2018 (6) TMI 805 - AT - Service Tax

Construction Services - Sub-contract - The revenue has carried out an investigation and it was revealed that the respondent had belatedly filed ST-3 return for the period 2005- 06 to 2009-10, the payment of service tax too was made after considerable delay along with interest - Held that - the sub-contractor is independent service provider, the service provided by the sub-contractor is an input service for the respondent and when such service is billed by the respondent to their client the respondent comes into the shoes of service provider and his service even though it is received from the sub-contractor, shall be treated as fresh output service according to that sub-contractor as well as the respondent being main contractor are independently liable for payment of service tax - the matter needs to be remanded to Adjudicating Authority as whether demand can be dropped on the ground of revenue neutrality. Penalty u/s 76 77, and 78 - Held that - From the plain reading of above section 80 it can be seen that the penalty can be waived under section 80 only in those case where there is sufficient cause for non payment of service tax. The section 80 does not provided wavier of penalty only when Service Tax is paid before issuance of Show Cause Notice therefore for waiver of penalty some more circumstances need to be looked into - the issue needs to be reconsidered. Appeal allowed by way of remand.

Summary

Issues:
1. Delayed filing of ST-3 return and payment of service tax.
2. Discrepancy between amount shown in Balance Sheet and ST-3 return.
3. Show Cause Notice issued for demand of service tax, interest, and penalties.
4. Adjudication confirming service tax demand and appropriating payments.
5. Appeal by revenue seeking confirmation of service tax demand and penalties.
6. Arguments regarding service tax liability on sub-contractor services.
7. Arguments regarding penalty imposition.
8. Tribunal's decision on service tax liability and penalty imposition.

Analysis:
1. The case involved the respondent engaged in plumbing and fire fighting equipment installation services, facing issues of delayed filing of ST-3 return and payment of service tax, with a substantial amount paid after the due date. Discrepancies were found between the amounts in the Balance Sheet and ST-3 return, leading to a Show Cause Notice for a significant demand, interest, and penalties.

2. The adjudication by the Ld. Commissioner confirmed a portion of the service tax demand, appropriated payments made, and dropped certain demands and penalties. The revenue appealed seeking confirmation of the remaining service tax demand and penalties, specifically focusing on the service tax related to sub-contractor services.

3. The revenue argued that the service tax demand related to services provided by the sub-contractor should be borne by the respondent, emphasizing the independent liability of both parties for service tax payment. They cited legal precedents and circulars to support their stance on revenue neutrality and penalty imposition post-enquiry initiation.

4. In response, the respondent contended that demanding service tax on sub-contractor services would lead to double taxation, highlighting their entitlement to Cenvat Credit and emphasizing the absence of cash payment due to revenue neutrality. They also defended the dropped penalties, citing timely payment before the Show Cause Notice.

5. The Tribunal analyzed the service tax liability issue, rejecting the Commissioner's stance on sub-contractor payment absolving the main contractor from service tax obligations. They emphasized the need for Cenvat Credit verification for revenue neutrality determination, remanding the matter for further assessment.

6. Regarding penalties, the Tribunal noted that the Commissioner's waiver based on pre-notice payment was insufficient under Section 80 of the Finance Act, requiring consideration of reasonable cause for non-payment. The Tribunal remanded the penalty imposition decision to the Adjudicating Authority for a fresh order, allowing the revenue's appeal on this aspect.

In conclusion, the Tribunal's decision involved remanding the service tax liability issue for further assessment and reconsidering penalty imposition based on reasonable cause, ensuring a comprehensive review of the case.