Shifting of service tax liability.

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mehul jain (Querist)
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03 June 2013 Dear Sir,

Under Reverse charge system, if company pay service tax to transporter(not to govt.) and later transporter deposit service tax to govt.

so can we shift our service tax liability to Transporter as per above manner?????

Thanking you,

CA Vikas Acharya

CA Vikas Acharya (Expert)
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03 June 2013 Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306
Taxation
Indirect taxes
Shifting of burden of tax liability by contract from statutory assessee to another party - Permissibility - Held, nothing in
law prevents a statutory assessee from entering into agreement with another party (promisor) that burden of any indirect
tax arising out of obligations of promisor under contract would be borne by promisor - Indirect tax provisions do not
determine rights and liabilities between contracting parties as agreed in contract between them - Service tax being an
indirect tax, held, it can be passed on to another party by entering into contract, even though he is not the assessee
under the statute - Cl. 9.3 of agreement stipulating that respondent contractor would bear and pay all taxes, duties and
other liabilities in connection with discharge of his obligations under contract - Appellant employer deducting service tax
on services of contractor from 30-11-1997 to 6-8-1999, during which period respondent contractor was assessee under
service tax provisions - However, after Amendment Act of 2000, in view of changed definition of assessee (with
retrospective effect) appellant became statutory assessee - Since respondent contractor disputed deduction of service
tax from point when appellant became statutory assessee, dispute referred to arbitration - Arbitrator held that under
terms of contract appellant was right in deducting service tax from bills of respondent as clearing and forwarding
contractor even after the amendment - Respondent contending that appellant employer as assessee (in view of
Amendment Act of 2000) being receiver of services was liable to pay service tax and said burden could not be shifted on
to contractor - Sustainability - Held, position of parties as to liability to pay service tax is exactly the same as prior to and
after passing of Amendment Act of 2000 in view of Cl. 9.3, though appellant became statutory assessee after
amendment - Rationale behind Cl. 9.3 of agreement was that appellant should be exposed to known and determined
liability under said contract, and liability for all taxes arising out of obligations of contractor were assumed by contractor -
Hence, held, respondent as contractor is liable to bear service tax in discharge of his obligations under said contract
under Cl. 9.3 of terms of agreement, (2012) 5 SCC 306-A
Arbitration
Arbitration and Conciliation Act, 1996
S. 34 - Interpretation of contract by arbitrator - Scope of Interference by court - Held, if view taken by arbitrator is
possible one, it cannot be subjected to judicial review even if contract is capable of two interpretations, (2012) 5 SCC
306-B
Service Tax
Liability to Pay Tax
Service tax being an indirect tax, held, it can be passed on to third party - Hence, assessee can certainly enter into
contract to shift its liability of service tax, (2012) 5 SCC 306-C
Contract and Specific Relief
Construction/Interpretation of Contract
Doctrine of contra proferentem - Application of - Held, where a clause exists in commercial contract mutually agreed
upon by parties, principle of contra proferentem is not applicable, (2012) 5 SCC 306-

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