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TMI Blog2012 (3) TMI 437X X X X Extracts X X X X X X X X Extracts X X X X ..... d was submitted by the respondent on 15.04.2005. The said bid was accepted on 06.07.2005. A formal contract was executed as between the appellant and the respondent (hereinafter collectively referred to as the parties), on 24.08.2005. 2.2 It would be important to note that in the interregnum a notification was issued qua imposition of service tax on road maintenance. The said notification was issued on 27.07.2005; which was brought into effect from 16.06.2005. 2.3 The period for execution of the contract commenced from 24.08.2005 (i.e., the date when a formal contract was executed) and, it was stipulated to end on, 23.08.2008. 2.4 It is with the issuance of the notification dated 27.07.2005, that a dispute arose between the parties on the recoverability of the service tax imposed on the respondent. Consequently, the disputes in the first instance, under the mechanism encapsulated in the contract, were referred to the Dispute Resolution Expert, i.e., the Chief Engineer, PWD, Maintenance Zone M-3, in terms of clause 21.1 of the General Conditions of the Contract (in short GCC). 2.5 The recommendation of the aforementioned expert, went against the respondent, which propell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o rely, both on the clarification sought vide communication dated 31.03.2005, and response of the appellant to the said clarification. In response to the said clarification, Ms Zubeda Begum brought to our notice, that the appellant had made it clear that it was not paying any service tax to the contractor(s) on road maintenance, and therefore, no service tax would be paid to the contractor, i.e., the respondent under the contract. 3. The other submission, which is really made to buttress her earlier submission, is that, the circular dated 28.01.2009 makes it abundantly clear that reimbursement of service tax would be made only vis- -vis the contracts executed in future and not qua contracts which stood finalized and/or in those cases, where tenders had already been received. It is, therefore, Ms Zubeda Begum s contention that the surrounding circumstances would demonstrate that service tax had to be borne by the respondent. In support of her contentions, Ms Zubeda Begum has relied upon the judgment of the Supreme court in Modi Co. vs Union of India (1968) 2 SCR 565 at page 569. 3.1 Ms Zubeda Begum also sought to distinguish the judgment relied upon by the learned Single Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also of the view that there is no provision in the contract which by implication could be said to, take into account, such an eventuality. 3.5 Ms Zubeda Begum s reliance either on the clarification dated 31.03.2005 sought by the respondent or, on the circular dated 28.01.2009 does not take the case of the appellant any further. It could not have been said that the clarification was sought in anticipation of what the future would hold. None of the parties, could have, at that stage contemplated the imposition of service tax on road maintenance. Therefore, the clarification by itself, would not, in our view, support what Ms Zubeda Begum sought to contend, which is, that the surrounding circumstances seem to indicate that service tax would have to be borne by the respondent. In this context the response of the appellant would be apposite. For the sake of convenience, relevant extracts of both, the clarification and the response of the appellant are set out hereinafter: Clarification sought by the respondent Response of the appellant As per the recent order by the Central Government, the Service Tax @ 10.2% is to be le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition; and (b) If such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer may deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction. (2) the provisions of sub-section (1) apply to the following taxes, namely:- (a) any duty of customs or excise on goods; (b) any tax on the sale or purchase of goods. 3.9 A perusal of the section would show that, unless there is an intention to the contrary, if there is any change in tax, i.e., increase or decrease, parties have to bear the necessary consequences which flow from the increase or decrease in tax. Applying the same principle to the present contract, we are of the view that the appellant would have to bear the burden of service tax, which was impo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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