2013 (5) TMI 82 - AT - Service Tax

Site formation and clearance services - appellant has received orders for providing services from Andhra Pradesh Government had given the same contracts on back to back basis to the sub-contractors retaining margins of commission of 2% to 3% and the balance given to the subcontractors who have actually undertaken the work - service tax demand under Business Auxiliary Service on the 2% to 3% margin retained by the appellant - Held that - The amount of 2% to 3% margin retained by the appellant cannot be treated as service charges received from the sub-contractors and separately taxed under Business Auxiliary Service in the light of the submissions that the entire amount received from Andhra Pradesh Government has suffered service tax at their hands under the head site formation and clearance . There shall be waiver of pre-deposit of dues as per the impugned order and stay of recovery thereof till the disposal of the appeal.

Summary

Issues:
Interpretation of service tax liability on retained margins for subcontracted work.

Analysis:
The case involved a dispute regarding the service tax liability on margins retained by an appellant who provided services of "site formation and clearance" to the Andhra Pradesh Government and subcontracted the work on a "back to back" basis. The appellant retained a margin of 2% to 3% from the payments received from the government and passed on the remaining amount to the subcontractors. The show-cause notice alleged that the retained margin constituted commission received from subcontractors and was liable for service tax under 'Business Auxiliary Service,' resulting in a demand for service tax, interest, and penalties amounting to Rs. 4,96,416.

The appellant contended that they had already paid service tax on the entire amount received from the Andhra Pradesh Government for the services provided, and the margins retained were not separate service charges but part of the overall consideration for the services rendered. Despite the lack of clear mention of this claim in the original and appellate orders, the show-cause notice sought to impose service tax specifically on the retained margins.

The Tribunal, after hearing both parties, held that the margins retained by the appellant could not be considered as service charges received from subcontractors and separately taxed under 'Business Auxiliary Service.' This decision was based on the understanding that the entire amount received from the government had already been subjected to service tax under the category of "site formation and clearance" services. Consequently, the Tribunal ruled in favor of the appellant, waiving the pre-deposit of dues as per the impugned order and staying the recovery of the demanded amount until the appeal was disposed of.

In conclusion, the Tribunal's judgment clarified that the margins retained by the appellant were not subject to separate service tax liability under 'Business Auxiliary Service' as they were integral to the overall consideration for the services provided to the Andhra Pradesh Government.