Undoubtedly, service tax burden can be transferred by contractual arrangement to other party; but, on that account, assessee cannot ask revenue (except under reverse charge) to recover tax dues from a third party or to wait for discharge of liability by assessee till it has recovered amount from its customers (i.e., service recipients).
1) The assessee, Delhi Transport Corporation (DTC), entered into contracts with agencies (contractors/advertisers) providing space to such parties for display of advertisements on bus-queue shelters and time-keeping booths.
2) The agreement provided that it shall be the responsibility of the contractor/advertiser to pay advertisement tax or any other taxes directly to the concerned authority in addition to the quoted license fee.
3) Assessee didn’t pay service tax to the department as it, by way of contract, casted responsibility on the contractor/advertiser to pay the same. However, service tax was also not paid by the contractor/advertiser.
4) The Department raised demand of service tax on assessee under 'Sale of Advertising Space or Time Services'.
The High Court held in favour of revenue as under :
a) Though assessee's services were taxable, but the service tax burden could have been transferred by way of a contract.
b) The ruling of Supreme Court in the case of Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran (2012) 35 STT 664/21 taxmann.com 20 cannot detract from the fact that in terms of the statutory provisions it is the assessee which is to discharge the liability towards the revenue on account of service tax. Undoubtedly, the service tax burden can be transferred by contractual arrangement to the other party. But, on account of such contractual arrangement, the assessee cannot ask the revenue to recover the tax dues from a third party or wait for discharge of the liability by the assessee till it has recovered the amount from its contractors.
c) Hence, demand was confirmed with interestas contractor/advertiser didn’t pay the service tax to the Department, though they were contractually liable to pay the same - (2015) 59 taxmann.com 51 (Delhi).