2013 (12) TMI 1221 - AT - Service Tax

Waiver of predeposit of tax - Demand of differential amount - Erection, commission and installation - Suppression of facts - Held that - audit report relates to the year 2006 and the show-cause notice is issued after two years in 2008. It is also clear from the audit report that the audit report was provided on the basis of Board s circular dated 7.10.1998. In view of that, the allegation of suppression of facts, prima facie, is not sustainable - Stay granted.

Summary

Issues:
1. Waiver of predeposit of tax, interest, and penalty.
2. Limitation ground for the show-cause notice.
3. Liability of subcontractor to pay service tax.
4. Interpretation of audit report and relevant circulars.
5. Allegation of suppression of facts.

Analysis:

1. The applicant sought waiver of predeposit of tax amounting to Rs.11,54,212/- along with interest and penalty. The demand was raised for services related to erection, commission, and installation work. The counsel argued on the limitation ground, citing an audit report from 2006 to show no suppression of facts. The respondent contended that the demand was valid, relying on Supreme Court decisions. The Tribunal found merit in the applicant's submission and waived the predeposit, staying the recovery pending appeal.

2. The Tribunal examined the audit report from 2006, which clarified the service tax liability of subcontractors working for main contractors. The report highlighted that subcontractors need not pay service tax if the principal contractor has already done so for the same service category. The Tribunal noted that the audit report was based on a circular from 1998, indicating that the allegation of suppression of facts was not sustainable. The case law cited by the respondent was deemed irrelevant to the present case.

3. The issue of the subcontractor's liability to pay service tax was crucial in this judgment. The Tribunal analyzed the nature of the services provided by the subcontractor to the main contractor and concluded that the subcontractor, in this case, was not required to pay service tax as the main contractor had already paid for the services rendered.

4. The interpretation of the audit report and relevant circulars played a significant role in determining the tax liability. The Tribunal referenced the circulars to establish that the service provided by the subcontractor fell outside the definition of taxable service, thereby supporting the decision to waive the predeposit of tax, interest, and penalty.

5. The allegation of suppression of facts was addressed in light of the audit report and circulars. The Tribunal found that the audit report and circulars provided clarity on the tax liability of subcontractors, indicating that there was no suppression of facts in this case. This finding contributed to the decision to grant the waiver of predeposit and stay the recovery pending appeal.

In conclusion, the judgment by the Appellate Tribunal CESTAT CHENNAI granted the waiver of predeposit of tax, interest, and penalty to the applicant based on the analysis of the limitation ground, subcontractor's tax liability, interpretation of the audit report and circulars, and the absence of suppression of facts.