By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether provision in the agreement to bear service tax liability by service receiver would absolve the service provider from his statutory liability to pay the same to Government? Held, No.
Facts:
Appellant provided taxable service of “sale of space or time for advertisement” to various advertising agencies. The agreements entered into with these service receivers contained a clause that the liability to tax including service tax would be borne by the recipient of the service. Appellant therefore claimed that it neither obtained registration nor collected and paid service tax from service receivers under the bonafide belief that by virtue of the agreement, liability to remit service tax stood transferred to the recipient. The assessee also pointed out that, in terms of specific clause in the agreement, disputes arose between Appellant and service receivers some of which are subject matter of arbitration proceedings and that, advertisers had not reimbursed the Appellant for the service tax component. It was also submitted that, in one of such proceedings, the High Court has given a direction, that in the event service tax liability is imposed, such liability shall be on the service receiver in terms of the agreement. Accordingly reliance was placed on the Apex Court judgment in the case of Rashtriya Ispat Nigam Ltd. vs. Dewan Chand Ram Saran [2012] 21 taxmann.com 20.
Revenue rejecting the contention of the assessee invoked extended period of limitation which is assailed by the assessee on the ground of bonafide belief.
Held:
The Tribunal rejecting the claim of bonafide belief held that, nothing is alleged, asserted nor established that there is any ambiguity in the provisions of the Act, which might justify a belief that the Appellant/service provider was not liable to service tax. It further held that it is axiomatic that no person can harbour a “bonafide belief” that a legislated liability could be excluded or transferred by a contract. It is a well settled position that legislation is not rejected or amended by private agreement.
Decision of the Apex Court relied by the assessee was distinguished on the ground that, in that case Court only observed that, transferring of the burden of liability to tax to a contractor was not prohibited and qua the terms of the agreement between the parties, the contractor was liable to bear the burden. However, it is not an authority for the proposition that if the Appellant’s tax burden is shifted to the advertisers under the private agreement, the Appellant is immune to tax so far as revenue authorities are concerned. Appeal was accordingly dismissed.
