Punjab-Haryana High Court
Harman Transport Co. And Another vs Food Corporation Of India And Others on 16 April, 2012
IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.
CWP No. 15974 of 2011 & connected petitions
Date of Decision: April 16, 2012
Harman Transport Co. and another
...Petitioners
Versus
Food Corporation of India and others
...Respondents
CORAM: HON'BLE MR. JUSTICE
JUSTICE M.M. KUMAR
HON'BLE MR. JUSTICE ALOK SINGH
Present:
For the petitioner(s): Mr. Anil Kshetarpal, Advocate.
Mr. Parveen Kumar, Advocate.
Mr. Namit Kumar, Advocate.
Mr. Amit Jain, Advocate.
Mr. H.P.S. Bhinder, Advocate.
For the respondent(s): Mr. K.K. Gupta, Advocate.
Mr. Hari Pal Verma, Advocate.
1. To be referred to the Reporters or not?
2. Whether the judgment should be
reported in the Digest?
M.M. KUMAR, J.
1. The question which falls for consideration in this bunch of petitions* filed under Article 226 of the Constitution is as to the effect of notification dated 27.2.2010, issued by the Government of India (P-10), which included transport service concerning "food grains and pulses" in the list of exempted items from the service tax leviable under Section 66 of the Finance Act, 1994 (for brevity, 'the Act'). In other words whether the petitioners would be obliged to pay 'service tax' to respondent Food Corporation of India under the terms of contract or their obligation under the contract would come to an end after 27.2.2010. The facts have been referred from CWP No. 15974 of 2011 & connected petitions 2 CWP No. 15974 of 2011.
2. The petitioners have prayed for quashing communications dated 11.4.2011 (P-11) and 9.6.2011 (P-13). By those communications it has been decided that the contracts, which were awarded before issuance of notification dated 27.2.2010 by the Government of India (P-10), regarding exemption of services provided by Goods Transport Agency for transportation of food grains by road and rates are accepted inclusive of service tax in respect thereof, payment would be released after deduction of service tax element from the gross bill of the contractor.
3. The petitioners are engaged in the business of transporting food grains of the Food Corporation of India. The respondent Food Corporation of India invited sealed tenders for appointment of contractor for Mandi Labour Contract/Mandi Transportation Contract (MLC/MTC) for a period of two years with a provision of further extending the contract for one year at the same terms and conditions at its discretion. It was stipulated in the tender notice that the contractors would be liable to pay all taxes inclusive of service, duties, cess etc. as applicable on date from their transportation bills in the case of long route transactions (P-1). On 31.3.2009 (P-2), petitioner No. 1 was awarded MLC/MTC contract for a period of two years with respect to FCI district Karnal, which has been extended for another year. Similarly, petitioner No. 2 was also awarded MLC/MTC contract on 31.3.2009 for FCI district Kurukshetra for a period of two years and the same was also extended for a further period of one year (P-3).
4. It is pertinent to notice that the petitioners have placed on record three types of tender documents/contracts. The first one is meant for Mandi Labour/Mandi Transportation Contract, which CWP No. 15974 of 2011 & connected petitions 3 they have entered into as a result of award of contracts to them (P-4). The second pertains to appointment of loading, unloading and handling transportation contract at FCI godowns and rail heads, which does not pertain to the petitioners and meant only for the Handling and Transportation Contractors (HTC). The HTC contractors are also required to carry out transportation within the local area. However, as per the said contract no service tax is deducted from the payments made to Handling and Transport Contractors against the transportation within the local area. The amount of service tax in such cases is paid by the FCI at its own level. The third tender document/contract is for the appointment of Road Transport Contractors (P-6).
