Indian Court Allows Company to Shift Service Tax Liability

In a milestone verdict, the apex court of India held that an assessee of service tax may enter into a contract with another party to shift liability. This case involved Rashtriya Ispat Nigam Ltd and M/S Dewan Chand Ram Saran where the Supreme Court r

Sunnyvale, CA (prHWY.com) June 1, 2012 - Sunnyvale, CA - In a milestone verdict, the apex court of India held that an assessee of service tax may enter into a contract with another party to shift liability. This case involved Rashtriya Ispat Nigam Ltd and M/S Dewan Chand Ram Saran where the Supreme Court read out the verdict in favour of the former.

Background:
In an agreement, public sector steel manufacturer, Rashtriya Ispat Nigam Ltd involved goods transporter, M/S Dewan Chand Ram Saran as a contractor for transportation of goods. As per the clause of the agreement which says that the contractor has to pay all taxes, duties and other liabilities relating to the discharge of his obligations, the public sector undertaking (PSU) deducted service tax from the transporter's bill.

Following the deduction, M/S Dewan Chand took the matter to the court. The Bombay high court gave the verdict in favour of M/S Dewan, and subsequently, the PSU challenged it in the Supreme Court.

Decision:
Overruling the High Court's decision, the Apex Court held that there is no law that can thwart the PSU to get into an agreement with the transporter that shifts the service tax liability.

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