The petitioner is a person who undertakes works of civil contracts. He had entered into two agreements with the 1st respondent. The said agreements are produced as Exts.P1 and P2. Ext.P1 agreement related to a work at Puthiyappa site for an amount of Rs.4.11 crores and Exts.P2 related to a work at the Chomal site for an amount of Rs.3.42 crores. The work involved dredging activities, which were brought within the purview of service tax with effect from 16.06.2005. In Exts.P1 and P2 agreements, entered into between the petitioner and 1st respondent, there is no express clause that deals with the inter se allocation of the burden of taxes paid by the petitioner in connection with the execution of works under Exts.P1 and P2 agreements. While the petitioner completed the work to the satisfaction of the 1st respondent, when it sought to recover payment for the work done, the 1st respondent took a stand that the service tax amounts paid by the petitioner to the Central Excise Department, in connection with the work done for the 1st respondent, would not be reimbursed to the petitioner in view of the absence of a provision in the contract. It was impugning the said stand of the 1st respondent that the petitioner approached this Court through the present writ petition seeking, inter alia, a direction to the respondents to reimburse the petitioner for the service tax amount paid by him in connection with the execution of work under Exts.P1 and P2 agreements.
2. A counter affidavit has been filed on behalf of the 1st respondent wherein emphasis is laid on the fact that there is no provision under Exts.P1 and P2 agreements which enables the petitioner to claim reimbursement of service tax paid by him, as a matter of right, from the 1st respondent.
3. I have heard Sri.Vinod Bhat, the learned counsel appearing on behalf of the petitioner and Smt.K.T.Lilly, the learned Government Pleader appearing on behalf of respondents.
4. On a consideration of the facts and circumstances of the case and the submissions made across the Bar, I am of the view that, although the Scheme of the Finance Act, 1994 as amended governing the levy of service tax indicates that the said tax, being a destination based consumption tax, is one that has to be ultimately borne by the recipient of the service, the inter se allocation of the burden of tax is a matter that can be agreed upon between parties to a contract. In this scenario, therefore, if there is an express provision in the contract which enables the service provider to pass on the burden of the tax levied on him, to the service recipient, then the said express provision in the contract would indicate the intention of the parties as regards the allocation of the tax burden. It would follow, as a corollary, that in the absence of such a provision in the contract between the parties, a contrary intention namely, that the parties to the contract did not intend for the burden of the tax to be passed on to the other, would have to be inferred. In the instant case, it is not in dispute that in Exts.P1 and P2 agreements, entered into between the petitioner and the 1st respondent, there is no Clause which expressly deals with the inter se allocation of the burden of service tax paid by the petitioner in respect of the work done by him for the 1st respondent under the said agreements. In that view of the matter, and in the absence of any express statutory provision such as Section 64 A of the Sale of Goods Act, that would enable this Court to read in an implied term, into the contract between parties, that would enable the petitioner to seek a reimbursement of the service tax paid by him as of right from the 1st respondent, I am constrained to hold that the petitioner cannot insist on a reimbursement of service tax amount paid by him from the 1st respondent. In that view of the matter, the prayers in the writ petition cannot be granted and resultantly, the writ petition is dismissed, but with no order as to costs.
A.K.JAYASANKARAN NAMBIAR JUDGE mns