2011 (9) TMI 1120 - AT - Service Tax

Liability of tax on sub-contractor - the main contractor has discharged the entire Service tax on the cost value of the contract - Revenue s grievance is limited to the fact that Commissioner (Appeals) has set aside the demand and penalties without actually verifying as to whether the prime contractor had discharged the tax on the full value of the contract or not. Held that - Inasmuch as the verification is one of the essential fact for setting aside of demand, we are of the view that matter should be remanded to the original adjudicating authority for carrying out the verification of the above factual fact and decide the consequent duty liability of the respondents - matter on remand.

Summary

Issues: Delay in filing appeal, Double taxation due to service tax, Verification of tax payment by main contractor

Delay in filing appeal:
The judgment addresses the issue of condoning an 8-day delay in filing the appeal by the Revenue, attributing it to administrative reasons. The Bench, comprising Archana Wadhwa and Rakesh Kumar, decides to condone the delay and allow the COD application due to the short duration of the delay. The appeal proceeds to be heard, considering the delay issue resolved.

Double taxation due to service tax:
The main issue revolves around the demand against the respondent, a sub-contractor, being set aside by the Commissioner (Appeals) on the grounds that the main contractor had already paid the entire service tax on the contract value. The judgment highlights that taxing the sub-contractor again would lead to double taxation, which is impermissible under the law. The Commissioner (Appeals) set aside the demand and penalties subject to verification of the main contractor's tax payment. The Revenue's grievance lies in the lack of actual verification of the main contractor's tax payment, leading to the demand being set aside prematurely.

Verification of tax payment by main contractor:
The judgment acknowledges the Revenue's argument that the demand and penalties were set aside without proper verification of whether the main contractor had indeed discharged the tax on the full contract value. The Bench finds merit in the Revenue's stance and decides that the matter should be remanded to the original adjudicating authority for verification of this crucial fact. The judgment clarifies that the remand is specifically for verifying the factual position regarding the main contractor's tax payment and not for re-deciding the matter on legal grounds. Consequently, the COD and the appeal by the Revenue are disposed of in this manner, emphasizing the importance of factual verification in tax liability determinations.

This detailed analysis of the judgment showcases the thorough consideration given to each issue, ensuring that legal principles are upheld and factual verifications are conducted to prevent double taxation and ensure proper tax liability determination.