2017 (5) TMI 826 - AT - Service Tax

Sub-contract - Commercial or Industrial Construction Service - taxability - Held that - Board vide Circular dated 7.10.98 did clarify that no service tax is required to be paid by the sub-contractor provided that the main contractor paid the service tax on the services rendered by him, in respect of the same service category - Though a revised clarification was issued vide circular dated 23.08.2007, the fact remains that there is a room for bona fide belief on the part of the appellant regarding non-liability to service tax for the works carried out in their capacity as sub-contractor - claim of the appellant that they have rendered service as a sub-contractor and the full service tax liability on the whole contract has been discharged by the main contractor, requires verification - appeal allowed by way of remand.

Summary

Issues:
1. Tax liability of the appellant as a sub-contractor in various projects.
2. Classification of contracts under "works contract service" and applicable tax liability.
3. Demand for extended period and the element of willful misstatement.
4. Double taxation issue regarding service tax payment by the main contractor.

Analysis:
1. The appeal concerned the tax liability of the appellant, a sub-contractor engaged in construction activities. The Revenue sought to recover service tax under the category of "Commercial or Industrial Construction Service" for the period 2005-2006 to 2009-2010. The Original Authority confirmed a service tax liability of &8377; 79,45,262 against the appellant and imposed penalties under Sections 76 and 78 of the Finance Act, 1994.

2. The appellant argued that as a sub-contractor, service tax had already been discharged by the main contractor for the entire value of the service, citing various Tribunal decisions. They contended that the contracts involved transfer of goods and should be classified under "works contract service," taxable only from 1.6.2007 onwards based on a Supreme Court decision. The appellant also disputed the demand for an extended period, claiming no willful misstatement.

3. The Tribunal noted that the Original Authority's finding that contracts involving transfer of property would attract service tax even before 1.6.2007 was legally incorrect. Referring to the Supreme Court decision, the Tribunal ruled that the appellant's works contracts were liable to service tax only from 1.6.2007. The Tribunal emphasized that no double taxation is permissible under the law, citing relevant case laws and circulars.

4. Considering the appellant's argument that the main contractor had already paid the service tax, the Tribunal directed a re-examination by the Original Authority. The Tribunal highlighted the need to verify whether the main contractor had indeed discharged the full service tax liability and acknowledged the appellant's bona fide belief regarding non-liability for service tax as a sub-contractor. The matter was remanded back to the Original Authority for a fresh decision, allowing the appellant an opportunity to present their case.

This detailed analysis of the judgment addresses the key issues raised in the appeal and the Tribunal's decision regarding the tax liability, classification of contracts, demand for extended period, and the issue of double taxation concerning service tax payment by the main contractor.