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TMI Blog2025 (3) TMI 849X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the business of providing wet washing services, wash bedrolls that are ordinarily used by the Railway passengers. During the period between 20.12.2009 & 11.06.2012, the appellant-Company has won thirteen agreements with the respondent-Railway in a public tender process for providing the services of collection of soiled linens, washing, loading of washed linens in coaches and supplying washed bedrolls to Railway passengers. All these contracts were entered into prior to 1.7.2012 i.e., the crucial date with effect from which the Service Tax Regime underwent a paradigm shift in the sense that what was selectively taxable became the exception, all services having become taxable. In other words, negative list taxation regime came into operation. During the contract period, only the service of dry cleaning was taxable and wet cleaning was not. 3. The respondent-Railway despite half a dozen letters sent by the appellant during the period between 9.10.2012 to 26.7.2013 for claiming reimbursement of service tax component, maintained stony silence. Eventually, that led to appellant sending a legal notice dated 29.10.2014 in that connection calling upon the Railways to make good the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt decision in CENTRAL ORGANISATION FOR RAILWAY ELECTRIFICATION vs. ECI SPIC SMO MCML (JV) 2024 SCC Online SC 3219. Therefore, the subject arbitration clause is liable to be ignored for all practice purposes. (ii) Secondly, the question is not as to the liability to pay the service tax in respect of services in question; it is essentially as to who should pay this in the light of change of legal regime of taxation post conclusion of contracts. In fact, in Railways Reply Legal Notice dated 23.12.2014, at para 3, it is specifically admitted 'It is true that the service tax is indirect tax and has to be necessarily collected from the receiver of services. My client has already discharged the service tax portion to your client since cost as per tenders as quoted by your client includes the service tax portion also. Therefore, my client need not reimburse the service tax twice... ' Thus, there being no repudiation of liability for discharging the service tax, it cannot be argued that there is an arbitrable dispute merely because a question as to who should pay, eventually arises. This view gains support from the Coordinate Bench decision in W.A.No.1427/2021 (T-RES) between HUBBALLI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvice tax because of paradigm shift in the Legal Regime, with effect from 1.7.2012 i.e. post-contract period. 5.3 AS TO SPECIFIC CLAUSES IN THE TENDER/CONTRACT DOCUMENTS: (a) The next contention of learned Panel Counsel is that the Price Bid for comprehensive work of supply, washing and distribution of Bed Rolls to the passengers of AC includes rate inclusive of all applicable taxes and levies etc. This argument is structured on the basis of clause (xvi) of Agreement No. 04/MECH/SBC/2012 dated 11.06.2012 which reads as under: "(xvi) Successful tenderer has to pay necessary Service Tax wherever levied or becomes leviable or as and when advised by the Service Tax Department. Failure to do so shall lead to termination of contract and forfeiture of Security Deposit (SD) and Performance Guarantee (PG). Railway Administration may also recover the same from any pending bills of the successful tenderer." (b) Learned Sr. Advocate appearing for the appellant is right in telling us that this clause cannot be construed as absolving obligation of the Railways to reimburse the service tax component. This submission impresses us in the light of admission of the Railways in its Legal R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to bear the brunt vide Govt. of NCT vs. MBL Infrastructure 2012 SCC Online Del 1465. 5.4 AS TO DRAWING ANALOGY FROM SEC.64A OF THE SALE OF GOODS ACT, 1930: (i) The contention of the Railways that what has not been contemplated when the parties negotiated the contract, cannot be loaded to the shoulders of his client, merely because there is change of law, does not merit acceptance. There is a statute namely, the Sale of Goods Act, 1930 which regulates the contract of/for sale or purchase of goods. However, there is no corresponding statute of the kind in respect of service and labour. Section 64A of the Act that applies to sale of goods gives an indication as to who should bear the brunt of new taxes. The same reads as under: "64A(1). In contracts of sale, amount of increased or decreased taxes to be added or deducted.- (1) Unless a different intention appears from the terms of the contract, in the event of any tax of the nature described in subsection (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulation as to the payment of tax where tax was not charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereas 'service is rendered'. Goods are tangible whereas services need not be so. Consideration for sale of goods is price; such terminology is not employed when it comes to rendering of service. In a sense salary, wages, charges, etc. are employed in lieu of price. Of course, the words consideration is genus and price, salary, wages, charges, etc. are species. All this being said, there is one common thing between these two: Both are taxed, although under different statutes. The basic principle on which levy is enacted, thus largely remains the same, variance in modalities notwithstanding. All this we are saying to point out that there is nothing that bars drawing of wisdom of a provision of a statute, which may not be applicable to transactions of the kind, the case involves. (iv) We are asking ourselves a question: Had the levy of service tax on services of the kind is abolished by an Ordinance with retrospective effect, whether Railways would have allowed the appellant to retain the quoted rates which admittedly include the tax component ? The answer would be perfectly in the negative. As a corollary of this the recipient of services like the buyer of goods has to bear the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X
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