9911796707
TMI BlogWHETHER THE SERVICE TAX LIABILITY CAN BE TRANSFERRED TO THIRD PARTY?X X X X Extracts X X X X X X X X Extracts X X X X ..... WHETHER THE SERVICE TAX LIABILITY CAN BE TRANSFERRED TO THIRD PARTY? - By: - Mr. M. GOVINDARAJAN - Service Tax - Dated:- 28-5-2015 - - The concept of service tax was introduced in the year 1994 by Chapter V of Finance Act, 1994 . According to the provisions of the Act and the rules made there under every person providing taxable services to any person is liable to pay service tax at the rates specified now and then, to the credit of the Central Government. Now in certain cases the service receiver is also liable to pay service tax at the rates specified by the Government in this regard. Every person paying the service tax is required to register with the Central Excise Department and liable to file returns in ST 3 form periodica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly. The issue to be considered in this article is whether the service tax liability can be transferred to third party with reference to decided case laws. In Rastriya Ispat Nigam Limited V. Dewan Chand Ram Saran 2012 (4) TMI 457 - Supreme Court of India the appellant is a Government of India undertaking engaging in the manufacture of steel products and pig iron for sale in the domestic and export markets. In 1997 the appellant appointed the respondent as the handling contractor. A formal contract was entered into between both parties. Clause 9.3 of the contract provides that the contractor shall bear and pay all taxes, duties and other liabilities in connection with the discharge or obligation under this order. Later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contractor invoked the arbitration clause for raising a dispute as to its liability to pay service tax. The claim petition was dismissed by arbitrator. The same was challenged by means of a petition before the High Court which held that insofar as the service tax liability is concerned the Rastriya Ispat Nigam Limited which had given the contract was the assessee and liable to tax. Against this order the appellant filed the present appeal before the Supreme Court. The Supreme Court held that service tax is an indirect tax and it is possible that it may be passed on. Therefore an assessee can certainly enter into a contract to shift its liability of service tax. The Supreme Court further held that the provisions concerning serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice tax are relevant only as between the appellant as an assessee under the statute and the tax authorities. This statutory provision can be o no relevant to determine the rights and liabilities between the appellant and the respondent as agreed in the contract between two of them. There was nothing in law to prevent the appellant from entering into an agreement with the respondent handling contractor that the burden of any tax arising out of obligations of the respondent under the contract would be borne by the respondent. In Delhi Transport Corporation V. Commissioner of Service Tax 2015 (4) TMI 705 - DELHI HIGH COURT the appellant entered into contracts with seven agencies to provide space to such parties for display of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvertisements on bus queue shelters and time keeping booth. The agreement made with all the contractors are the same. Clause 9 of the contract provides that it shall be the responsibility of the contractor/advertiser to pay direct to the authority and MCD concerned the advertisement tax or any other taxes levy payable or imposed by any authority and the amount will be in addition to the licence fee quoted above. The Department on the basis of information received from anti evasion branch found that the appellant did not pay the service tax for the services rendered by it and called for additional details/documents from the appellants which have been promptly complied with by the appellant. The Department directed the appellant to app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly for service tax registration and also to pay the service tax and for this purpose the Department directed the appellant to depute its officers for computation of tax. Show cause notices were issued to the appellant. In its reply the appellant contended that it is an autonomous body of Government of NCT of Delhi created under the Road Transport Act and had no intention to violate the provisions of the taxing statutes. The obligation for registration under the Service Tax Rules had escaped the notice of its accounts department and Chartered Accountant//auditors and thus, the omission was neither intentional nor deliberate. After brought the same to the notice, the appellant took steps for registration. Since the appellant had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurring losses and depending on the grants given by the Government, the appellant moved the Government for granting exemption from service tax. The appellant further contended that in terms of the contractual agreement by the contractors engaged by itr and that all such contractors, except the two, had been paying the service tax chargeable in their respect pursuant to supplementary bills rose from time to time and further that all such remittances received had been duly deposited with the service tax department. The amount received from the contractors has been shared with Delhi Municipal authority and as such the liability of service tax is to be apportioned to the extent of 50%. The Adjudicating Authority confirmed the demand along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with interest and penalty. The Tribunal upheld the demand. Before the High Court the appellant relied on the judgment of the Supreme Court in Rastriya Ispat Nigam Limited (supra) in which the Supreme Court held that it is possible that it may be passed on. The appellant contended that having entered into contracts in the nature, it was a legitimate expectation that the service tax liability would be borne by the contractors/advertisers and thus there was no justification for the appellant being held in default or burdened with the penalty. The High Court considering the contentions of the appellant held that the ruling of Supreme Court could not be detracted from the fact that in terms of the statutory provisions it is the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant which is to discharge the liability towards the Revenue on account of service tax. Undoubtedly the service tax burden can be transferred by contractual agreements to the other party. The High Court held that on account of such contractual arrangement the assessee cannot ask the Department to recover the tax dues from a third party or wait for discharge of the liability by the assessee till it has recovered the amount from its contractors. The High Court agreed with the findings of the Tribunal that the plea of bona fide belief is devoid of substance. The appellant is a public sector undertaking and should have been more vigilant in compliance with its statutory obligations. It cannot take cover under the plea that contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors engaged by it having agreed to bear the burden of taxation, there was no need for any further action on the part. For purposes of taxing statute, the appellant is an assessee and statutorily bound to not only get itself registered but also submit the requisite returns as per the prescription of law and rules made there under. The High Court upheld the order of the Tribunal except the penalty under Section 78 which was set aside invoking Section 80 of the Chapter V of Finance Act. - Reply By ARJUN PRAJAPATI as = What is the conclusion?? Dated: 29-5-2015 - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
