2018 (1) TMI 1017 - AT - Service Tax

Business Auxiliary Services - liability to tax - case of appellant is that no service tax liability would fall upon them, inasmuch as no service activity was undertaken by them and the entire contract was further contracted to M/s Ram Lalloo Civil Construction who might have paid the service tax - Held that - the said does not stand examined by the lower authorities - Inasmuch as there is no clear finding of the lower authorities on the said issue, it is deemed fit to set aside the impugned order and matter remanded to the Original Adjudicating Authority for examination of the said plea of the appellant - appeal allowed by way of remand.

Summary

Issues:
1. Confirmation of service tax demand against the appellant for providing 'Business Auxiliary Services' to a Thermal Power Station.
2. Appellant's contention of not directly carrying out the contract and assigning it to a subcontractor.
3. Lack of examination by lower authorities regarding subcontracting arrangement and service tax liability.
4. Appellant's argument that service tax liability should fall on the subcontractor.
5. Need for a clear finding on the service tax liability before determining if the activity amounts to manufacturing.

Analysis:
The judgment by the Appellate Tribunal CESTAT ALLAHABAD addressed the issue of confirming a service tax demand against the appellant for providing 'Business Auxiliary Services' to a Thermal Power Station. The appellant argued that they did not directly execute the contract but subcontracted it to M/s Ram Lalloo Civil Construction. They contended that the subcontractor should bear the service tax liability as they performed the services. However, the lower authorities did not thoroughly examine this aspect, basing their decision on the appellant's alternative submission regarding the nature of the activity as manufacturing rather than service provision.

The Tribunal noted that the lower authorities failed to assess whether the subcontracting arrangement absolved the appellant of service tax liability. As per the appellant's argument, if M/s Ram Lalloo Civil Construction conducted the services without the appellant's direct involvement, the service tax responsibility should rest with the subcontractor. Since the lower authorities did not provide a clear determination on this crucial issue, the Tribunal decided to set aside the previous order and remand the case to the Original Adjudicating Authority for a detailed examination of the appellant's plea.

The judgment emphasized the necessity of establishing the party responsible for the service tax liability before delving into whether the activity amounted to manufacturing. The Tribunal's decision to remand the matter aimed to ensure a proper evaluation of the subcontracting arrangement and the consequent service tax obligations. Ultimately, the appeal was allowed for remand, highlighting the importance of a comprehensive analysis of the service tax liability in such contractual arrangements to uphold procedural fairness and legal clarity.