2016 (12) TMI 1467 - AT - Service Tax

Sub-contract - liability to pay tax as sub-contractor - Board Circular No. 96/7/2007-ST dated 23.08.2007 - Held that - The Commissioner (Appeals) has confined his discussion only to the issue whether the appellant is liable to pay service tax even though the main contractor has discharged the service tax liability on the entire contract. The Commissioner (Appeals) had relied upon the Board Circular No. 96/7/2007-ST dated 23.08.2007. Needless to say that the Board Circular is not binding upon the assessee. However, the other contentions have not been considered at all - the appellant has paid service tax for some services which he was main contractor. However, there is no clarity on the amount which the appellant has discharged liability as main contractor and regarding the amount which the appellant contends that he is not liable to pay as a sub-contractor. It is therefore fit to remand the matter - appeal allowed by way of remand.

Summary

Issues:
Service tax liability of sub-contractor when main contractor has paid, demand of service tax on fabrication works, valuation of taxable services, reliance on Board Circular, fabrication activities as taxable services.

Analysis:

1. Service Tax Liability of Sub-contractor:
The appellants were engaged in various services and executed sub-contracting works for different companies. The issue arose when the department alleged non-payment of service tax by the appellants for works done as sub-contractors, despite the main contractors paying the tax. The department relied on a Board Circular to hold the appellants liable. The appellants contended that they should not be liable if the main contractor had already paid the tax. The Tribunal noted that the Commissioner (Appeals) did not consider all contentions raised by the appellants. The Tribunal found it necessary to remand the matter to the adjudicating authority for a fresh consideration, emphasizing that the Board Circular was not binding on the assessee.

2. Demand of Service Tax on Fabrication Works:
The appellants contested the demand of service tax on fabrication works, arguing that such works should not be subject to service tax as they amount to manufacturing activities. They also raised concerns about the valuation of taxable services, stating that deductions for receivables, VAT, and other amounts were not considered in the demand calculation. The Tribunal acknowledged these contentions and directed the adjudicating authority to review them during the fresh consideration.

3. Reliance on Board Circular and Fabrication Activities:
The department relied on a Board Circular to support its position that the appellants were liable to pay service tax even if the main contractor had already paid. Additionally, the department argued that fabrication works should be considered taxable activities as they were part of installation works. The Tribunal noted these arguments but emphasized that the Board Circular was not binding. The Tribunal directed a reevaluation of all contentions, including the nature of fabrication activities and their taxability.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal by way of remand, instructing the adjudicating authority to reconsider the case comprehensively, taking into account all contentions raised by the appellants regarding service tax liability, fabrication works, valuation of services, and the applicability of the Board Circular.