2017 (9) TMI 156 - AT - Service Tax

Construction services - tax paid by principal - liability of sub-contractor to pay service tax - double taxation - Held that - no double taxation is permissible under the law. The Constitution (Article 265) provides to take the exact amount of tax i.e. neither more nor less - In the instant case, if the principal has already paid the Service Tax, then the same cannot be demanded from the appellant. As per the clarification of the Board s Circular dated 23-8-2007 as well as dated 7-10-1998, if the principal had not paid the Service Tax then the same can be charged. If the Service Tax has already been paid by the principal, then the same cannot be demanded again - For the purpose of computation pertaining to double taxation, the matter is remanded to the adjudicating authority - appeal allowed by way of remand.

Summary

Issues:
Classification of services under "Works Contract Services" or "Commercial or Industrial Construction" services, liability to pay Service Tax, plea of working under bona fide belief, applicability of double taxation, remand for adjudicating authority to examine cum-duty benefit.

Analysis:
The case involves a dispute regarding the classification of services provided by the appellant between "Works Contract Services" and "Commercial or Industrial Construction" services for the period from April 2005 to March 2010. The appellant contended that the services fall under "Works Contract Services" introduced from June 1, 2007, but the department classified them under "Commercial or Industrial Construction" services and demanded Service Tax, penalty, and interest. The appellant had paid Service Tax under "Commercial or Industrial Construction" services for a brief period for one project. However, the department insisted on classifying all services under "Commercial or Industrial Construction" services for the entire period, leading to the present appeal.

During the hearing, the appellant argued that they were working under a bona fide belief and cited cases to support the plea against double taxation. The Tribunal acknowledged that no double taxation is permissible under the law and referred to constitutional provisions ensuring the exact amount of tax. If the principal had already paid the Service Tax, the same cannot be demanded again from the appellant. The Tribunal highlighted the importance of the Board's Circulars in this regard and emphasized that if the principal had already settled the Service Tax, it cannot be charged again.

Ultimately, the Tribunal partly allowed the appeal by remanding the matter to the adjudicating authority for a limited purpose, specifically to examine the issue of double taxation and cum-duty benefit. The adjudicating authority was directed to verify the documents and consider the arguments related to double taxation before making a final decision. The remand was made to ensure a comprehensive review of the matter and to address the specific concerns raised by the appellant regarding double taxation and the tax already paid by the principal.