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July 2014

[2014] 45 taxmann.com 217 (Allahabad) – Bhagwati Security Services (Regd.) vs. UOI, BSNL

By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
Reading Time 1 mins
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Whether service receiver is liable to remit service tax to service provider, even in the absence of Clause to that effect in the agreement? Held – Yes

Facts
Petitioners entered into agreement with respondent No. 2, i.e., BSNL for providing security service. Subsequently, service tax was demanded from the petitioner which was deposited by the petitioner. The petitioner applied before respondent No. 2 for reimbursement of the service tax, which request was denied by the respondent No. 2 on the ground that the reimbursement of the service tax was not contemplated in the service agreement.

Held
High Court held that, service tax is statutory liability which is required to be collected by the service provider from the person to whom service is provided, and thereafter to be deposited with the Government treasury within the prescribed time.Thus, essentially the statute is being imposing the tax upon the person to whom service is being provided, and the service provider is merely a collecting agency. The High Court therefore directed BSNL to make reimbursement of service tax to the petitioner without further delay.

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