5. As per the stipulation in the tender notice, the petitioners were awarded the rate for transportation of the food grains on the basis of net weight of the food grains including the taxes, which is inclusive of Service Tax, Duty, Cess, Toll etc.. However, the Octroi duty, which is an entry fee in a particular municipal area, was payable on actual basis in addition to the rates settled between the petitioners and the respondents. It has been pleaded by the petitioners that in case of any increase in the taxes, duties, toll etc. it was their responsibility to pay the same but they have no right to demand any corresponding increase in the rates already fixed at the time of awarding of tender in their favour. It is pertinent to mention that as per the provisions of Section 94(1) and (2) of the Act, the Central Government framed the rules for the purpose of assessment and collection of 'Service Tax'. As per clause (v) of Rule 2(1)(d), the service tax is payable in case of a transport service by a person who receives the services and is liable to pay freight either himself or through his agent, for CWP No. 15974 of 2011 & connected petitions 4 transportation of such goods by road. It has been urged that as per the Service Tax Rules, the liability to pay the service tax is on the person who pays or is liable to pay the freight. In other words, the service tax is payable by the person who enjoys or takes benefit of the services. However, in the case of the petitioners, the respondents started deducting the amount of service tax from their transportation bills for the year 2009-10, as per details given in Annexure P-7. The petitioners protested against deduction of service tax from their bills and one such representation dated 30.4.2009 is placed on record (P-8). Thereafter, according to the petitioners the deductions on account of service tax were stopped during the financial year 2010-11. But in the financial year 2011-12 i.e. after extending the period of contract, the respondents again started the deductions.
6. On 3.12.2004, a notification under Section 93(1) of the Finance Act was issued by the Central Government exempting payment of whole of service tax by a goods transport agency, who is providing service to a customer in relation to transport of fruits, vegetables, eggs or milk by road in a goods carriage, which was leviable thereon under Section 66 of the Finance Act (P-9). On 27.2.2010, another notification was issued and the 'food grains and pluses' were also added in the category of exempted items for the purposes of transportation through road, from the payment of service tax (P-10). In other words, the foods grains pertaining to the Food Corporation of India, which are transported by the petitioners and on which they used to pay service tax as per the agreement entered into between the parties, were exempted from levy of service tax after issuance of notification dated 27.2.2010. On 11.4.2011 (P-11), the impugned order has been passed by the CWP No. 15974 of 2011 & connected petitions 5 Food Corporation of India directing its General Managers to deduct the element of service tax from the gross bills of the contractors with respect to the contracts which were awarded before issuance of notification dated 27.2.2010 (P-10). It is claimed that even various regional offices of the Food Corporation of India made back references by highlighting that the element of service tax could not have been deducted from the gross bill of the transport contractors because the service tax is not payable by Food Corporation of India and the contracts have been awarded on net weight basis, which was inclusive of all taxes (P-12). Despite the above mentioned representation, the respondents have directed its regional offices to strictly implement the impugned circular dated 11.4.2011, vide impugned communication dated 9.6.2011 (P-13).
7. In the written statement filed on behalf of the respondents the factual position has not been denied. The only assertion made is that till the notification dated 27.2.2010 (P-10) was issued by the Central Government, service tax was used to be deducted from the payments of the petitioners and deposited with the Government. Thereafter, the amount equivalent to the element of the service tax was continued to be deducted as the service tax was part of the rate and, therefore, the Food Corporation of India has to recover that part of the rate from the petitioners as they are not entitled for the said benefit. It has been submitted that the petitioners have no concern with that part of the rate which pertains to service tax and the same has been rightly ordered to be deducted from the gross bill of the contractors.
8. We have heard learned counsel for the parties and have also perused their respective pleadings. It has remained undisputed that on 31.3.2009 both the petitioners were awarded CWP No. 15974 of 2011 & connected petitions 6 MLC/MTC contract (P-2 and P-3) for a period of two years, which have been extended for another year in respect of FCI districts Karnal and Kurukshetra respectively. The tender notice incorporated a clause obliging the petitioners to pay all taxes inclusive of service tax from their transportation bills. The aforesaid clause reads as under:
" THE CONTRACTORS ARE LIABLE TO PAY ALL TAXES INCLUSIVE OF SERVICE TAX, DUTIES, CESS ETC. AS APPLICABLE ON DATE FROM THEIR TRANSPORTATION BILLS IN THE CASE OF LONG ROUTE TRANSACTIONS."
