Gaiagen Technologies Private Limited Vs State of Kerala (Kerala High Court)
Kerala High Court: Service tax refund/adjustment cannot be decided before determining whether pest control contract is a ‘Service Contract’ or ‘Works Contract’
Summary: The Appellant is providing pest control services. It is registered with service tax authorities and paid service tax. A demand of VAT was confirmed on the ground that activity is a works contact. It was challenged in writ on two grounds: (i) it is a service contract and hence; no VAT is payable; and (ii) service tax and VAT are mutually exclusive levies; hence; if VAT is held to be payable; service tax department should remit it to the State VAT authorities. The Ld. Single Judge set aside the order and remanded the matter back to the adjudicating officer to examine the contracts and then come to a conclusion whether VAT is payable or not. On second aspect; it was held that service tax is not refundable as principle of unjust enrichment would apply relying on Supreme Court decision in Mafatlal Case. Hence; writ appeal before the Division Bench.
The Hon’ble Kerala High Court (Division Bench) set aside the order; to the extent under challenge; and allowed the appeal. It held: (i) the question of refund or adjustment would arise once the authority holds that VAT is payable; hence; the decision on this count was premature and speculative; (ii) the Revenue also agreed with the said aspect; (iii) therefore; the said issue is left open to be agitated at an appropriate stage; after the principal issue on merits about “service contact” vs “works contract” is decided.
