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2022 (10) TMI 629 - HC - Service TaxReimbursement of amount of Service Tax - maintenance of street lights - if petitioners were required to pay service tax, then whether the same, if at all, could be recovered from respondent no.1 i.e., Municipal Corporation of Delhi (MCD) or not? - HELD THAT - It is quite evident that as far as the Service Tax Department is concerned, during the relevant period, the service provided by the petitioners was not exempted from service tax - service tax was leviable on maintenance of street lights, contrary to the stand taken by respondent no.1/MCD. The petitioners have paid service tax, during the relevant period. The logical sequitur would be that the petitioners would have to be reimbursed the service tax that they have paid, since the recipient would have to bear the ultimate burden of the payments in that behalf. During the relevant period, there was no exemption operating qua the payment of service tax on the maintenance of street lights - Petition disposed off.
Issues Involved:
1. Whether service tax, during the relevant period, was payable by the petitioners on maintenance of street lights. 2. If service tax was payable, whether it could be recovered from respondent no.1, the Municipal Corporation of Delhi (MCD). Issue-wise Detailed Analysis: Issue 1: Service Tax on Maintenance of Street Lights 1. Exemption Notification Analysis: - The petitioners argued that service tax on maintenance of street lights was exempted under Notification No. 24/2009-S.T, dated 27.07.2009, which exempts services related to the "management, maintenance or repair of roads." - The court examined the 2009 Notification and noted that it explicitly exempts services related to roads but does not mention street lights. 2. Respondent's Statutory Functions: - Respondent no.1/MCD claimed that their statutory functions under Section 42(n) and 42(o) of the Delhi Municipal Corporation Act, 1957, and Article 243W of the Constitution, include maintenance of street lights, which should be covered under the exemption for road maintenance. - The court found that the statutory functions and the Twelfth Schedule of the Constitution, which includes street lighting, do not explicitly extend the road maintenance exemption to street lights. 3. Affidavit and Clarifications: - The court referred to an affidavit by the Commissioner of Service Tax, which clarified that no exemption was available for the maintenance of street lights during the relevant period. - The affidavit also reviewed other notifications, such as Notification No. 32/2010 and Entry 12(a) of Notification No. 25/2012, and concluded that these did not apply to street light maintenance. 4. Strict Interpretation of Exemption Notifications: - The court emphasized that exemption notifications should be interpreted strictly, as established in Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company and Ors., (2018) 9 SCC 1. - The court held that the 2009 Notification could not be extended to include street lights, as it specifically mentions roads. 5. Conclusion on Issue 1: - The court decided in favor of the petitioners, concluding that during the relevant period, there was no exemption from service tax for the maintenance of street lights. Issue 2: Reimbursement of Service Tax from MCD 1. Admitted Fact: - It was undisputed that the petitioners had paid the service tax during the relevant period. 2. Legal Precedent: - The court referred to the judgment in Pearey Lal Bhawan Association v. Satya Developers Pvt. Ltd., ILR (2011) 1 Delhi 604, which established that the ultimate burden of service tax rests on the recipient of the service. - This judgment was affirmed by the Division Bench in Satya Developers Pvt. Ltd. v. Pearey Lal Bhawan Association dated 13.10.2015. 3. Non-Contest by Respondent: - Mr. Gautam, representing MCD, did not contest the petitioners' claim that the recipient should bear the service tax liability if no exemption was applicable. 4. Conclusion on Issue 2: - The court held that since the petitioners had paid the service tax, MCD, as the recipient of the service, must reimburse the petitioners for the service tax paid. Final Judgment: 1. During the relevant period, there was no exemption from the payment of service tax for the maintenance of street lights. 2. The petitioners rightly paid the service tax as service providers. 3. MCD, being the recipient of the service, must bear the burden of the service tax and reimburse the petitioners. 4. The writ petitions were disposed of with the direction that the monies paid by the petitioners towards service tax be reimbursed expeditiously.
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