No service tax liability arises when government contracts are involved; refunds must be sought from tax authorities, not contractors.

J U D G M E N T

The petitioner is stated to be a contractor, who was engaged by the 1^st respondent herein, for the deepening of the Akkulam Lake in Thiruvananthapuram District. The contract was entered into between the Government and the Travancore Cements Limited – the 1^st respondent herein. However, the 1^st respondent subcontracted the above work to the petitioner. It is not in dispute that the petitioner carried out the afore work and was also entitled for payments from the 1^st respondent herein. Though the 1^st respondent paid the amounts due to the petitioner, an amount of Rs.43,83,085/- was deducted from the amounts paid to the petitioner as above, towards the tax payable under the provisions of the Finance Act, 1994 (hereinafter referred to as ‘the Act’). The petitioner contends that there was no service tax liability as regards the activity carried on by it, insofar as the work was awarded by the Government. As against the assessment completed against the petitioner, also taking into account the amount of Rs.43,83,083/- stated to have been deducted by the 1^st respondent and paid to the service tax department, the petitioner had filed an appeal under the provisions of the Act. By the order at Ext.P3 dated 20.01.2020, the First Appellate Authority, having accepted the contention raised by the petitioner with reference to the entitlement for exemption as regards the works extended towards the Government, the petitioner instituted Ext.P4 application dated 27.12.2021 to the 1^st respondent herein seeking for refund of the tax deducted as above. This Court pursuant to the judgment at Ext.P5, also directed the afore application to be considered and disposed of.

2. The 1^st respondent herein has now issued the order at Ext.P6 dated 04.07.2022, stating that the amount already deducted from the petitioner has been remitted to the service tax authorities and, therefore, it is for the petitioner to approach the service tax authorities, if they have any claim for refund. It is seeking to challenge Ext.P6 that the petitioner is before this Court.

3. Heard Sri.Babu Joseph Kuruvathazha, the learned counsel for the petitioner, Smt.Latha Anand, the learned counsel for the 1^st respondent, as well as Sri.Sreelal N.Warrier, the learned counsel for respondents 3 and 4.

4. The contention raised by Sri.Babu, the learned counsel for the petitioner, is that the finding in Ext.P6 is incorrect and arbitrary, since the deduction has been carried out by the 1^st respondent itself. At the same time, I notice that the petitioner has no case that after the deduction of tax as above, the amount so deducted has been kept with the 1^st respondent. Once the tax is deducted, naturally the 1^st respondent is to pay the same to the service tax authorities.

5. In such circumstances, the petitioner may not be justified in seeking refund from the 1^st respondent herein. If at all the petitioner is entitled to seek refund on the basis of Ext.P3 appellate order, the petitioner has to get the same from the service tax authorities.

In such circumstances, I dispose of the writ petition as under;

i. The challenge against Ext.P6 issued by the 1^st respondent is rejected.

ii.

The petitioner is permitted to file an appropriate refund application under the provisions of Section 11B of the Central Excise Act, 1944 , before the service tax authorities, within a period of six weeks from the date of receipt of a copy of this judgment.

iii.

If such an application is being filed, the service tax authorities to consider the prayer for refund, strictly in accordance with law, and take a decision thereon, as expeditiously as possible, at any rate, within a period of eight weeks thereafter.

Sd/-

HARISANKAR V. MENON JUDGE