By TIOL News Service

AHMEDABAD, AUG 04, 2015: BY way of petition under Article 226 of the Constitution of India, the petitioners have prayed for appropriate writ, order and/or direction to quash and set aside the order passed by the Settlement Commission in so far as it relates to confirmation and fastening the tax liability of Rs.31,01,599/- and interest thereon on the petitioner Company.

It is the contention of the Petitioner that while confirming the demand of service tax liability of Rs.31,01,599/-, the Settlement Commission has materially erred in not appreciating the fact that the petitioner was the sub-contractor to provide bus services to M/s. Asia Motor Works Ltd (AMW Ltd). It is submitted that as such as per the agreement between the petitioner and M/s. Mahindra Logistics Ltd (MLL), the petitioner was under an obligation to provide buses for transportation of employees of M/ s.AMW Ltd., as a sub-contractor of M/ s.MLL and for providing bus services for transportation of its employees and M/ s.MLL has appointed the petitioner Company on back to back basis for carrying out the obligation of M/ s.MLL in respect of provision of transportation facilities to the employees of M/ s.AMW Ltd. As per the conditions mentioned in the agreement between the petitioner Company and M/ s.MLL , the petitioner was required to raise monthly invoices from M/ s.MLL for transportation facilities for the employees of M/ s.AMW Ltd. and that M/ s.MLL shall make the payment to the petitioner Company for such amounts. As agreed, the petitioner Company was not to raise any bill to M/ s.AMW Ltd., ultimate client receiving the services, but the bills on M/ s.AMW Ltd. were to be raised by M/ s.MLL as their contractor. In accordance with the said arrangement, the petitioner Company used to raise bills on M/ s.MLL for the period in question. In turn M/ s.MLL raised their bills to M/ s.AMW Ltd. as regards the said business transaction, because M/ s.MLL has been contractor for providing transportation services for the services of the said client. M/ s.MLL in fact paid service tax to M/ s.AMW Ltd. for providing transportation services for the employees of M/ s.AMW Ltd. It is submitted that therefore, by very nature of the above arrangement, the obligation to discharge services tax liability for the aforesaid services namely Tour Operator Services lay on M/ s.MLL and the said contractor has been actually discharging services tax liability on the entire amount billed and received by their client M/ s.AMW Ltd. Therefore, the Settlement Commission has materially erred in confirming the demand notice with respect to service liability to the extent of Rs.31 ,01,599 /- with respect to transportation services provided to M/ s.AMW Ltd.

After hearing both sides, the High Court held:

On considering the contract, by no stretch of imagination, it can be said that the petitioner is subcontractor for providing transportation services to Ms.AMW Ltd. On considering the entire contract / agreement between the petitioner and M/ s.MLL , it is an independent contract between the petitioner and M/ s.MML to provide buses to M/ s.MLL . As per the said agreement / contract dated 16/3/2008, the petitioner is appointed as a transporter to transport the employees of customer from pick up point to plant and back and managing interplant vehicles movement. That pursuant to the aforesaid contract / agreement between the petitioner and M/s.MM and M/ s.MLL , the petitioner has supplied buses for transportation to the clients of M/s.MM / M/ s.MLL

We are in complete agreement with the view taken by the learned Settlement Commission while confirming the service tax liability of Rs.31 ,01,599 /- with respect to the services provided by the petitioner to M/ s.MLL . It is rightly held that with respect to the service / transportation service / buses provided by the petitioner to M/ s.MLL , the petitioner is liable to pay service tax on the same.

(See 2015-TIOL-1743-HC-AHM-ST)