2022 (12) TMI 661 - AT - Service Tax

Claim of refund of service tax - work contract services - Section 102 of the Finance Act, 1994 which exempted services provided to Government for the period 01.04.2015 to 29.02.2016. - HELD THAT - Undisputedly, the contract has been entered and signed on 19.03.2015. A contract comes into effect and binds the parties only when it is accepted. As per Section 2(b) of Indian Contract Act, 1872, acceptance is defined as when the person to whom the proposal has been made signifies his assent thereto, the offer is accepted . Thus acceptance refers to the act of one party agreeing to the terms of proposed by another party. Merely receiving a tender or opening a tender cannot be considered as acceptance. There should be communication or intimation of the acceptance. As per Section 102, the service provider is eligible for exemption of service tax only if contract is entered prior to 01.03.2015. The letter dt. 08.05.2015 reproduced above explaining the applicability of exemption from service tax issued by the Head office of the recipient (Contract Management) cannot override the provisions of law. Since the contract has been entered on 19.03.2015, the appellant is not eligible for exemption of service tax. Decided against the assessee.

Summary

Issues:
1. Eligibility for refund of service tax on works contract services provided to the Government during a specific period.
2. Interpretation of Section 102 of the Finance Act, 1994 regarding the condition for exemption from service tax.
3. Consideration of the date of receiving the tender by the Government for eligibility of refund.
4. Analysis of the contract acceptance date in determining eligibility for exemption.
5. Comparison of the dates of tender opening and contract signing for exemption assessment.

Analysis:
The case involved the appellant, engaged in providing Works Contract Services to the Military Engineer Services, seeking a refund of service tax paid during 2015-16 under Section 102 of the Finance Act, 1994. The appellant's refund claim was rejected by the original authority, and the Commissioner (Appeals) upheld the decision, leading to the current appeal.

The appellant argued that as per Section 102, service tax exemption applies if the contract for works contract services to the Government was entered into before 01.03.2015. The appellant contended that the date of receiving the tender should be considered for exemption eligibility, supported by a letter from the Directorate of Contract Management. However, the Department argued that the contract was signed on 19.03.2015, after the specified date, making the appellant ineligible for exemption.

The Tribunal analyzed the contract acceptance principle, stating that a contract binds parties upon acceptance, not merely upon receiving or opening a tender. Referring to the Indian Contract Act, the Tribunal emphasized the importance of communication or intimation of acceptance for a contract to be valid. Despite the letter from the Directorate of Contract Management, the Tribunal held that the contract must be entered before 01.03.2015 to avail the exemption, which was not the case for the appellant.

Ultimately, the Tribunal upheld the authorities' decision to reject the refund claim, stating that the appellant was not eligible for the exemption based on the contract signing date. The appeal was dismissed, emphasizing the strict requirement of entering the contract before 01.03.2015 for service tax exemption under Section 102.

This detailed analysis highlights the significance of contract dates, legal interpretations, and the strict application of statutory provisions in determining eligibility for service tax exemptions in works contract services provided to the Government during a specified period.