Dismissed

M/S.Caxport v. M/S.Sail

Orissa HC17 Mar 2021WP(C)/18412/2008

Case brief

AI extract

What is this about?

In a writ petition, a firm providing cargo handling services challenged the refusal of Steel Authority of India Ltd. to reimburse service tax paid. The court held that the contract's clause requiring compliance with relevant legislation and full payment of bills implied that the contractor bore the tax liability. The petition was dismissed.

What did the court decide?

The writ petition was dismissed with no order as to costs.

M/S.Caxport Vs M/S.Sail — Contract and Commercial Disputes | Orissa HC (2021)

¶1

W.P.(C) No.18412 of 2008

¶2

17.03.2021

¶3

Heard Mr. Gautam Mukherji, learned Senior Advocate for the Petitioner and Mr. Jagannath Pattnaik, learned Senior Advocate for the Opposite Parties-M/s. Steel Authority of India Ltd. (SAIL).

¶4

The Petitioner, which is a firm, providing “Cargo Handling Service”, in the name and style M/s. CAXPORT, questions the action of the SAIL declining to reimburse the service tax payable under the handling contract entered into between the parties.

¶5

Pursuant to a tender invited by SAIL for handling iron and steel materials at the warehouse of SAIL, Central Marketing Organisation, the Petitioner participated, was successful and was awarded the contract. On 15^th February 2005, an agreement was entered into. The relevant clause of the agreement, concerning the issue of payment of tax, is Clause 3.2, which reads as under:

¶6

“3.2 While handling the materials, the contractor should comply with all relevant Railway Rules, Regulations and any other state or Central Act / Legislation in force, and shall be responsible for all damage / losses etc, arising out of any infringement thereof. While handling, extreme care should be taken to protect and preserve the condition of materials.”

¶7

Although the Petitioner claims that it had no knowledge that cargo handling service was amenable to service tax with effect from 16^th August 2002, in terms of Finance Act, 1996, the fact remains that on 20^th July 2005, the Petitioner wrote a letter to SAIL, Branch Sales Office (BSO), Rourkela,

¶8

-2-

¶9

enclosing a copy of the “Cargo Handling Service Registration number issued by the Central Excise Department on 19^th July, 2005.” The subject of that letter reads “Registration of Service Tax.”

¶10

In a letter addressed to the BSO, SAIL on 6^th February 2006, the Petitioner pointed out that on 17^th January 2006, a team of officers of the Central Excise and Customs, Rourkela had visited its office and issued summons for production of records/documents pertaining to the contract dated 15^th February 2005, for recovery of service tax on “Cargo Handling Service.” The Petitioner noted in the letter that “this contract fells under service tax net which attracts the liability of the Service Tax Payment”, and added as under:

¶11

“You are well aware that “Cargo Handling Service” was implemented by the Finance Act 2002 w.e.f., 16.8.02 vide notification No:8/2002 S.T. dated 1.8.02. But in your contract there is no such clause of Service Tax payment. However the undersigned appeal before your honour to arrange for reimbursement of the Service Tax payment on the aforesaid contract.”

¶12

It was also mentioned in the said letter that the Petitioner had deposited Rs.8,37,874/- together with interest in respect of the bills raised by SAIL for the period from February, 2005 to December, 2005 and was compelled to pay it since it was due by 31^st January, 2006. By letter dated 17^th March 2006, the Petitioner informed SAIL that till 8^th February 2006, in respect of the bills for the quarters ending December 2005,

¶13

-3-

¶14

the Petitioner had paid service tax in December Rs.12,00,105/-.

¶15

On 26^th July 2006, the Petitioner wrote to BSO, SAIL seeking reimbursement of the service tax paid thus far to the extent of Rs.18,61,738/-. The stand taken by the Petitioner was that in terms of the contract dated 15^th February 2005, the liability to pay service tax was not of the Petitioner.

¶16

The consistent stand of the SAIL, as reflected in its reply dated 17^th September 2007 to the Petitioner, reads as under:

¶17

“As per our legal opinion, for contracts signed after 16.8.2002, the contractor has considered the service tax liability while submitting the bid and therefore, no further liability would arise for SAIL unless there is an increase in the rate of service tax and in that event only the differential liability could be passed on the SAIL. The rate under the contract signed after 16.8.2002 is always inclusive of service tax.

¶18

In the instant case, the contract has been signed on 17.2.2005 which is well after 16.8.2002 when the rate applicable for service tax was at 10% + 2% Education Cess (from 10.9.2004). Hence, question of reimbursement of service tax would arise only if there is an increase in the rate of service tax during the tenure of the contract and such reimbursement would be limited to the component/portion of the total service tax which is in excess of 10.20% due to rise in the rate of statutory levy.

¶19

Hence, in context with the above, if any amount is due for enhancement of statutory levy towards service tax after 17.2.2005, it will be reimbursed to you at the earliest possible.”

¶20

In this writ petition, additional affidavits were filed by the Petitioner to contend that in respect of certain other contracts

¶21

-4-

¶22

entered into with other Cargo Handling Service Providers SAIL had in fact reimbursed the service tax component.

¶23

However, as explained by SAIL in their reply to the additional affidavits, the said Cargo Handing Contracts were entered into much before the said service became amenable to service tax. Therefore, the Petitioner cannot seek to draw a parallel with those service providers.

¶24

Mr. Mukherji, learned Senior Advocate for the Petitioner sought to contend that there was no provision in the contract regarding levy of any service tax and, therefore, it was deemed not to be included when the Petitioner quoted its rates pursuant to the tender issued. According to him, the Petitioner was entitled not only to the differential rate hike, but also on the whole amount paid as service tax from the date of commencement of the contract. This according to the Petitioner worked out to nearly Rs.33 lakhs.

¶25

The Court is unable to agree with the above submissions. The aforementioned Clause 3.2 makes it explicit that it is the Petitioner as a service provider, which will have to bear the tax liability arising from the services provided under the contract. The amenability of the service provided by the Petitioner to service tax was not as a result of any change in the law after the date of entering into the contract but much prior thereto. Having entered into the contract with open eyes, the Petitioner should be understood as having undertaken to bear the liability of all taxes statutorily mandated arising from the performance of the service. The service tax being one

¶26

-5-

¶27

such indirect tax levyable in terms of the Finance Act, 1996 with effect from 16^th August 2002, the question of the Petitioner, in terms of Clause 3.2 of the contract not being liable to bear the burden of service tax, did not arise.

¶28

In the circumstances, the Court is unable to accede to the prayers of the Petitioner. The writ petition is dismissed but in the circumstances, with no order as to costs.

¶29

( Dr. S. Muralidhar) Chief Justice

¶30

( B.P. Routray ) Judge

¶31

M. Panda

M/S.Caxport v. M/S.Sail

Case brief

What is this about?

What did the court decide?

M/S.Caxport v. M/S.Sail

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Balarampur Paribesh Vs Govt.of Orissa

M/S.Rocky Marbles Vs G.M.,S.B.I. and Ors.

Padmashree Krutartha Vs Chief Comnr.of I.Tax

Gayatri Traders Vs State

Amit Ku.Pattnaik Vs State of Orissa

State Vs Shyamsundar Nayak