2017 (9) TMI 993 - AT - Service Tax

Sub-contract - whether the sub-contractor is liable to pay service tax on the taxable service provided by it, irrespective of the fact that the main contractor had discharged the service tax liability on providing such service? - Held that - CBEC vide Circular dated 23.08.2007 has clarified that the services provided by the sub-contractor is a taxable service, even if the same is used for completion of the work by the main service provider. Thus, for providing the taxable service, the sub-contractor is liable for payment of service tax on provision of such service. Time limitation - Held that - the SCN was issued on 30.11.2011, seeking confirmation of service tax demand for the period April 2007 to September 2010. The issue of non-payment of service tax by the sub-contractor, when the same was paid by the main contractor was debatable, subject to various interpretations. Accordingly, favorably interpreting the provisions that the sub-contractor is not liable to pay service tax, the Commissioner (Appeals) has dropped the service tax demand - the respondent cannot be saddled with liability beyond the normal period of limitation - For computation of the service tax demand within the normal period of limitation, the matter remanded back to the original authority for necessary computation. Appeal allowed by way of remand.

Issues:
1. Liability of sub-contractor to pay service tax despite main contractor's payment.
2. Consideration of additional documents by the Commissioner (Appeals) in appeal proceedings.
3. Time limitation for service tax demand.
4. Applicability of extended period of limitation for non-payment of service tax.

Analysis:

Issue 1: Liability of sub-contractor to pay service tax
The Revenue appealed against the order passed by the Commissioner (Appeals) regarding the liability of the sub-contractor to pay service tax on taxable services provided, even if the main contractor had already paid the tax. The Revenue relied on a CBEC Circular stating that subcontractors are liable to pay service tax. The Tribunal noted that the Circular clarified that sub-contractors are indeed liable for service tax on services provided. The Tribunal distinguished previous cases cited by the appellant, as they were prior to the issuance of the Circular. Therefore, the Tribunal held that the sub-contractor is liable to pay service tax on the services provided.

Issue 2: Consideration of additional documents
The Commissioner (Appeals) considered additional documents related to the supply of tangible goods service, which were not submitted before the original authority. The Tribunal held that the Commissioner's consideration of these documents was not justified under Rule 5 of the Central Excise (Appeals) Rules, 2001, as they were not submitted before the adjudicating authority. Therefore, the Tribunal found merit in the Revenue's appeal regarding the consideration of additional documents.

Issue 3: Time limitation for service tax demand
The Tribunal found that part of the service tax demand confirmed against the appellant was barred by the limitation of time. The show cause notice was issued for the period April 2007 to September 2010, which the Tribunal deemed debatable due to various interpretations. The Tribunal held that the appellant cannot be held liable beyond the normal period of limitation, favorably interpreting provisions that the sub-contractor is not liable to pay service tax.

Issue 4: Applicability of extended period of limitation
Regarding the extended period of limitation for non-payment of service tax, the Tribunal noted that in a similar case, the Hon'ble Kerala High Court held that non-payment and non-filing of returns do not constitute willful suppression of facts. Therefore, the Tribunal concluded that the extended period of limitation cannot be invoked in the present case as there was no element of suppression or fraud by the appellant.

In conclusion, the Tribunal remanded the matter back to the original authority for computation of service tax demand within the normal period of limitation. Penalties were not levied on the respondents considering the circumstances of the case. The appeal was disposed of accordingly on 13.07.2017.

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