Question And Answer
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Date: March 29, 2022
Query asked by CA KARAN SHAH

Service provider (individual) has provided supply of man-power service to body corporate in FY 2015-16.

Service receiver has already laid service tax on RCM on said transaction.

department held that – service provided is not manpower service and demanded service tax from service provider.

i did find case law wherein it is held that – if service receiver has paid ST to service provider (who had charged in his bill), then service receiver not required to pay ST on RCM as it will amount to double taxation.

the above case are not directly applicable in my case.

request to guide me – provide line of argument and relevant case laws.

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Answer given by

The intention of any Taxation law is to collect tax once on the taxable transaction. Where legislature feels to protect leakage, instead of forward charge, RCM system is applied. Therefore, if the tax is paid under RCM, though right or wrong, the tax authorities cannot be justified in asking tax on forward basis on the same transaction from the supplier. This will amount to double taxation. Reference can be made to following judgments.
Four Seasons Wines Limited (MVAT A.No.5 of 2017 dt.4.7.2017)(Bombay High Court).
In this case, the employer failed to deduct tax from the payment to contractor under Maharashtra VAT Act. Therefore, the demand was raised on the employer. Employer showed that the contractor has already discharged tax on the given contract turnover. Hon. Bombay High Court held that now tax cannot be demanded from employer, otherwise it will be double taxation. Such principle will also apply in your above case.
Kolkata CESTAT judgment in case of Mahanadi Coalfields Ltd. vs. CCGST & CE 2020-TIOL-1434-CESTAT-KOL.
In this case the litigant has paid tax to service provider instead of paying tax under RCM. Therefore, tax was levied on litigant under RCM. Hon. CESTAT held that there is no loss of revenue as the service provider has paid the tax.
The matter in your case is exactly reverse. However, the principle laid down will fully apply including that there is no loss of revenue and the double taxation is also required to be avoided.
Under above circumstances you can take stand that when there is no dispute about receipt of tax under RCM from the recipient, liability cannot be raised on the supplier.

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