2020 (1) TMI 102 - AT - Service Tax

Extended period of limitation - validity of SCN - works contract service - works order received from the main contractor, and as per the terms of the contract, the main contractor has discharged the service tax liability - liability of appellant to discharge service tax - HELD THAT - The issue as regards the liability of sub-contractor, where the main contractor has discharged the service tax liability, being the bone of contention, there were divergent views taken by the different benches of this Tribunal. Finally, the said issue, referred to the Larger Bench, in the case of Milenge Developers Pvt. Ltd. 2019 (6) TMI 518 - CESTAT NEW DELHI-LB was got decided in the year 2019, where it was held that A sub-contractor would be liable to pay Service Tax even if the main contractor has discharged Service Tax liability on the activity undertaken by the sub-contractor in pursuance of the contract. Invocation of extended period of limitation - HELD THAT - The element of suppression, fraud, etc. are not made out against the assessee and as such, the extended period of limitation is not available to the Revenue. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the show cause notice invoking the extended period of limitation was rightly issued.
2. Whether the appellant is liable to pay service tax in the matter of works contract when the main contractor has already discharged the service tax liability.

Analysis:

Issue 1:
The appellant, a registered service tax payer, was asked for TDS details by the Revenue during a routine inquiry. It was discovered that the appellant had not paid service tax on the turnover achieved through the main contractor, M/s. Aren Roch Tech Pvt. Ltd. The Revenue alleged that the appellant deliberately evaded legitimate service tax payment by not reflecting the amount in their return, resulting in suppression of facts. A show cause notice was issued for the extended period, demanding service tax payment with interest and penalties.

Issue 2:
The appellant contended that the main contractor had already paid the service tax liability, citing rulings of the Tribunal that a sub-contractor should not be taxed if the principal contractor has discharged the liability. The Asstt. Commissioner confirmed the demand, imposing penalties. The Commissioner (Appeals) upheld the decision. The appellant argued that there were conflicting judgments on the liability of a sub-contractor when the main contractor has paid the service tax, highlighting a case pending before the Bombay High Court. The appellant also mentioned a debatable issue decided by the Larger Bench of the Tribunal in 2019, indicating that the element of suppression was not established.

Conclusion:
The Tribunal found that the issue of sub-contractor liability when the main contractor has paid the service tax was contentious, with divergent views among different benches. Considering the lack of evidence of suppression or fraud against the appellant, the Tribunal concluded that the extended period of limitation was not applicable. Therefore, the appeal was allowed, and the impugned order was set aside, granting the appellant consequential benefits as per the law.