2018 (8) TMI 17 - AT - Service Tax

Refund of tax paid by sub-contractor - case of appellant is that the main contractor had paid the tax, thus, sub-contractor applied for refund claim for the tax paid by him on same service as it amounted to double payment of tax - refund rejected on the ground that the respondent did not produce any documentary evidence to show that they were in fact the sub-contractor of the work, ultimately executed by the main contractor, M/s Devi Constructions - Held that - For providing the same taxable service viz. Commercial and Industrial Construction Service, only one party was liable to pay service tax. Since both the parties had discharged the service tax liability for the some work, tax amount paid twice, cannot be retained by the Government, as the legitimate due; and on claim of one tax as refund by either of the person, the same should have been refunded. Thus, the service tax paid by the respondent should be eligible for the refund benefit. It is also found that the respondent had enclosed copy of invoices, showing payment of VAT/ Sales Tax on the material component, used for providing the works contract service. Since works contract service was specifically brought into tax net only with effect from 01.06.2007, the respondent should not be liable to pay service tax under the taxable category of Commercial or Industrial Construction Service prior to such date Refund cannot be denied - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Liability of service provider to pay service tax under Commercial or Industrial Construction Service.
2. Double payment of service tax by main contractor and subcontractor.
3. Eligibility of refund claim for service tax paid.
4. Interpretation of works contract service liability as per Supreme Court judgment.

Analysis:
1. The case involved a dispute regarding the liability of the respondent, a service provider registered under the category of "Commercial or Industrial Construction Service," to pay service tax. The respondent, a subcontractor, had discharged the service tax liability for work subcontracted from the main contractor, who had also paid the service tax. The main issue was whether the respondent was absolved from its statutory liability for service tax payment due to the main contractor's payment.

2. The Revenue contended that the respondent, as a service provider, was still liable to pay service tax despite the main contractor's payment. They relied on Circular No. 96/7/2008-ST to support their argument. However, the respondent argued that since both parties had paid tax for the same service, either the main contractor or the subcontractor should be eligible for a refund. The respondent further claimed that the activity undertaken was a composite one falling under works contract service.

3. The Tribunal found that both the main contractor and the respondent had paid service tax for the same taxable service. As the main contractor did not provide any additional taxable service, only one party should be liable for service tax. Therefore, the tax paid twice should be refunded to one of the parties. The Tribunal rejected Revenue's argument that the tax paid by the respondent should be eligible as CENVAT Credit to the main contractor, as the clarification was issued after the period in dispute. The respondent's claim for refund was supported by the invoices showing payment of VAT/Sales Tax on the material component used for the works contract service.

4. The Tribunal also considered the judgment of the Hon'ble Supreme Court in the case of Commissioner of Central Excise, Kerala vs. Larsen & Toubro, which stated that the liability to pay service tax under works contract service should commence from 01.06.2007. Since the respondent's liability was for the period 2006-07, they should not be liable to pay service tax under the Commercial or Industrial Construction Service category before that date. Therefore, the respondent was entitled to the refund benefit based on this ground as well.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the appeal filed by Revenue, ruling in favor of the respondent's entitlement to the refund of service tax paid.