2018 (2) TMI 788 - AT - Service Tax

Liability of tax - sub-contractor - whether the appellant who has rendered services under the category of commercial or industrial construction service as a sub contractor of M/s Paharpur Cooling Towers Ltd., as per the pleadings of the appellant, that the main contractor-Paharpur Cooling Towers Ltd., have discharged the service tax liability, whether the appellant is liable again on the same amount of turnover? Held that - the facts of this case are squarely covered by the ruling in BCC Developers and Promoters Private Ltd. 2017 (9) TMI 156 - CESTAT NEW DELHI , where it was held that If the Service Tax has already been paid by the principal, then the same cannot be demanded again. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Liability of the appellant for service tax on turnover as a subcontractor.
2. Applicability of double taxation in the case.
3. Interpretation of relevant legal provisions and circulars.

Analysis:
1. The primary issue in this appeal before the Appellate Tribunal CESTAT, ALLAHABAD was whether the appellant, a subcontractor providing services under 'commercial or industrial construction service,' was liable to pay service tax on the turnover despite the main contractor having already discharged the service tax liability. The appellant contended that the main contractor had fulfilled the tax obligation, thus absolving the appellant from further liability.

2. The Tribunal examined the facts where the appellant, a proprietorship firm, had undertaken subcontracted work from M/s Paharpur Cooling Towers Ltd. for services in 'maintenance and repairs' and 'commercial or industrial construction' during 2009-10 to 2012-13. While the appellant paid service tax for maintenance services, the dispute arose concerning the construction services. The Adjudicating Authority held the appellant liable for service tax on the turnover under commercial construction, imposing penalties as well.

3. The appellant relied on a certificate from the main contractor and cited a precedent involving similar circumstances to support their claim of no double taxation. Referring to the BCC Developers case, the Tribunal emphasized that if the principal contractor had already paid the service tax, the subcontractor should not be subjected to additional taxation. Citing constitutional provisions and circulars, the Tribunal concluded that demanding tax again from the subcontractor, when already paid by the principal, was impermissible.

4. Based on the precedent and the facts presented, the Tribunal ruled in favor of the appellant, setting aside all penalties imposed and granting consequential benefits. The Tribunal highlighted that the case was akin to the BCC Developers ruling, thus absolving the appellant from the additional tax liability. The Miscellaneous Application was also disposed of in favor of the appellant.

5. However, the Tribunal granted the Commissioner the liberty to verify if the principal contractor had indeed paid the service tax, ensuring compliance with tax obligations. This provision aimed at safeguarding against any potential discrepancies in tax payments by the principal contractor, thereby upholding the integrity of the tax system.