2014 (8) TMI 628 - AT - Service Tax

Waiver of pre-deposit of Service Tax - Joint venture / consortium partner agreement - sharing of revenue - one partner paid the service tax - rendering the services as sub-contractor the principal contractor - construction, erection, commissioning and installation services - Held that - As the demand pertaining to ₹ 38.75 Lakhs, the Applicant could able to make out a prima facie case, as they could able to show before us that the consortium partner M/s.Rajsekhar Construction has paid the service tax, a fact supported by a Chartered Accountant s Certificate. However, as far as the balance amount of ₹ 11.62 Lakhs is concerned we do not find merit in the submission of the Applicant that unless they receive the Service Tax amount in full from the principal contractor they are not under any obligation to discharge the Service Tax on the taxable value, even though invoices were raised and services rendered long ago - against the outstanding of ₹ 1.00 Crore the Applicant had already received around ₹ 70 Lakhs from the principal contractors. At this stage, fairly it could be inferred that the Service Tax component are included in the received amount of ₹ 70.00 lakhs. In the result the Applicant failed to make out a prima facie case for full waiver of ₹ 11.62 Lakhs. Taking note of the fact that the Applicant has already deposited ₹ 46,000/- we direct the Applicant to deposit the balance amount of ₹ 11.16 Lakhs within a period of 6 weeks - Partial stay granted.

Summary

Issues: Application for waiver of pre-deposit of Service Tax and penalty under Section 78 of the Finance Act, 1994.

Analysis:
1. The applicant sought a waiver of pre-deposit of Service Tax amounting to Rs. 50.37 lakhs and an equal penalty under Section 78 of the Finance Act, 1994. The applicant claimed that a significant portion of the demand related to services rendered in partnership with a consortium partner, who had already paid the Service Tax. Additionally, the applicant highlighted discrepancies in the amount received from principal contractors and the Service Tax discharged. The applicant argued that they were not obligated to pay the Service Tax until receiving full payment from the principal contractors.

2. The Revenue, represented by the Ld.A.R., contested the applicant's claims and reiterated the findings of the Ld.Commissioner. The Revenue argued that the applicant failed to provide sufficient evidence that the consortium partner had indeed paid the Service Tax on the taxable value of services rendered. While acknowledging the Chartered Accountant's Certificate presented by the applicant, the Revenue asserted that further scrutiny was necessary. Regarding services rendered as a subcontractor, the Revenue pointed out that although the applicant had received payments that included Service Tax amounts, they had not discharged the corresponding Service Tax liability.

3. After hearing both sides and examining the records, the Tribunal found merit in the applicant's claim regarding a portion of the demand amounting to Rs. 38.75 lakhs. The Tribunal noted that the applicant successfully demonstrated, with the Chartered Accountant's Certificate, that the consortium partner had paid the Service Tax for this specific amount. However, concerning the remaining balance of Rs. 11.62 lakhs, the Tribunal rejected the applicant's argument that they were not obligated to pay the Service Tax until receiving full payments from the principal contractors. The Tribunal agreed with the Revenue that the Service Tax component was likely included in the payments already received by the applicant from the principal contractors.

4. Consequently, the Tribunal directed the applicant to deposit the balance amount of Rs. 11.16 lakhs within six weeks. Upon this deposit, the balance dues would be waived, and the recovery stayed during the appeal's pendency. Failure to comply with this directive would lead to the dismissal of the appeal without further notice. The compliance deadline was set for 24.07.2014.