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2019 (8) TMI 323 - AT - Service TaxConstruction of Residential Complex Service - Non-payment of service tax - sub-contract - construction of residential complex for Rajkot Municipal Corporation - time limitation - HELD THAT - There is no dispute on the taxability as has been held by the Larger Bench in the case of CST, New Delhi vs. Melange Developers Pvt. Limited 2019 (6) TMI 518 - CESTAT NEW DELHI-LB that the subcontractor is independently liable to pay service tax even though service tax liability has been discharged by the main contractor - demand upheld. Time Limitation - HELD THAT - If any assessee is of the belief that being sub-contractor they are not liable to pay service tax, in the light of amendment in Circular in 2005, the assessee should have approached the department and make the position clear regarding their bonafide belief. But in the present case, the appellant did not approach the department regarding their bonafide belief nor they obtained the registration. Therefore, when the Board issued amendment in 2005, it cannot be said that the appellant entertained bonafide belief correctly. In the case of Max Tech Oil Gas Services Pvt. Limited 2016 (10) TMI 833 - CESTAT NEW DELHI , on the identical issue of taxability on sub-contractor, it was clearly held that extended period is invokable. Similarly, in the case of Sew Construction Limited 2010 (11) TMI 469 - CESTAT, NEW DELHI , the Tribunal has dealt with the liability to pay service tax by the sub-contractor and has clearly held that since registration was not sought, claim of bonafide belief cannot be accepted and demand for the extended period was maintained and penalty was also intact. Appeal dismissed - decided against appellant.
Issues Involved:
1. Liability of sub-contractor to pay service tax 2. Time limitation for demand of service tax Analysis: Issue 1: Liability of sub-contractor to pay service tax The case involved the appellant, a sub-contractor, who had constructed residential quarters for the Gujarat State Police Housing Corporation Limited (GSPHCL) and the Rajkot Municipal Corporation (RMC). The appellant had not paid service tax on the construction services provided to GSPHCL and RMC, leading to a demand raised under the category of Residential Complex Service. The appellant argued that the demand was time-barred as the show cause notice was issued beyond the normal period. The appellant contended that there was confusion regarding the liability of the sub-contractor to pay service tax, citing conflicting judgments. However, the Tribunal held that the sub-contractor is independently liable to pay service tax, even if the main contractor had discharged the liability. The Tribunal noted that after the Board Circular amendment in 2005, there was no reason for the appellant to believe that they were not liable to pay service tax. The appellant's failure to approach the department or obtain registration indicated a lack of bonafide belief in their non-liability, leading to the dismissal of the appeal. Issue 2: Time limitation for demand of service tax Regarding the time limitation for the demand of service tax, the appellant relied on judgments related to the period before the Board Circular amendment in 2005, which clarified the liability of sub-contractors to pay service tax. The Tribunal emphasized that post the amendment, the appellant should have clarified any doubts regarding their liability with the department. The Tribunal cited precedents where non-seeking of registration by sub-contractors led to the rejection of bonafide belief claims and upheld demands for the extended period. In light of these observations, the Tribunal upheld the impugned order, dismissing the appeal and maintaining the demand for service tax. In conclusion, the Tribunal affirmed the liability of the sub-contractor to pay service tax independently, even if the main contractor had discharged the liability. The Tribunal also highlighted the importance of clarifying any doubts regarding liability post the Board Circular amendment in 2005 and emphasized the significance of seeking registration to support bonafide belief claims. The judgment serves as a reminder for sub-contractors to ensure compliance with service tax obligations and seek clarity on their tax liabilities to avoid disputes and penalties.
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