Vineet Kothari, J. - (1.) THE petitioner, Contractor Association (Civil) Rajasthan Rajya Vidyut Mandal, Jodhpur, has filed this writ petition to espouse the common cause of its members against the respondent - -Rajasthan Rajya Vidyut Prasaran Nigam Ltd. ('Nigam' for short) inter alia challenging the impugned action of the respondent Nigam of deducting 50 per cent of the service -tax imposed under the provisions of the Finance Act, 1994, as amended from time to time, from the running/final bills of members of the petitioner association, namely, the various individual contractors, who executed the works contracts of raising civil construction for the respondent Nigam. By consent of learned counsel, the matter was heard finally at the admission stage itself.
(2.) MR . Dinesh Mehta, learned counsel for the petitioner association, mainly raised the following contentions: (i) that under cl. 36C of the general conditions of the contract, which is quoted below, the respondent Nigam -awarder of the contract, was liable to pay the service -tax in question as only the royalty or other tax on materials was required to be paid by the contractor: Clause 36C: Royalty or other tax on materials, issued in the process of fulfilling contract, payable to the Government under rules in force, will be paid by the contractor himself. (ii) that w.e.f. 1st July, 2007 the works contract services were included within the definition of taxable services under s. 65(105)(zzzza) and in pursuance of the Notification No. of 2012, dt. 20th June, 2012 [(2012) 250 CTR (St) 216 :, (2012) 73 DTR (St) 53 - -Ed.] issued under s. 68(2) of the Finance Act, 1994, the Central Government provided the percentage of tax payable by the persons providing services and persons receiving the services. In the said Notification No. of 2012 dt. 20th June, 2012, the Central Government has provided that both, the person providing the service and person receiving the service in relation to works contract shall be liable to pay 50 per cent of the service -tax payable. The contention is that the respondent Nigam is not entitled to deduct any portion of the service -tax of 50 per cent of the total service -tax liability from the payment of bills for work done by the contractors, the members of the petitioner association, in respect of the contract executed prior to 1st July, 2012. He submitted that there is no quarrel that after 1st July, 2012 the liability to pay entire service -tax under the contract has been affixed on the contractor by making specific stipulations in the tender documents only, but prior to 1st July, 2012, for such works contracts executed by the respondent Nigam in favour of the contractors, no such specific liability to pay the entire service -tax was fixed on the contractors and, therefore, such deduction of service -tax from the bills is illegal. He, though, admitted that the bills were being raised for the gross amount inclusive of service -tax liability of 12 per cent leviable under s. 66B of the Act and service -tax was not separately charged or shown in the bills raised by the contractors. Sec. 67(2) of the Act also clearly so stipulates and thus gross amount of bill would be deemed to be inclusive of service -tax component. (iii) that the respondent Nigam in its meeting dt. 10th Nov., 2005 vide Annex. 2, the Committee comprising of CMD, director (F & CA) and director (technical) had taken a decision to reimburse the amount of service -tax to the contractors, and such service -tax on works contract, which was introduced in the first instance w.e.f. 1st July, 2007 was being reimbursed by the respondent Nigam to the contractors but suddenly after 1st July, 2007, the respondent Nigam has deducted 50 per cent of the total service -tax liability, which was stated to be 12 per cent, from the running bills of the contractors and such action of the respondent Nigam is illegal and, therefore, writs of prohibition and mandamus deserve to be issued to the respondent Nigam. (iv) that the impugned action of deduction of 50 per cent of service -tax is being taken by the respondent RRVPNL in pursuance of communication Annex. 8 dt. 6th July, 2012 of the Chief Controller of Accounts of RRVPNL, who after issuance of Notification No. of 2012, dt. 20th June, 2012, in consultation with the tax consultants has asked the concerned authorities to comply with these provisions and take necessary action in this regard viz., obtaining registration with Central Excise Department, etc. On the other hand, Mr. R.K. Agrawal, learned senior advocate assisted by Mr. Manoj Bhandari appearing for the respondent Nigam raised the following preliminary objections as to the maintainability of the present writ petition: (i) that the petitioner association cannot espouse the cause of individual contractors, who are individually liable to be registered under the provisions of the Finance Act, 1994 for discharging their liability to pay service -tax with the Central Excise Department and the contract terms of each contract is a matter of individual contract and, therefore, no such common cause arises in the matter so as to be adjudicated in the present writ petition. (ii) that several disputed questions of facts are involved in the present case as to the date of contract, nature of payments to the contractors, nature of bills raised by the contractors, whether the component of service -tax is included in the bills or charged separately, whether the respondent Nigam is liable to pay or reimburse the amount of service -tax to the contractors or not, are all individual questions of facts to be decided on the basis of relevant evidence by the concerned authorities of the Department and, therefore, no writ petition can be maintained by the petitioner association in this regard. (iii) that admittedly, an arbitration clause exists in each contract and, therefore, dispute, if any, in this regard can be raised before the arbitrator and in view of such alternative remedy available to the petitioner association or its members, the present writ petition is not maintainable under Art. 226 of the Constitution of India. (iv) that under the 'reverse charge mechanism of service -tax' introduced by the respondent Nigam in pursuance of the amendment in law w.e.f. 1st July, 2012, the respondent Nigam was entitled to deduct the 50 per cent of service -tax liability, which was included in the gross amount of the bills of the contractors as the service -tax liability was shifted on the service receiver i.e., Nigam under the Notification No. of 2012 -ST, dt. 20th June, 2012 to avoid the non -payment of service -tax by individual contractors the Government bodies like the respondent Nigam, which could be held to be more responsible and accountable for payment of such public revenue, the concept of "reverse charge mechanism" was introduced by the Central Government and such liability is being discharged by the respondent Nigam and it has got registered with the Central Excise Department after 1st July, 2012 and consequently there is no ground to challenge such deduction of 50 per cent of service -tax from the bills by the contractors, much less the petitioner association and no sufficient materials and documents are available on record of this Court to decide these academic and hypothetical questions only.
(3.) ON the merits of the writ petition, without prejudice to the preliminary objections raised by him, Mr. R.K. Agarwal, senior advocate also urged that the liability to pay the service -tax is admittedly on the service provider i.e., the contractors under s. 68(1) of the Act and under s. 68(2) of the Act in case of individual contractors except body corporates, who are liable to regular audit and compliance with the various provisions of the Companies Act and other relevant statutes, such liability to pay 50 per cent of the service -tax has been shifted to the respondent Nigam and other body corporates, who are awarders of such contracts and with this change in law, in the absence of any terms in the contract itself, the respondent Nigam is perfectly justified in deducting 50 per cent of the service -tax at source while making payment of the bills to the contractors and depositing the same in public exchequer and no challenge can be made to the same. Learned counsel Mr. R.K. Agarwal relied on the decision of Supreme Court in the case of All India Federation of Tax Practitioners & Ors. vs. Union of India & Ors. : (2007) 211 CTR (SC) 449 : (2007) 7 SCC 527 and decision of Andhra Pradesh High Court in the case of Bhagyanagar Contractors Welfare Association vs. Managing Director, M.W.S. & Sewerage Board & Ors. : 2003 (4) ALD 489 (AP), which would be referred hereinafter.;