2023 (11) TMI 901 - HC - Service Tax

Direction to Assessing Authority to complete the assessment afresh - direction to respondents 4 and 5 to deposit the amount of service tax erroneously collected from the petitioner to the 1st respondent to discharge the VAT liability - rejection of request for refund of the service tax paid - HELD THAT - The imposition of any tax has to be with the authority of law. In the instant case, the petitioner apparently proceeded on the assumption that the activity carried out by it was a service contract and proceeded to remit service tax in respect of its entire turn over. However, the question whether a pest control contract is a works contract by reason of there being an element of sale of the materials used for pest control was considered by the various High Courts as well as the Apex Court. It is an admitted fact that the said question has found a quietus in as much as the Apex Court has held that the contract of pest control has an element of sale of chemicals involved and is, therefore, a works contract and is amenable to tax as such. The Appellate Tribunal has directed the reworking of the assessments on the basis of the findings of the Apex Court. Even going by the decision of the Appellate Tribunal, the petitioner had been relegated to the Assessing Authority for passing an order of assessment in the light of the decision of the Apex Court. Nothing precludes the consideration of the contentions of the assessee at the hands of the Assessing Authority. I, therefore, find that the Assessing Authority is duty bound to consider the contentions of the assessee on facts before proceeding with the modification of the assessment as directed in Ext. P5. A person whether a manufacturer or importer must fight his own battle and must succeed or fail in such proceedings. Once the assessment of levy has become final in his case, he cannot seek to reopen it nor can he claim refund without reopening such assessment/order on the ground of a decision in another person's case. In the instant case, the petitioner had made the payment of the service tax for the periods in question voluntarily and had never challenged the authority of the Service Tax Authorities. It is also not in dispute before me that the levy was under the provisions of an enactment which the petitioner still maintains is applicable to the transaction in question. It is only at a belated stage when the VAT authorities raised a demand on the basis of the law as decided by the Apex Court that the petitioner, for the first time, raises a claim for refund of the service tax paid or seeks payment of the VAT demanded by the Service Tax Authorities - The instant case is not one where the levy of service tax was under any provision found to be constitutionally invalid. The levy was under the provisions of a valid statute and the petitioner had raised no objection or appeal as against the assessment. There is no specific contention raised by the petitioner that the burden of the service tax that he had paid to the appropriate authorities had not been passed on to the end customer - the petitioner cannot place any reliance on the doctrine of unjust enrichment as against the revenue. The Assessing Authority shall consider the issue afresh with notice to the petitioner with regard to the nature of the contracts entered into by the petitioner with its customers and pass a reasoned order in continuation of Ext. P5. It is made clear that further assessments can be made and demands raised on the basis of the findings of the Assessing Authority - Application disposed off.

Issues Involved:
1. Challenge to Ext. P5 order by the KVAT Appellate Tribunal.
2. Prayer for refund of service tax paid.
3. Challenge to Ext. P11 order rejecting refund request and Ext. P14 notice under Section 25(1) of the KVAT Act.
4. Challenge to Ext. P13 order rejecting annual returns for 2015-16.

Summary:

Issue 1: Challenge to Ext. P5 Order by the KVAT Appellate Tribunal

W.P.(C) No. 8448/2021 challenges Ext. P5 order dated 5.3.2019, by which, the Kerala Value Added Tax Appellate Tribunal (KVAT Appellate Tribunal) partly allowed the appeals filed by the State and directed the Assessing Authority to complete the assessment afresh, taking note of the decision of the Apex Court in State of Gujarat v. Bharat Pest Control [2018-TIOL-310-SC].

Issue 2: Prayer for Refund of Service Tax Paid

The petitioner argued that the transaction was purely a service contract and not a works contract, hence VAT imposition was erroneous. Alternatively, if deemed a works contract, the Service Tax Authorities should pay the VAT amount as the collection of service tax was erroneous. The court noted that the imposition of any tax must be with the authority of law and referred to the Apex Court's decision that pest control contracts involve an element of sale, thus qualifying as works contracts.

Issue 3: Challenge to Ext. P11 Order and Ext. P14 Notice

Challenge is raised to Ext. P11 order of the 6th respondent rejecting the refund request of the service tax paid and Ext. P14 notice issued by the 7th respondent under Section 25(1) of the KVAT Act. The court found that the Assessing Authority must consider the petitioner's contentions on facts before modifying the assessment as directed in Ext. P5.

Issue 4: Challenge to Ext. P13 Order Rejecting Annual Returns for 2015-16

The prayer in W.P.(C) No. 19432/2021 is to quash Ext. P13 order dated 5.7.2021, rejecting the annual returns for 2015-16. The court set aside Ext. P13, directing the Assessing Authority to reconsider the issue with notice to the petitioner regarding the nature of the contracts.

Conclusion:

The court upheld Exts. P5 and P11 orders but set aside Ext. P14 notice and Ext. P13 order. The Assessing Authority is directed to consider the issue afresh with notice to the petitioner regarding the nature of the contracts entered into with its customers and pass a reasoned order in continuation of Ext. P5. All other prayers were declined.

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