Service tax burden can be transferred by contractual arrangement to the other party but, the assessee cannot ask the Revenue to wait for discharge of the liability till it has recovered the amount from its contractors
In the instant case, Delhi Transport Corporation (the Appellant) had entered into contracts with seven agencies (the Advertisers) to provide taxable service by providing space to such parties for display of advertisements on its buses, bus queue shelters, time keeping booths and other properties and in the contract it was provided that the responsibility to pay Service tax and other advertisement tax will be of the Advertisers.
However, due to dispute, two Advertisers had not reimbursed the appellant for the Service tax component. Consequently, the Appellant failed to pay Service tax on the services rendered by them and the Department issued SCN to the Appellant to pay balance amount of Service tax along with interest and penalties thereon.
The Hon’ble High Court of Delhi held that when there is no dispute that the services provided are taxable, the ruling of the Hon’ble Supreme Court in the case of Rashtriya Ispat Nigam Limited Vs. Dewan Chand Ram Saran [(2012) 5 SCC 306], cannot detract from the fact that in terms of the statutory provisions it is the Appellant liable to discharge the Service tax liability. Undoubtedly, the Service tax burden can be transferred by contractual arrangement to the other party. But, on account of such contractual arrangement, the assessee cannot ask the Revenue 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. However, in terms of erstwhile Section 80 of the Finance Act, penalty amount was set aside.
Direct Link to download full text of the above Judgment/ Order from official website:
http://lobis.nic.in/dhc/RKG/judgement/18-04-2015/RKG17042015CEAC952014.pdf
(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: [email protected])
