Patna High Court Refuses To Interfere With ₹60.88 Lakh Service Tax Demand Against FCI Contractor

The Patna High Court on 28 August refused to interfere with a Service Tax demand of Rs. 60.88 lakh, along with interest and penalties, raised against a contractor engaged by the Food Corporation of India (FCI).

A Division Bench of Justices Rajeev Ranjan Prasad and Ramesh Chand Malviya dismissed the writ petition filed by Anjani Kumar Singh, while granting him liberty to pursue the statutory remedy available under law. It observed:

“We have noticed that neither before the competent authority/assessing authority nor before this Court, the petitioner has produced the relevant tender document.”

The petitioner was engaged as a handling and transport contractor by FCI. Following a show-cause notice, he claimed that the services provided under the FCI contract were exempt from Service Tax under the applicable exemption notification.

The tax authority rejected the exemption claim and raised a Service Tax demand of Rs. 60,88,607 under Section 73(2) of the Finance Act, 1994 (which provides for recovery of Service Tax not levied or paid), besides imposing an equivalent penalty under Section 78 and other penalties.

The adjudicating authority found that the petitioner had not submitted the relevant work orders or agreements to establish that the amounts reflected in Form 26AS and other financial documents related to exempt services provided to FCI. In the absence of such documents, it held that the petitioner had failed to establish his eligibility for the exemption.

The authority also held that the burden of establishing eligibility for a tax exemption lies on the person claiming it. It relied on Supreme Court decisions, including Commissioner of Customs (Import) v. Dilip Kumar & Company, for this proposition.

Before the High Court, FCI submitted that the transportation rate approved under the tender was inclusive of taxes. The Revenue argued that the petitioner could not collect tax as part of the contractual amount and thereafter avoid depositing it with the Government.

The Bench noted that the relevant tender document had not been produced either before the assessing authority or before it. It also noted that the petitioner had not filed a rejoinder to FCI's counter affidavit. It held:

“In such circumstances, we are of the considered opinion that the impugned order does not require any interference by this Court sitting in its extraordinary writ jurisdiction,” the Bench held.

Accordingly, the High Court dismissed the writ petition. However, it permitted the petitioner to pursue the statutory remedy available under law. It further directed that, if an issue of limitation arises, the competent forum should consider the period spent by the petitioner before the High Court.

For the Petitioner: Mr. Sadashiv Tiwari, Advocate

For the Respondents: Dr. K.N. Singh, ASG; Mr. Anshuman Singh, Senior Standing Counsel; and Mr. Shivaditya Dhani Sinha, Advocate