2007 (10) TMI 133 - AT - Service Tax

If the main contractor discharges the service tax liability, there is no need for sub-contractor to pay the service tax tax can t be demanded twice on same service no evidence required on part of assessee - no merit in the demand also the entire demand is time barred hence set aside

Summary

Issues: Rectification of mistake in the Final Order passed by the Tribunal, Liability to pay service tax on sub-contracting work, Time bar for demand beyond the normal period.

Rectification of Mistake in Final Order:
The applicant filed a petition seeking rectification of a mistake in the Final Order passed by the Tribunal. The Adjudicating Authority had confirmed two demands against the appellants. The Tribunal set aside one demand based on relevant legal precedents but did not address the second demand of Rs.31,04,826. The learned Advocate argued that the demand was based on the appellants being liable to pay service tax on services rendered to photographic studios, which was a sub-contracting work. The Advocate cited Board clarifications on sub-contractors' liability for service tax and emphasized that service tax should be paid only when services are rendered directly to customers. The Tribunal agreed with the Advocate's argument, stating that when a sub-contractor provides taxable services, they are not liable to pay service tax. The Tribunal also noted that demanding service tax twice on the same service is not permissible. Therefore, the Tribunal set aside the demand of Rs.31,04,826 based on these grounds.

Liability to Pay Service Tax on Sub-Contracting Work:
The learned Departmental Representative argued that the appellants were liable to pay service tax even if they rendered services to the main photographers. However, the Tribunal, after careful consideration, held that the demand for service tax on the value of services rendered by the appellants as sub-contractors was not justified. The Tribunal referred to various circulars of the Board and established the principle that a sub-contractor is not liable to pay service tax when the main contractor has already discharged the tax liability. The Tribunal emphasized that it is the Revenue's responsibility to verify this fact and not the appellants'. Therefore, the Tribunal found no merit in the demand for service tax on sub-contracting work and set it aside.

Time Bar for Demand Beyond Normal Period:
The learned Advocate argued that the demand, issued for the period from July 2001 to 2002, was beyond the normal one-year period. The Advocate contended that the appellants had provided all necessary details during the investigation, and the invocation of a longer period was not sustainable. The Tribunal agreed with the Advocate, citing a previous decision, and stated that when primary facts are disclosed and monthly returns are filed regularly, invoking a longer period for demand is not justified. The Tribunal also noted that it is not the appellants' responsibility to provide evidence regarding the payment of service tax by the main contractor. Therefore, based on the time bar and other considerations, the Tribunal set aside the demand for service tax.

In conclusion, the Tribunal allowed the miscellaneous application for rectification of the mistake in the Final Order, setting aside the demand for service tax on sub-contracting work due to the principles governing sub-contractors' liability and the time bar for the demand beyond the normal period.