction of service tax despite its inclusion in the tender documents.

3. The State's counsels failed to provide a legal basis for the deduction of service tax in light of the exemption notification. The court emphasized that taxation must be authorized by law under Article 265 of the Constitution of India. As the exemption clearly stated that service tax was not leviable, the respondents had no authority to collect it. Consequently, the court allowed the writ applications, directing the refund of all wrongfully deducted service tax and prohibiting future collections as long as the exemption remained valid.

4. In conclusion, the High Court of Patna, comprising Honourable Mr. Justice Ramesh Kumar and Honourable Mr. Justice Amaresh Kumar Lal, delivered a common order on multiple writ applications concerning the refund and deduction of service tax from contractors' bills. The judgment highlighted the importance of legal authorization for tax collection, upheld the exemption notification, and restrained the respondents from collecting service tax contrary to the law.