Service recipient is required to reimburse the Service Tax to the service provider - High Court
THE service provider is actually a collector of Service Tax - he collects the Service Tax and pays it to the Government, though the responsibility to pay tax is on him. It quite often happens that at the time of providing the service, there is no clarity on whether the tax is payable, or the recipient refuses to pay Service Tax as there was no provision for that in the contract. Come what may, after the service is received, some service recipients refuse to pay Service Tax and the list would include respectable (?) MNCs, PSUs and even Government departments! A retired senior officer of the Indian Army running a security service wrote a letter to the Board that a Navy unit is refusing to pay him Service Tax as it was not mentioned in the contract.
In a case before the Allahabad High Court, the respondent BSNL refused to pay Service Tax to the petitioner service provider who provided security services, on the ground that the same was not contemplated in the service agreement.
The High Court noted:
1. Service tax is statutory liability.
2. It is atax whichis 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.
3. Thus essentially the statute is being imposing the tax upon the person to whom service is being provided, and the serviceprovideris merely a collecting agency.
So, the High Court directed BSNL to make reimbursement of service tax to the petitioner without further delay.
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