2016 (2) TMI 366 - AT - Service Tax

Benefit of abatement - installation/commissioning of ground based towers for BSNL - Revenue stated that the appellant was liable to pay service tax by including the value of towers and as the value was not included abatement of 67% under Notification No. 1/2006-ST was not admissible and therefore the impugned demand is sustainable. - Held that - the question of availability of 67% abatement under Notification No. 1/2006-ST loses relevance as whatever service tax the appellant paid can be deemed to be reversal of the Cenvat credit of service tax (paid by sub-contractor) taken by it (i.e. the appellant) when service tax paid by it (appellant) was not less than such credit taken. - Stay granted.

Summary

Issues Involved:
- Service tax demand confirmation under ECIS for the period October 2009 to March 2010.
- Applicability of abatement under Notification No. 1/2006-ST.
- Liability of the appellant to pay service tax for supply of towers and ECIS.

Analysis:

1. Service Tax Demand Confirmation under ECIS:
The appellant filed a stay application and appeal against the order-in-original confirming a service tax demand of Rs. 69,08,552 under ECIS for the specified period. The appellant argued that it was a manufacturer of transmission towers and had separate agreements with BSNL for supply, installation, and commissioning of towers. It contended that the service component was sub-constructed by a sub-contractor who paid service tax, and the value of towers was not includible in the assessable value. The appellant maintained that it did not provide ECIS directly to BSNL, and any credit taken was reversed by payment of service tax. The ld. DR argued that the appellant was liable to pay service tax for the towers supplied to BSNL.

2. Applicability of Abatement under Notification No. 1/2006-ST:
The contention regarding the applicability of abatement under Notification No. 1/2006-ST was raised, stating that as the value of towers was not included, the abatement of 67% was not admissible. The Tribunal examined the purchase order for supply, installation, and commissioning of towers, which clearly delineated separate amounts for towers and the service component. It was observed that the appellant supplied towers to BSNL and sub-contracted the ECIS part to a sub-contractor who paid service tax. The Tribunal referred to a Board circular emphasizing that a sub-contractor is liable to pay service tax for taxable services provided, regardless of whether the services are used as input services.

3. Liability of the Appellant for Service Tax:
Based on the analysis of the purchase order and the circular, the Tribunal concluded that the appellant did not provide ECIS directly and therefore was not liable to pay service tax for ECIS. The Tribunal noted that the service tax paid by the appellant could be considered as a reversal of the Cenvat credit taken from the sub-contractor. Considering the amount already remitted against the demand, the Tribunal decided not to order any further pre-deposit and stayed the recovery of the remaining adjudicated liability during the appeal's pendency.

In summary, the Tribunal ruled in favor of the appellant, holding that the appellant was not liable to pay service tax for ECIS as it did not directly provide such services. The decision was supported by the purchase order details and the clarification provided in the Board circular. The Tribunal emphasized the liability of the sub-contractor for service tax payment and deemed the appellant's payment as a reversal of Cenvat credit.