2018 (7) TMI 1389 - AT - Service Tax

Works contract - Commercial or Industrial Construction Service - demand of service tax on two on-going projects which had been carried out from the period July 2006 to September 2009 - Held that - Part of the demand would fall prior to 1.6.207 being works contract service and hit by the decision in the case of Larsen & Toubro 2015 (8) TMI 749 - SUPREME COURT . Demand of service tax - sub-contractor - The demand is made against the appellant merely alleging that he is the main contractor and although the contractor has discharged the service tax, it is only the sub-contractor and therefore the appellant is liable to pay service tax - Held that - There is no merit in this allegation of the department - The construction services had already suffered service tax as the contractor who is engaged in the construction of building/complex has discharged service tax. Further, the circular also makes it clear that when a contractor is engaged in construction of residential complex, the liability is on the contractor to pay the service tax - The Tribunal in the case of Logos Construction Pvt. Ltd. Vs. Commissioner of Central Excise, Chennai 2018 (6) TMI 1361 - CESTAT CHENNAI had occasion to consider a similar issue and has held that the demand cannot sustain. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of service tax on on-going construction projects from July 2006 to September 2009; Applicability of service tax prior to 1.6.2007 under works contract service; Liability of developer/promoter vs. contractor for payment of service tax.

Analysis:
1. The case involved a demand for service tax on two on-going construction projects carried out from July 2006 to September 2009. The appellant argued that the demand prior to 1.6.2007, falling under works contract service, could not be sustained based on a Supreme Court judgment. The appellant contended that as a developer/promoter, they were not liable to pay service tax as the contractor had already discharged it. The Circular dated 1.8.2006 clarified that the liability to pay service tax lies with the contractor engaged in construction activities.

2. The Tribunal analyzed the issue and found that the demand could not be upheld. It was noted that the construction services had already incurred service tax as the contractor involved in the projects had paid the tax. The department's claim that the appellant, as the main contractor, was still liable for service tax despite the contractor's payment was deemed meritless. Reference was made to a previous case where a similar issue was considered, leading to the conclusion that the demand against the appellant could not be sustained.

3. Based on the discussion and analysis, the Tribunal concluded that the demand for service tax could not be upheld. The impugned order was set aside, and the appeal was allowed with any consequential relief. The decision highlighted the distinction between the roles of developer/promoter and contractor in terms of service tax liability, ultimately ruling in favor of the appellant.

This detailed analysis of the judgment covers the issues raised, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision in favor of the appellant.