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2011 (5) TMI 399 - AT - Service TaxSite preparation, site levelling works in connection with setting up of a super Thermal Projects by M/s. NTPC - site formation - Value of services - Held that - As there is no dispute about the Service Tax liability on site formation services with effect from 16-6-2005, the dispute only relates to actual quantum of Service Tax demandable, the same requires to be reconsidered afresh by the Commissioner after taking into account the submissions and evidence to be produced by NBCC. Regarding services provided to sub-contractors - Held that - The Supervision of work undertaken by the sub-contractors by NBCC was to ensure whether the same was in conformity with the terms and conditions of the contract and the same cannot be treated as services rendered by NBCC to the sub-contractors. The margin retained by them as main contractor cannot be treated as consideration notionally received back from the sub-contractors. Therefore demand of Service Tax holding that NBCC has rendered business auxiliary services to the sub-contractors cannot be sustained.
Issues Involved:
1. Demand of Service Tax on NBCC for site formation services. 2. Demand of Service Tax on APR and SAC for business auxiliary services. 3. Classification of services rendered by sub-contractors. 4. Quantum of Service Tax liability. 5. Imposition of penalties under various sections. Issue-Wise Detailed Analysis: 1. Demand of Service Tax on NBCC for Site Formation Services: NBCC entered into a contract with NTPC for site preparation and levelling works. The Commissioner demanded Service Tax from NBCC, treating the services rendered to NTPC as site formation services. NBCC contested the quantum of the demand, arguing that services rendered prior to 16-6-2005 should not be taxed as Service Tax on site formation services was introduced only from that date. The Tribunal found the demand of over Rs. 17 crores to be highly inflated and remanded the case for reconsideration of the quantum of Service Tax after taking into account the submissions and evidence provided by NBCC. 2. Demand of Service Tax on APR and SAC for Business Auxiliary Services: The Commissioner held that APR and SAC rendered business auxiliary services to NTPC on behalf of NBCC. The sub-contractors argued that their activities fell under site formation services, not business auxiliary services. The Tribunal agreed, stating that the sub-contractors had no direct contract with NTPC and their activities were wrongly categorized by the Department. The demand for Service Tax under business auxiliary services was set aside. 3. Classification of Services Rendered by Sub-Contractors: The sub-contractors (APR and SAC) were found to have rendered site formation services to NBCC, not business auxiliary services to NTPC. The Tribunal noted that the sub-contractors' activities were specific to site formation, and the supervision by NBCC did not constitute services rendered to the sub-contractors. The Tribunal rejected the Department's view that the sub-contractors rendered services to NTPC on behalf of NBCC. 4. Quantum of Service Tax Liability: NBCC contested the Service Tax demand on the grounds that the Commissioner did not consider the value of services rendered before 16-6-2005. The Tribunal found the demand inflated and remanded the case for a fresh determination of the correct quantum of Service Tax. NBCC had already paid Rs. 3.03 crores, which they claimed was the correct amount. 5. Imposition of Penalties Under Various Sections: The Tribunal held that no penalties were imposable on NBCC as they had paid Service Tax for services rendered from 16-6-2005 and the dispute was only about the quantum. The Tribunal also noted that the sub-contractors were following the Board's instructions dated 14-9-1997, which stated that when the main contractor pays Service Tax, sub-contractors are not required to pay it. Therefore, no penalties were justified against the sub-contractors, and the case was considered revenue neutral. Conclusion: - NBCC: The appeal was disposed of with instructions for the Commissioner to reconsider the quantum of Service Tax after granting NBCC a reasonable opportunity to present their case. - APR and SAC: The appeals were allowed, setting aside the Service Tax demands and penalties, with consequential relief as per law. The Tribunal found that no services were rendered by sub-contractors to NTPC on behalf of NBCC and that the sub-contractors' activities were wrongly categorized.
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