2017 (6) TMI 685 - AT - Service Tax

Sub-contract - levy of tax - principal contractor had remitted the service tax on their behalf - Held that - when service tax has been paid by the main contractor, charging the sub-contractor again will amount to taxing the same service twice - matter requires to be remanded to the adjudicating authority to verify whether the service rendered by the appellant has suffered tax in the hands of the principal contractor - appeal allowed by way of remand.

Summary

Issues:
Discharge of service tax dues on payment collected from principal contractor for services rendered. Interpretation of liability for service tax when service has been taxed in the hands of the principal contractor.

Analysis:
The dispute in this case revolves around the payment of service tax dues amounting to ?4,62,327 collected from the principal contractor, M/s. Technip India Ltd., for services provided between October 2007 to March 2008. The appellant claimed to be in a back-to-back contract where the principal contractor had already remitted the service tax on their behalf. However, the department disregarded the challans submitted by the appellant, asserting that they were solely liable for paying the service tax, regardless of whether the tax was collected from the recipient or not. The original authority confirmed the tax demand, along with interest and a penalty under Section 76 of the Finance Act, 1994. The appellant's appeal to the Commissioner (Appeal) was also dismissed, leading to the current appeal.

During the hearing, the appellant's advocate referred to a previous Tribunal order in the appellant's favor on a similar issue, indicating that if the service had already been taxed in the hands of the principal contractor, the appellant should not be liable for the same tax. On the contrary, the respondent cited a Board Circular and previous Tribunal decisions to argue that a subcontractor is not immune from service tax liability even if the main contractor has paid the tax. The respondent emphasized that the provider of taxable services must discharge the service tax liability, regardless of previous payments by the principal contractor.

The Tribunal analyzed the previous decisions cited by both parties and distinguished them from the present case. It was noted that when service tax has already been paid by the main contractor, imposing tax on the subcontractor would result in double taxation of the same service. Therefore, the Tribunal ruled that if the service rendered by the appellant had indeed been taxed by the principal contractor, the appellant would not be liable for further tax. The case was remanded to the adjudicating authority to verify this aspect, allowing the appellant to present evidence supporting their claim that the tax liability had been settled by the main contractor. If proven, no tax liability, interest, or penalty would be imposed on the appellant.

In conclusion, the appeal was allowed by way of remand, with the Tribunal directing the adjudicating authority to thoroughly investigate whether the service provided by the appellant had already been taxed by the principal contractor to determine the appellant's tax liability accurately.