2020 (6) TMI 419 - AT - Service Tax

Commercial or industrial construction service - service tax liability of the sub-contractor - mis-statement of facts or not - extended period of limitation - HELD THAT - The matter stands decided on merit in favour of the Department vide the decision of this Tribunal s Larger Bench in the case of COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. 2019 (6) TMI 518 - CESTAT NEW DELHI herein it has been held that in the scheme of service tax the every individual service provider need to discharge his service tax liability and since the scheme of Cenvat credit is very much available to all the service provider as per the chain of events, the credit of the service tax paid by the sub-contractor can be availed by the principal service provider. Extended period of limitation - HELD THAT - Since the issue has been under dispute and there have been several interpretation regarding the service tax liability of the sub-contractor where the main contractor has paid the service tax on the entire value of the service. It cannot be alleged that there have been element of fraud, collusion, willful mis-statement or suppression of acts with an intent to evade service tax, the demand in such circumstances can only be confirmed for the normal period of demand as provided under Section 73 (1) of the Finance Act, 1994. Insofar as the demand of the service tax on merit is concerned, the appeal of the appellant is dismissed, however, the period of demand need to be restricted on the normal period of demand as per the Section 73 (1) of the Finance Act, 1994 - appeal allowed in part.

Summary

Issues:
1. Taxability of service tax on subcontractors.
2. Invocation of extended time proviso under Section 73(1) of the Finance Act, 1994.

Issue 1: Taxability of service tax on subcontractors:
The case involved the appellants providing commercial or industrial construction services, which are taxable under Section 65(105)(zzq) of the Finance Act, 1994. The Department detected that the appellants provided taxable services to a company as a subcontractor without registration or payment of service tax. The Department issued a show cause notice, resulting in a service tax demand confirmed under Section 73(1) of the Act, along with penalties. The appellants appealed, arguing contradictory judgments on subcontractor taxability. The Tribunal's Larger Bench decision in the case of Melange Developers Pvt. Ltd. held that every service provider must discharge service tax liability, dismissing the appellant's appeal on merit. However, the Tribunal considered the absence of elements like fraud or intent to evade tax, limiting the demand to the normal period under Section 73(1) of the Act. The decision was supported by the High Court's judgment in Commissioner of Central Excise v. Wonderax Laboratories (I) Pvt. Ltd.

Issue 2: Invocation of extended time proviso under Section 73(1) of the Finance Act, 1994:
The appellants argued against invoking the extended time proviso, citing their belief that the principal service provider's tax discharge exempted them from paying service tax. The Tribunal noted that despite the dismissal of the appeal on merit, due to conflicting interpretations on subcontractor taxability, the demand couldn't allege fraud or intent to evade tax. Relying on judicial precedents, including the case of Adhikrut Jabti Evam Vasuli v. Commissioner of Central Excise, Indore, the Tribunal concluded that in cases of genuine doubt due to legal interpretation, the extended time proviso cannot be sustained. Thus, the demand was restricted to the normal period under Section 73(1) of the Act, partially allowing the appeal.

In conclusion, the Tribunal upheld the taxability of service tax on subcontractors based on the Larger Bench decision, dismissed the appeal on merit, but limited the demand period due to the absence of fraudulent intent. The judgment emphasized the importance of legal interpretation and bona fide beliefs in tax disputes, providing relief to the appellants in this case.