Service Recipient is Required to Reimburse Service Tax Paid by the Service Provider

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We are
sharing with you an important judgement of the Hon’ble Allahabad High
Court  in the case of M/s. Bhagwati Security Services (Regd.) Versus Union
of India (2013 (11) TMI 649) on the following issue: 
Issue: 
Whether
the service provider can get the reimbursement of service tax already paid by
him, from the service recipient? 
Facts of the Case: 
M/S. Bhagwati
Security Services (Regd.), the Petitioner (“the
Assessee” or “the Company”)
 was providing security services
under the service Agreement (“the
Agreement”)
 to BSNL. The Company deposited service tax to the
Department on the basis of demand raised by the authorities. Thereafter, the
Company applied for reimbursement of service tax from BSNL, which was denied on
the ground that the same was not provided in the Agreement. The Company filed
petition in the High Court. 


Held: 
The
Hon’ble High Court after going through the Agreement and other legal provisions
of the Finance Act and rules thereof held that: 
·        
Service
tax is statutory liability. It is a tax which is required to be collected by
the service provider from the person to whom service is provided, and
thereafter to be deposited with Government treasury within the prescribed time.
 
·        
Thus,
essentially the statute is being imposing the tax upon the person to whom
service is being provided and the service provider is merely a collecting
agency.
 
·        
BSNL (i.e.
service recipient) directed to make reimbursement of service tax to the
petitioner without further delay.
 
 HIGH COURT
JUDGMENT
 
Service
tax is statutory liability. It is a tax which is required to be collected by
the service provider from the person to whom service is provided, and
thereafter to be deposited with government treasury within the prescribed time. 
Thus
essentially the statute is being imposing the tax upon the person to whom
service is being provided, and the service provider is merely a collecting
agency. In that view of the matter, the writ petition is allowed. The
respondent no.2 is directed to make reimbursement of service tax to the
petitioner without further delay. 
High Court of Allahabad 
WRIT TAX No. – 870 of 2007 
M/S Bhagwati Security Services (Regd.) 
Vs. 
Union Of India & Others 
ORDER 
Hon’ble Sushil Harkauli, J.
Hon’ble Naheed Ara Moonis, J. 
Heard
learned counsel for the petitioner and the learned counsel appearing on behalf
of the respondent No. 2, and seen the record.
There
is an agreement between the petitioner and the respondent No. 2 i.e. B.S.N.L.,
under which the petitioner was required to provide security services to the
respondent No. 2. under agreement between the two parties. The agreement
contained the terms of payment. 
Subsequently
service tax was demanded from the petitioner which has been deposited by the
petitioner . The petitioner applied before the respondent No. 2 for
reimbursement of the service tax, which request has been denied by the respondent
No. 2 by the impugned order. 
Only
reason given for denying the reimbursement of the service tax is that the same
was not contemplated in the service agreement. 
Having
gone through the agreement and the provisions of the relevant statute, we find
that service tax is statutory liability. It is a tax which is required to be
collected by the service provider from the person to whom service is provided,
and thereafter to be deposited with government treasury within the prescribed
time. 
Thus
essentially the statute is being imposing the tax upon the person to whom
service is being provided, and the service provider is merely a collecting
agency. 
In
that view of the matter, the writ petition is allowed. The respondent No. 2 is
directed to make reimbursement of service tax to the petitioner without further
delay. 
Order
Date: 16th January
2013.

RECOMMENDED READ  Provisions of mandatory Pre-deposit under Section 35 of the Central Excise Act, 1944

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