2011 (4) TMI 333 - AT - Service Tax

Demand - maintenance and repair of HST - Time barred - The issue in short is that the disputed amount should have been reported in two ST-3 returns for the first time when the amount was billed (ie in fourth row in item 4(A) of ST-3 return) and a second time (i.e in the first row in item 4(A) of ST-3 Return) when the amount was realised - If an assesse raises bills for Rs. 1,00,000/- in March 2004 and reports the same in the in ST-3 return for March in row 3 of item 4(A) of ST-3 and does not receive the billed amount till March 2005, no notice under section 73 can be issued because no short payment has occurred - The liability to tax has to be decided with reference to the definition the concerned taxable service at the relevant period of time and the activities carried out and the contract governing such activity - The Appellant is given the permission to adduce any fresh evidence that the Appellant wants to produce and to claim any exemption that the Appellant could have legally claimed at the relevant point of time - Appeal is disposed of

Summary

Issues Involved:
1. Liability of sub-contractors to pay service tax.
2. Eligibility for exemption under Notification 12/2003-ST.
3. Whether the demand is time-barred under section 73 of the Finance Act, 1994.

Detailed Analysis:

1. Liability of Sub-contractors to Pay Service Tax:
The appellant argued that as a sub-contractor, they were not liable to pay service tax, relying on CBEC Circular F. No.B-11/3/98-TRU dated 07-10-98 and various case laws. The Tribunal examined the issue, noting that the Board's earlier clarifications were issued under different contexts, such as ensuring that the same service was not taxed twice and addressing situations where sub-contractors' activities did not fit the definitions of taxable services. The Tribunal concluded that the liability to tax must be determined based on the definition of the concerned taxable service at the relevant time and the activities carried out under the contract. The Tribunal also noted that if the main contractor (HAL) had paid the service tax, the sub-contractor (the appellant) would not be liable to pay tax again on the same service. However, no evidence was presented that HAL had discharged the service tax liability.

2. Eligibility for Exemption under Notification 12/2003-ST:
The appellant claimed exemption for the value of materials supplied, which was not considered during the adjudication proceedings but was raised in the first appeal with supporting documents. The Tribunal referenced the Apex Court's decision in Share Medical Care Vs. UOI-2007 (209) ELT 321, which allows claims for exemption at any stage of the proceedings. The Commissioner (Appeal) erred in not considering this claim, and the Tribunal directed the adjudicating authority to re-examine this issue with the evidence provided by the appellant.

3. Whether the Demand is Time-barred under Section 73 of the Finance Act, 1994:
The appellant argued that the demand was time-barred, stating that the invoices were dated 31-03-2004 and that the relevant date for issuing the Show Cause Notice (SCN) should be within one year from the date of billing. The department contended that the relevant date should be from the date the payment was realized, which was 25-01-2005, making the SCN issued on 24-04-2006 within the permissible period. The Tribunal analyzed the provisions of section 73 and concluded that the relevant date should be counted from the date of realization of the payment, not the billing date. Therefore, the contention that the demand is time-barred was rejected.

Conclusion and Directions:
The Tribunal set aside the impugned order and remitted the matter to the adjudicating authority for re-examination in light of the observations made regarding the liability of sub-contractors, eligibility for exemption under Notification 12/2003-ST, and the relevant date for issuing the SCN. The appellant was allowed to produce fresh evidence and claim any exemptions legally available at the relevant time. The adjudicating authority was instructed to pass a fresh speaking order after giving the appellant an opportunity for a personal hearing. The appeal was disposed of as per these terms.