Kerala High Court Rejects Assessee ’s Claim For Service Tax Refund To Meet VAT Demand On Pest Control Contract

The Kerala High Court has rejected the assessee's claim for a service tax refund to meet the VAT demand on the pest control contract.The bench of Justice Anu Sivaraman has observed that the claim of the petitioner that the service tax authorities must be directed to meet the demand for VAT, if any, found payable by the petitioner cannot be accepted.The petitioner or assessee is in the business of pest control. As per the assessee, pest control falls under the category of a service contract and not a work contract. The assessee has sought the direction of the service tax department to deposit the amount of service tax erroneously collected from the petitioner with the VAT department to discharge the VAT liability.The issue raised was whether the business of pest control undertaken would fall within the meaning of a service contract or not.The assessee contended that the business of pest control it undertakes falls under the category of a service contract and not a work contract. The imposition of VAT on transactions that are purely service-oriented is erroneous.The department contended that a pest control contract cannot be carried out without the consumption of pesticides and chemicals. It has been clearly held that where pesticides or chemicals are used for the purpose of pest control in a contract, there is an element of sale involved and that the contract would, therefore, fall specifically within the four corners of a work contract. The petitioner was duty-bound to meet the demand for VAT, which has been raised on the basis of the directions issued by the Appellate Tribunal. Having raised a demand in accordance with the provisions of a valid enactment, the VAT authorities cannot be asked to approach the service tax authorities to whom the petitioner has made payments voluntarily for the refund or adjustment of the amounts.The court noted that the petitioner, who had volunteered to pay the service tax and never challenged the said levy, cannot attempt to get over the provisions of the statute providing for the conditions that have to be satisfied for raising such a demand. The instant case is not one where the levy of service tax was under any provision found to be constitutionally invalid. The levy was under the provisions of a valid statute, and the petitioner had raised no objection or appeal as against the assessment.“I notice that there is no specific contention raised by the petitioner that the burden of the service tax that he had paid to the appropriate authorities had not been passed on to the end customer. In the absence of such a specific contention, I am of the opinion that the petitioner cannot place any reliance on the doctrine of unjust enrichment as against the revenue,” the court said.Counsel For Petitioner: Jose Jacob, Bharat Raichandani, Jazil Dev FerdinantoCounsel For Respondent: Shyamdeep S.Shenoy, T.V.Vinu, Thanuja Roshan, Sreelal N.WarrierCitation: 2023 LiveLaw (Ker) 684Case Title: M/S.Gaiagen Technologies Private Limited Versus State of KeralaCase No.: WP(C) NO.8448 OF 2021Click Here To Read The Order

Kerala High Court Rejects Assessee ’s Claim For Service Tax Refund To Meet VAT Demand On Pest Control Contract

Mariya Paliwala

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