The court ruled that the change in the service tax regime post-contract does not absolve the respondent of its obligation to reimburse the appellant for the service tax paid.

CAV JUDGEMENT

(PER: HON'BLE MR JUSTICE KRISHNA S DIXIT)

This intra-court appeal seeks to call in question a learned Single Judge’s order dated 22.10.2018 whereby, appellant’s W.P.No.24097/2015 & W.P.No.30354/2015 have been negatived. In the said petitions, essentially, he had sought for a Writ of Mandamus to the respondent- Railway to reimburse service tax component in terms of tender documents followed by contract in the light of subsequent amendment of law relating to Service Tax Regime w.e.f. 1.7.2012. The said amount has been quantified at Rs.31,37,692/-.

2. Appellant, a company incorporated under the provisions of erstwhile Companies Act, 1956, is engaged in the business of providing wet washing services, wash bedrolls that are ordinarily used by the Railway passengers. During the period between 20.12.2009 & 11.06.2012, the appellant-Company has won thirteen agreements with the respondent-Railway in a public tender process for providing the services of collection of soiled linens, washing, loading of washed linens in coaches and supplying washed bedrolls to Railway passengers. All these contracts were entered into prior to 1.7.2012 i.e., the crucial date with effect from which the Service Tax Regime underwent a paradigm shift in the sense that what was selectively taxable became the exception, all services having become taxable. In other words, negative list taxation regime came into operation. During the contract period, only the service of dry cleaning was taxable and wet cleaning was not.

3. The respondent-Railway despite half a dozen letters sent by the appellant during the period between 9.10.2012 to 26.7.2013 for claiming reimbursement of service tax component, maintained stony silence. Eventually, that led to appellant sending a legal notice dated 29.10.2014 in that connection calling upon the Railways to make good the service tax component specifically mentioning the amendment to Finance Act, 1994 read with Central Excise Act, 1944. The Railways vide reply dated 12.11.2014 repelled the claim on the ground that the terms of the contract did not impose any such obligation on their part and that the passengers were charged by the Railways as per their schedule with no separate collection from them for bedrolls. A legal reply notice dated 23.12.2014 followed to the same effect.

4. Appellant had filed the subject writ petition grieving against the stand of the Railways. After service of notice, Railways entered appearance through its counsel and filed their Statement of Objections resisting the petition both on merits and on the ground of availability of arbitration facility. Learned Single Judge broadly agreed with the version of the Railways and dismissed the petition relegating the appellant to arbitration. Aggrieved thereby, this appeal is presented at our hands.

5. Having heard the learned Senior Advocate appearing for the appellant-Company and the learned Senior Panel Counsel representing the respondent-Railways, we are inclined to grant indulgence in the matter for the following reasons:

5.1 AS TO ARBITRATON CLAUSE BARRING INVOCATION OF WRIT JURISDICTION:

(a) The contracts for rendering of cleaning services were entered into prior to 1.7.2012 and at that time there was no service tax levy on wet cleaning services. True it is that there is an arbitration clause in the agreements in question which reads as under:

“If any dispute, difference or question shall arise between the Railway Administration and the contractor as to the respective rights, duties and obligations of the parties here to or as to the constructions or interpretations of any of the terms and conditions of the agreement as to its applications (except the decision whereof if herein expressly provided for) then the same shall be referred t