2016 (4) TMI 411 - AT - Service Tax

Classification - Pandal or Shamiana services - Section 65 (77a)&(77b) of the Finance Act, 1994 - Appellant contended that supply of light and light fittings to a building or a place which is not a Pandal or Shamiana cannot be covered under Pandal or Shamiana contractor service , therefore, not covered under taxable service - Held that - considering the definition of Pandal or Shamiana it is clear any place prepared or arranged for organizing an official, social or business function will become a Pandal or Shamiana. An open ground or a garden or a already existing building can also be categorized under this. Keeping this definition in mind it is clear that the appellant s activity of providing lights and light fittings in connection with decoration of such place are correctly classifiable under taxable service. Classification - Appellant contended that they were working as a sub-contractors to a main contractor who have been discharging service tax including the amount of bill raised by them as sub-contractor, therefore, again the liability cannot be raised against them - Held that - the tax liability discharged by the main contractor is as per the applicable legal provisions and it cannot be said that the main contractor is acting as an gent to discharge the tax liability of sub-contractor. The tax liability of the appellants are to be decided as per the applicable provisions of law during the relevant time. The admitted position is that the appellants could not state any legal provisions to support the claim that they need not pay service tax even if they provide taxable service when the value of such service is included in the output service of the main contractor. Such proposition will go against from principle of Cenvat Credit Rules and make the credit flow as mandated by these Rules as redundant. After the introduction of Cenvat Credit Rules and various changes in the legal provisions, the CBEC issued a master Circular on 23/08/2007. One of the points clarified therein is the service tax liability of sub-contractors if tax is paid by main contractor. It is noted that the question of double taxation will not apply to the present situation as the Cenvat Credit Rules provides for the situation where, subject to satisfaction of all the conditions, the tax paid on the input services are eligible as credit for the output service provider. As such, there is no merit in the appellant s claim in this regard. Nature of Functions - The appellants also contended that as in certain cases the services are rendered in connection with lighting up of Government buildings and temples, it cannot be covered under the tax liability. As examined by the lower Authorities, it is found that the nature of premises has no relevance on tax liability. As per the definition of Pandal or Shamiana any place specially prepared or arranged for organizing an official, social or business function is covered. The point to be considered is whether the function falls under any one of these three categories. Apparently religious function will not be covered for taxation. A social function even if held in a religious place may not be excluded for tax liability. From the nature of functions as examined in detail and presented in the appeal, no categorical evidence have been submitted to claim exclusion from the category of these functions in relation to which the appellants provided service either directly or indirectly. Therefore, the services so provided are correctly categorized under Pandal or Shamiana contractor in terms of sub-Section (77b) of Section 65 of Finance Act, 1994. - Decided against the appellant

Summary

Issues:
- Classification of services provided by the appellants under "Pandal or Shamiana contractor service."
- Liability of sub-contractors for service tax when the main contractor has already paid tax on the gross value.
- Applicability of Circular dated 07/10/1998 of CBEC on the tax liability of sub-contractors.
- Tax liability in cases where services are rendered in connection with lighting up of Government buildings and temples.

Analysis:

Issue 1 - Classification of services under "Pandal or Shamiana contractor service":
The appellants contended that the services provided by them, such as supplying light decoration to places not classified as Pandal or Shamiana, should not be covered under the taxable service category. However, the Tribunal analyzed the definitions of "Pandal or Shamiana" and "Pandal or Shamiana contractor" as per Section 65 (77a) and (77b) of the Finance Act, 1994. It was established that any place arranged for official, social, or business functions falls under the definition of Pandal or Shamiana, regardless of common understanding. The Tribunal rejected the appellants' argument based on the specific statutory definitions and previous court decisions, emphasizing that the tax liability is determined by the statutory definitions.

Issue 2 - Liability of sub-contractors for service tax:
Regarding the liability of sub-contractors when the main contractor has already paid tax on the gross value, the Tribunal held that the appellants, as sub-contractors, are liable to pay service tax irrespective of the main contractor's tax payments. The Tribunal emphasized that the tax liability of the appellants is independent of the main contractor's actions, as the provision of taxable service necessitates the payment of service tax by the service provider.

Issue 3 - Applicability of CBEC Circular dated 07/10/1998:
The appellants relied on a Circular dated 07/10/1998 of CBEC to support their argument that the main contractors had paid tax on the total gross value, including the sub-contractor portion. However, the Tribunal noted that the Circular was issued before the introduction of Cenvat Credit Rules and emphasized that the tax liability of the appellants should be determined based on the applicable legal provisions during the relevant period. The Tribunal dismissed the appellants' claim that they were exempt from paying service tax based on the main contractor's tax payments.

Issue 4 - Tax liability in connection with Government buildings and temples:
The appellants argued that services rendered in connection with lighting up Government buildings and temples should not incur tax liability. However, the Tribunal clarified that the nature of the premises is irrelevant for tax liability under "Pandal or Shamiana contractor service." The focus should be on whether the function held in these premises falls under official, social, or business categories. The Tribunal concluded that the services provided by the appellants were correctly classified under "Pandal or Shamiana contractor" as per the Finance Act, 1994.

In conclusion, the Tribunal found no merit in the appeals and dismissed them based on the detailed analysis and discussion provided in the judgment.