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IN THE SUPREME COURT OF INDIA
R.M. Lodha and H.L. Gokhale, JJ.
Rashtriya Ispat Nigam Ltd. - Appellants
Vs.
Dewan Chand Ram Saran - Respondent
Civil Appeal No. 3905 of 2012 (Arising out of Special Leave Petition (Civil) No. 17943/2008)
Decided On: 25.04.2012
(b) Service Tax Act, 1994 – Sections 65, 68 and 69 – Service tax is like Sales tax – An Assessee can enter into a contract to shift its liability – Liability arising out of services rendered by respondent – Pre amendment 2000 respondent was assessee liable to pay the tax – Post amendment appellant becoming liable, but it could shift the liability to respondent – Clause 9.3 of contract incorporates respondent’s acceptance of the liability. (Para 26, 27)
(1999) 6 SCC 418; (2007) 8 SCC 466 – Relied upon
(c) Interpretation of Contract – Clause 6 and 9.3 capable of two views – Arbitrator taking one possible, if not plausible, view – High Court ought not have interfered – a (Para 29,
(2009) 10 SCC 63; (2010) 11 SCC 296 – Relied upon
(1999) 4 SCC 214; (1989) 2 SCC 38; (2009) 5 SCC 313 – Referred
Facts of the case:
In the arbitration proceedings over disputes regarding ‘service tax’ the Respondent contended that its dominant work was of transporting and forwarding of goods by road, and not of a handling contractor.
The arbitrator held that the Respondent was forwarding and clearing contractor and dismissed the Claim Petition.
The award was affirmed by the High Court.
Finding of the Court:
The Appellant could not be faulted for deducting the service tax from the bills of the Respondent under Clause 9.3, and there was no reason for the High Court to interfere in the view taken by the arbitrator which was based, in any case on a possible interpretation of clause 9.3.
Result: Appeal allowed.
JUDGMENT
H.L. Gokhale, J.
1. Leave granted.
2. This appeal is directed against the judgment and order dated 25.2.2008 rendered by a Division Bench of the Bombay High Court in Appeal No. 188/2006 confirming the decision of a single Judge of that court dated 4.7.2005 in Arbitration Petition No. 364/2004, whereby the High Court has set aside the award dated 25.5.2004 passed by a sole arbitrator which award had dismissed the Claim Petition of the Respondent against the Appellant herein.
3. The questions involved in this appeal are two-fold, (i) firstly, whether under the relevant Clause 9.3 of the terms and conditions of the contract between the parties, the Appellant was right in deducting the service tax from the bills of the Respondent and, (ii) secondly, whether the interpretation of this clause and the consequent award rendered by the arbitrator was against the terms of the contract and therefore illegal as held by the High Court, or whether the view taken by the arbitrator was a possible, if not a plausible view.
The contract and the relevant clause:
4. The Appellant - a Govt. of India undertaking is engaged in the manufacture of steel products and pig-iron for sale in the domestic and export markets. The Respondent is a partnership firm carrying on the business of transportation of goods. In the year 1997, the Appellant appointed the Respondent as the handling contractor in respect of Appellant's iron and steel materials from their stockyard at Kalamboli, Navi Mumbai. A formal contract was entered into between the two of them on 17.6.1998. 'Terms and conditions for handling of iron and steel materials' though recorded in a separate document, formed a part of this contract. Clause 9.0 of these terms and conditions was concerning the payment of bills. Clause 9.3 thereof read as follows:
9.3. The Contractor shall bear and pay all taxes, duties and other liabilities in connection with discharge of his obligations under this order. Any income tax or any other taxes or duties which the company may be required by law to deduct shall be deducted at source and the same shall be paid to the Tax Authorities for the account of the Contractor and the Company shall provide the Contractor with required Tax Deduction Certificate.
Evolution of service tax:
5. Service Tax was introduced for the first time under Chapter V of the Finance Act, 1994. Section 66 of the Act was the charging section and it provided for the levy of service tax at the rate of five per cent of the value of the taxable services. "Taxable service" was defined in Section 65 to include only three services namely any service provided to an investor by a stockbroker, to a subscriber by the telegraph authority, and to a policy-holder by an insurer carrying on general insurance business. Section 68 required every person providing taxable service to collect the service tax at specified rates. Section 69 of the Finance Act, 1994 provided for registration of the persons responsible for collecting service tax. Sub-sections (2) and (5) indicated that it was the provider of the service who was responsible for collecting the tax and obliged to get registered.
6. By the Finance Act, 1997 the first amendment to Section 65 of the Finance Act, 1994 was made, inter alia, by extending the meaning of "taxable service" from three services to 18 different services categorised in Section 65 (41), Sub-clauses (a) to (r). Sub-clause (j) made service to a client by clearing and forwarding agents in relation to clearing and forwarding operations, a taxable service. Similarly, service to a customer of a goods transport operator in relation to carriage of goods by road in a goods carriage was, by sub-clause (m), also included within the umbrella of taxable service. The phrases "clearing and forwarding agent" and "goods transport operator" were defined as follows:
65. (10) 'clearing and forwarding agent' means any person who is engaged in providing any service, either directly or indirectly, connected with cle
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