2014 (8) TMI 619 - AT - Service Tax

Stay application - sub-contractor - main contractor have paid the service tax - Business Auxiliary Services - services to the U.P. Electricity Board - Held that - M/s. U.P. Power Control Corporation Ltd. entered into a contract with one I.T. Energy for generation of electricity bills, meter reading and collection of bills etc. M/s. I.T. Energy further sub-contracted the job to the appellant herein. It is seen that M/s. I.T. Energy paid the service tax on the entire amount including the value of the services being provided by the appellant. As such, they contested before the Original Authority that inasmuch as the main contractor paid the service tax, the demand of service tax from the appellant would be in duplicate. For the above proposition, they relied upon the Board s Circular dated 2-7-1997, 23-8-1997 and 7-10-1998, which provided that if the main contractor have paid the service tax, levy of service tax against the sub-contractor is not required - appellant s plea that the main contractor, M/s. I.T. Energy paid the entire service tax does not stand disputed by the Adjudicating Authority. The Commissioner (Appeals) has not dealt with the same. At this prima facie stage, we are of the view that if the main contractor has discharged the entire duty liability, second time confirmation of the demand against the present appellant, who is a sub-contractor only, may not be justified - Stay granted.

Summary

Issues Involved:
Service tax liability of the appellant as a sub-contractor when the main contractor has already paid the tax, applicability of circulars and tribunal decisions in such cases, justification of demand against the appellant, limitation period for raising the demand.

Analysis:

The judgment by the Appellate Tribunal CESTAT New Delhi dealt with the issue of service tax liability amounting to around Rs. 24.56 Lakhs confirmed against the appellant, a sub-contractor, for providing services to the U.P. Electricity Board under Business Auxiliary Services. The appellant argued that the main contractor, M/s. I.T. Energy, had already paid the service tax on the entire amount, and therefore, demanding tax from the appellant would be duplicative. They relied on various circulars and tribunal decisions supporting their stance that if the main contractor has paid the tax, the sub-contractor should not be held liable for the same.

The Adjudicating Authority and the Commissioner (Appeals) did not accept the appellant's contentions, stating that the circulars do not apply when the entire work is done by the sub-contractor. However, at a prima facie stage, the Tribunal found that the main contractor had indeed paid the service tax, which was not disputed by the authorities. The Tribunal also noted that the demand was raised after a significant period, indicating a limitation issue for the period 2003-04 and 2007-08.

Considering these factors, the Tribunal held that if the main contractor had fulfilled the tax liability, imposing the same demand on the appellant, who is a sub-contractor, would not be justified. Additionally, the prima facie demand was considered to be time-barred. Therefore, the Tribunal dispensed with the pre-deposit condition of duty and penalty, allowing the stay petitions in favor of the appellant. This decision highlights the importance of examining the actual tax payments made by different entities involved in a contractual chain to avoid double taxation and ensure fairness in tax liabilities.