2016 (10) TMI 801 - HC - Service Tax

Refund of service tax paid - subsequent exemption - recovery of tax so paid from the Municipal corporation / service recipient - As per the condition in the contract (E-tender) the amount to be offered was to include all taxes and levies. - The notification having not come to the notice of the Municipal Corporation the bills raised by the petitioner were cleared upto November 2012 which included the amount of service tax as well however from December 2012 onwards the amount of service tax was reduced. The grievance of the petitioner is that he is entitled to be paid that amount as well. Held that - we do not find any merit in the claim made. Once the amount offered by the petitioner included all taxes and levies and subsequently the levy of service tax was withdrawn by the Government that amount being one of the component in the price offered by the petitioner he is not entitled to claim that from the Municipal Corporation as that amount was to be received and paid to the department concerned. In case the amount on account of tax is directed to be paid to the petitioner he is not required to deposit the same with the department and will be unjustly enriched - appeal dismissed - decided against appellant.

Summary

Issues:
Impugning order rejecting payment representation - Service tax exemption issue - Entitlement to payment of service tax amount

Impugning Order Rejecting Payment Representation:
The petitioner approached the court challenging the order by the Commissioner of Municipal Corporation rejecting the representation seeking payment of a specific amount. The petitioner had been awarded a contract for waste lifting services, and the issue arose regarding the payment of service tax component included in the contract amount.

Service Tax Exemption Issue:
The contract between the petitioner and the Municipal Corporation included all taxes and levies, including service tax. However, a notification exempting the service from service tax was issued after the contract was awarded. The Municipal Corporation, unaware of the exemption, continued to deduct the service tax component from the payment to the petitioner. The petitioner claimed entitlement to the full amount without any deductions based on the subsequent exemption.

Entitlement to Payment of Service Tax Amount:
The petitioner argued that since the service was exempted from service tax, they should receive the full contract amount without any deductions. The Municipal Corporation contended that the petitioner should not be unjustly enriched by receiving the service tax component back as it was meant for deposit with the tax department. The court held that once the contract amount included all taxes and levies, the petitioner was not entitled to claim the service tax amount back from the Municipal Corporation.

The court noted that the service tax was leviable when the contract was awarded, and the contract amount included all applicable taxes. Even though the service became exempt from tax later, the petitioner was not entitled to claim back the service tax component as it was part of the original contract price. The court dismissed the petition, stating that if the petitioner were to receive the service tax amount, they would be unjustly enriched as it was meant for payment to the tax department.