2018 (3) TMI 1004 - AT - Service Tax

Refund claim - sub-contractor - whether the appellants being sub-contractors are entitled to refund of service tax paid on Construction Services used in the construction of the building for institute of Kidney Disease & Research Center, when the original contract awarded to the main contractor, M/s Malini Constructions? Held that - both the sub-contractor as well as the main contractor engaged in providing works contract service during the relevant period for carrying out the above construction work would be eligible to the exemption. The Ld. Commissioner (Appeals) upheld the rejection of refund claim on the ground that the appellants had not established the fact that they had provided works contract service to the main contractor i.e. M/s Malini Constructions during the relevant period - the fact remains to be scrutinized is whether the appellants had provided works contract service to M/s Malini Constructions, and accordingly, eligible to claim refund of service tax paid during the said period. Appeal allowed by way of remand.

Issues:
1. Eligibility of sub-contractors for refund of service tax paid on construction services.
2. Interpretation of Notification No. 25/2012-ST dated 20.06.2012.
3. Restoration of exemption under Section 102 of the Finance Act, 2016.
4. Requirement of establishing works contract service provision between sub-contractor and main contractor for refund.

Analysis:
The judgment revolves around two appeals challenging orders-in-appeal passed by the Commissioner (Appeals) of Central Excise-Ahmedabad, concerning the eligibility of sub-contractors for refund of service tax paid on construction services. The appellants, as sub-contractors of a main contractor, provided services for the construction of a building, claiming exemption under Notification No. 25/2012-ST dated 20.06.2012. However, due to an amendment in the notification, both the main contractor and sub-contractors became ineligible for the exemption, leading to the payment of service tax by the appellants during a specific period. Subsequently, a retrospective exemption was introduced under Section 102 of the Finance Act, 2016, making the service tax inapplicable for the mentioned period. The appellants filed refund claims, which were rejected, prompting the appeals before the Ld. Commissioner (Appeals) and further to the Tribunal.

The main issue addressed in the appeals was whether the sub-contractors were entitled to a refund of the service tax paid on construction services provided to the main contractor. The Tribunal analyzed the relevant provisions of Notification No. 25/2012-ST dated 20.06.2012, highlighting that both the main contractor and sub-contractors could claim exemption if engaged in works contract services for specified projects. The restoration of the exemption for the relevant period under Section 102 of the Finance Act, 2016, made the appellants eligible for a refund. However, the rejection of the refund claims was based on the failure to establish the provision of works contract services to the main contractor during the disputed period.

The arguments put forth by the appellants emphasized their compliance with works contract services by providing materials along with services, supported by documents such as ledger accounts and communication from the main contractor. Despite these evidences not being presented before the adjudicating authority, the Tribunal recognized the need for a thorough examination of whether works contract services were indeed provided to the main contractor. Consequently, the Tribunal set aside the impugned orders and allowed the appeals by remanding the matter to the Adjudicating Authority for further scrutiny and verification of the appellants' claims.

In conclusion, the judgment underscores the importance of substantiating the provision of works contract services between sub-contractors and main contractors to claim a refund of service tax paid on construction services, especially in cases involving retrospective exemptions and eligibility criteria under relevant notifications and legislative provisions.

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