2018 (4) TMI 849 - AT - Service Tax

Works contract service - sub-contract - respondent-assessee entertained a view that in respect of these three contracts, the main contractor for whom the respondent-assessee worked as a sub-contractor, has already discharged the Service tax liability on the entire project and hence they were not required to pay any Service tax - Held that - It is on record that on the activities provided as sub-contractor to the main contractor, the main contractor has already discharged Service tax liability. Circular dated 23.08.2007, clarifies that the services provided by the sub-contractor is essentially a taxable service. Since there are two streams of decisions by various Tribunal Benches, taking opposing views on the same issue, we are of the view that the matter needs to be considered by a Larger Bench - Registry is therefore directed to place the matter before the Hon ble President for constituting Larger Bench.

Issues:
1. Whether the respondent-assessee is liable to pay Service tax under Works Contract Service (WCS) for certain contracts.
2. Whether the Adjudicating Authority erred in dropping the demand for Service tax in respect of three contracts.
3. Interpretation of Circular No. 96/7/2007-ST regarding the liability of sub-contractors to pay Service tax.
4. Applicability of case laws in determining the liability of sub-contractors to pay Service tax.
5. Whether the sub-contractor is required to pay Service tax if the main contractor has already discharged the liability.

Analysis:
1. The appeal concerns the liability of the respondent-assessee to pay Service tax under WCS for specific contracts. The Department contended that the respondent-assessee's activity falls under WCS and thus they are obligated to pay Service tax. The Adjudicating Authority dropped the demand for Service tax on the basis that the main contractor had already paid the tax. The Department challenged this decision, leading to the present appeal.

2. The Adjudicating Authority's decision to drop the demand for Service tax in relation to three contracts was contested by the Revenue. The Revenue argued that the respondent-assessee should have paid Service tax for these contracts as they fell under WCS.

3. The dispute involved the interpretation of Circular No. 96/7/2007-ST, which clarified the tax liability of sub-contractors. The Revenue contended that the circular mandated Service tax payment by sub-contractors, while the Adjudicating Authority believed that demanding tax from the respondent-assessee would result in double taxation.

4. Both parties cited various case laws to support their arguments regarding the liability of sub-contractors to pay Service tax. The Revenue referenced cases where sub-contractors were held liable, while the respondent-assessee relied on cases where sub-contractors were not required to pay tax if the main contractor had already done so.

5. After considering the arguments and case laws presented by both sides, the Tribunal noted conflicting decisions by different Benches on the issue. As a result, the matter was referred to a Larger Bench for further consideration and resolution. The Tribunal directed the Registry to place the issue before the Honorable President for the constitution of a Larger Bench to address the conflicting views on the liability of sub-contractors to pay Service tax.

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