9. It has also not been disputed that 'service tax' was leviable on transport service concerning 'food grains and pulses' till 27.2.2010 when those items were also included in the list of exempted items. It is pertinent to mention that on 3.12.2004 (P-9) a notification in exercise of powers conferred by sub-section (1) of Section 93 of the Act was issued by the Government of India exempting payment of tax concerning taxable service provided by a goods transport agency to a customer in relation to transport of fruit, vegetables, eggs or milk by road in a goods carriage from the whole of service tax leviable thereon under Section 66 of the Act. It did not include 'food grains and pulses'. The notification dated 27.2.2010 (P-10) amended the notification of 3.12.2004 (P-9) and added 'food grains and pulses' in the list of exempted items. Therefore, it must be concluded that goods transport service provided by a goods transport agency to a customer in relation to transport of 'food grains and pulses' by road in a goods carriage were exempted from payment of 'service tax' with effect from 27.2.2010 (P-10). Therefore, the stipulation in the tender notice (P-1) requiring the contractors to pay 'service tax' came to an end CWP No. 15974 of 2011 & connected petitions 7 and there is no subsisting obligation to pay 'service tax' to the Government through respondent FCI. Once the aforesaid position is clear then no doubt is left that the respondent FCI cannot deduct any amount from the running bills of the contractors like the petitioners. Therefore, the action of the respondents is unsustainable in the eyes of law.
10. As a sequel to the above discussion, these petitions succeed. It is declared that the petitioners are under no obligation to pay 'service tax' to the Government nor respondent FCI could deduct the same with effect from 27.2.2010. If any deduction of any such amount has been made then the same shall be refunded to the petitioners within two months from the date of receipt of a copy of this order. If the refund is not made within the stipulated period then the refundable amount shall bear interest at the rate of 10% per annum from 27.2.2010 till the date of payment. The petitions stand disposed of.
11. A photocopy of this order be placed on the files of connected cases.
(M.M. KUMAR) JUDGE (ALOK SINGH) SINGH) April 16, 16, 2012 JUDGE PKapoor * Sr. CWP No. Title No.
1. 11040 of 2011 M/s Jagjiwan Pal Singh & Co. and others v.
Food Corporation of India and others
2. 15974 of 2011 Harman Transport Co. and another v. Food Corporation of India and others
3. 22401 of 2011 M/s B.K. & Co. v. Food Corporation of India and others
4. 21 of 2012 Varun Kumar v. Food Corporation of India and others CWP No. 15974 of 2011 & connected petitions 8
5. 46 of 2012 M/s R.V. & Co. and another v. Food Corporation of India and others
6. 47 of 2012 M/s Walia Goods Carrier and another v. Food Corporation of India and others
7. 131 of 2012 Vinod Kumar v. Food Corporation of India and others
8. 183 of 2012 Akash Mahajan v. Food Corporation of India and others
9. 215 of 2012 V.K. Transport Company, Gurdaspur v. Food Corporation of India and others
10. 328 of 2012 M/s Suresh Kumar Mahesh Kumar v. Food Corporation of India and others
11. 354 of 2012 M/s Suresh Kumar Mahesh Kumar v. Food Corporation of India and others
12. 355 of 2012 Punjab Himachal Goods Transport Co. v.
Food Corporation of India and others
13. 361 of 2012 Punjab Himachal Goods Transport Co. v.
Food Corporation of India and others
14. 642 of 2012 M/s Garcha Goods Transport Union and others v. Food Corporation of India and another
15. 2586 of 2012 M/s R.S. Labour and Transport Contractor and others v. Food Corporation of India and others (M.M. KUMAR) JUDGE (ALOK SINGH) April 16, 16, 2012 JUDGE PKapoor