2008 (11) TMI 107 - AT - Service Tax

Appellant took service tax credit paid by their sub-contractors It is not in dispute that sub-contractor provided the service to the main contractor and they were not accountable to the service receiver not disputed that sub-contractors did not provide any service at all Revenue s contention that what has been deposited by sub-contractor is not service tax but only a deposit, is not appreciable credit denied on ground that sub-contractors are not liable to pay tax, is not justified

Summary

Issues involved:
Claim of service tax credit by the appellant based on payments made by sub-contractors post-1-7-2003; Revenue's rejection citing a clarification by the Board; Allegation of suppression of material fact regarding credit availed; Discrepancy in details of credit availed in ST-3 returns; Dispute over liability for service tax between main contractor and sub-contractors.

Analysis:
The appellant claimed service tax credit of Rs. 5,16,431 paid by their sub-contractors after 1-7-2003. The Revenue rejected the claim citing a clarification by the Board stating that service tax liability is on the main contractor, not the sub-contractors. The Revenue also alleged that the appellant suppressed the material fact regarding the credit availed. The appellant argued that once duty is paid by the input supplier, the recipient is entitled to credit, citing relevant Tribunal decisions. The appellant contended that the credit taken by them was proper and that the Revenue's claim of non-submission of credit details was incorrect. The Revenue argued that the details of credit taken were not submitted as required by rules, and that the liability for service tax lies with the main contractor, accusing the appellant of making sub-contractors pay service tax to take credit.

The Tribunal considered the submissions and found that the judgments cited by the appellant covered the issue, even though they were not specific to service tax. It was acknowledged that the sub-contractors provided services to the main contractor and were not accountable to the service receiver. The Tribunal noted that the appellant had the option to pay service tax themselves instead of making sub-contractors pay and take credit. Since services were provided and liability discharged in two stages without tax evasion, the Tribunal held that the Revenue had no valid grievance. The Tribunal disagreed with the Revenue's argument that the sub-contractor's payment was a deposit, not service tax. Consequently, the Tribunal allowed the appeal, granting consequential relief to the appellant.

This judgment clarifies the entitlement of the recipient to claim service tax credit based on payments made by sub-contractors, the liability for service tax between main contractors and sub-contractors, and the necessity of disclosing credit details in compliance with rules. The decision emphasizes the importance of following legal provisions and ensuring transparency in availing tax credits to avoid disputes and uphold tax compliance standards.