2018 (12) TMI 1779 - AT - Service Tax

Liability of service tax - services for civil works, fabrication, testing commissioning, erection and installation in the capacity of a sub-contractor - whether the appellant herein be saddled with service tax liability when the Revenue is not deprived, given the fact that tax stood collected by them, on the whole of the contact value including the consideration paid by the main contractor to the sub contractor i.e., the appellant in this case? - HELD THAT - Hyderabad Bench of this Tribunal in case of Power Mech Projects Ltd. vs. Commissioner of Central Excise, Guntur 2016 (9) TMI 844 - CESTAT HYDERABAD , wherein identical case was involved regarding the service tax liability in the category of Erection, Commissioning and Installation Services for the period April 2007 to March 2008 i.e. the period subsequent to material period impugned herein, the Tribunal after noting the fact that since main contractor had already discharged service tax liability, set aside the demand on the sub contractor. The legal position herein stands decided in favour of the appellant herein and against the Revenue.

Summary

Issues:
1. Whether the appellant is liable to pay service tax when the main contractors have already paid the tax.
2. Whether penalty imposition is justified in absence of any malafide intention.
3. Interpretation of the definition of taxable service under section 65(105)(zzd) for 'Erection, Commission, and Installation services' before the amendment in Finance Act, 2008.

Issue 1:
The appellant, a sub-contractor, contested the demand of service tax imposed by the Ld. Commissioner, arguing that since the main contractors had already paid the service tax on the entire contract value, they should not be liable for double taxation. The appellant relied on various Trade Notices and Circulars to support their belief. The Ld. Commissioner rejected the plea, stating that the services provided by the appellant were not covered in the circulars, thus denying the dispensation. The appellant's consultant referred to previous decisions where demands on sub-contractors were held unsustainable when the main contractor had paid the service tax. The Tribunal, after considering these precedents, held in favor of the appellant, following the decisions of the Hon'ble Chhattisgarh High Court and the Hyderabad Bench of the Tribunal.

Issue 2:
The appellant's consultant argued against the imposition of penalty, claiming no malafide intention to evade tax. The Departmental Representative supported the Ld. Commissioner's findings, stating that the appellant should have paid the service tax independently for the service recipients to avail CENVAT Credit. However, the Tribunal did not find merit in the Revenue's argument and set aside the penalty along with the demand for service tax and interest.

Issue 3:
The consultant further contended that the amendment in Finance Act, 2008, regarding the definition of taxable service under section 65(105)(zzd) for 'Erection, Commission, and Installation services' did not apply to them as the services were rendered before the amendment. The Tribunal acknowledged this argument and concluded that the liability to pay service tax did not arise in the appellant's case due to the timing of the services rendered in relation to the legislative change.

In conclusion, the Tribunal allowed the appeal, setting aside the demand for service tax, interest, and penalty, emphasizing that the appellant should not be held liable for service tax when the main contractors had already discharged the tax liability.