2017 (5) TMI 1197 - AT - Service Tax

Sub-contract - liability of tax - whether sub-contractor is liable to service tax and is a service tax provider? - Held that - the issue is no longer res integra and is squarely covered by the judgement of this Tribunal in the case of Sunil Hi-Tech Engineers Ltd. 2014 (10) TMI 524 - CESTAT MUMBAI (LB) , where it was held that The appellant is liable to pay service tax on the taxable services rendered by him in the capacity of a sub-contractor - decided in favor of revenue.

Summary

Issues:
1. Whether a sub-contractor is liable to pay service tax and considered a service tax provider.
2. Whether the extended period for invoking the demand was correctly applied.
3. Whether penalties under Sections 76, 77, and 78 of the Finance Act, 1994, were rightly imposed.

Issue 1:
The Tribunal analyzed whether a sub-contractor is liable to pay service tax and considered a service tax provider. The Revenue contended that the sub-contractor is liable for service tax, citing precedents like the Sunil Hi-Tech Engineers Ltd. case. The Respondent argued that the main contractor had already paid service tax and submitted a letter stating the responsibility for payment lies with them, referencing a CBEC Circular. The Tribunal referenced the circular to establish that a sub-contractor is indeed a taxable service provider, irrespective of whether the services are used as input services by the main service provider. The Tribunal emphasized that circulars are to be applied based on the law at the time, and the issue was previously addressed in the Sunil Hi-Tech Engineers Ltd. case. The Tribunal remanded the matter back to the adjudicating authority for re-computation of service tax demands and penalties, based on the principles discussed.

Issue 2:
Regarding the extended period for invoking the demand, the Revenue argued that it was correctly applied due to the suppression of facts by the appellant. The Tribunal agreed with the Revenue's stance and held that the extended period was justifiably invoked in the case. The Tribunal emphasized that the appellant's suppression of facts warranted penalties under Sections 76, 77, and 78 of the Finance Act, 1994. The Tribunal directed the re-computation of penalties after re-assessment of the service tax demand by the adjudicating authority.

Issue 3:
The Tribunal deliberated on the imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994. It was established that the appellant's suppression of facts warranted penalties, and the quantum of penalties would need to be re-determined after re-computing the service tax demand. The Tribunal upheld the imposition of penalties under the specified sections of the Finance Act, 1994, emphasizing the necessity for re-assessment of penalties based on the revised service tax demand.

In conclusion, the Tribunal ruled in favor of the Revenue, allowing the appeal and setting aside the order of the Commissioner (Appeals). The judgment reiterated the liability of a sub-contractor to pay service tax and provided detailed reasoning based on legal precedents and circulars. The Tribunal emphasized the importance of re-computation of service tax demands and penalties, highlighting the need for adherence to legal provisions under the Finance Act, 1994.