Service Recipient should pay service tax to service provider if Tax already paid by service provider

Hon’ble Allahabad High Court  in the case of M/s Bhagwati Security Services (Regd.) Versus Union of India [2013 (11) TMI 649] on the following issue:

Issue:

Whether the service provider can get the reimbursement of service tax already paid by him, from the service recipient?

Facts of the case:

M/S. Bhagwati Security Services (Regd.), the Petitioner (“the Assessee” or “the Company”) was providing security services under the service Agreement (“the Agreement”) to BSNL. The Company deposited service tax to the Department on the basis of demand raised by the authorities. Thereafter, the Company applied for reimbursement of service tax from BSNL, which was denied on the ground that the same was not provided in the Agreement. The Company filed petition in the High Court.

Held:

The Hon’ble High Court after going through the Agreement and other legal provisions of the Finance Act and rules thereof held that:

• Service tax is statutory liability. It is a tax which is 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.
  

• 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.
  

• BSNL (i.e. service recipient) directed to make reimbursement of service tax to the petitioner without further delay.