2021 (12) TMI 1268 - AT - Service Tax

Work contract service - the appellant has received the amount towards the provisions of said services from their service receiver but have not paid the Service Tax on such taxable receipts - extended period of limitation - HELD THAT - There is no dispute about the fact that the amount of Service Tax for the amount of consideration received by the appellant stand already paid with the Government exchequer, however by the main contractor M/s. Gannon Dunkerley and Co. Ltd. There is also no denial to the fact that during the period there were several pronouncements made not only by this Tribunal but even by the departmental adjudicating authority holding that the sub-contractor is not liable to pay the Service Tax when the main contractor has paid the said Service Tax. The facts of the case are sufficient to hold that there was no clarity about the individual liability of the sub contractor towards the payment of service tax. Even the Department was not clear on the interpretation of the circulars issued, judgements made and practice followed on sub contractors liability. As such in the case where the main contractor had discharged the Service Tax on entire value of service. These findings are sufficient for me to hold that there cannot be any intentional conduct of the appellant to not to pay the service tax during 2013-14. Alleging fraud mis-statement or suppression of facts upon the appellant in view of prevalent situation is opined to be definite error on part of the Adjudicating Authority below. The onus was otherwise on the Department to prove that short payment of service tax has been made with intent to evade such payment. Apparently and admittedly in the present case the service tax stands already paid with respect to the amount involved in the present appeal, i.e. the amount of consideration received by the appellant/ sub contractor for providing works contract services to main Contractor M/s. Gannon Dunkerley Co. Ltd. The question of any positive evidence proving evasion does not at all arise. The impugned show cause notice is held to be barred by limitation - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Service Tax liability of sub contractor
2. Extended period of limitation for Show Cause Notice

Issue 1: Service Tax liability of sub contractor
The case involves the appellant providing taxable services on a work contract basis to M/s. Gannon Dunkerley and Co. Ltd. The Department alleged non-payment of Service Tax amounting to &8377; 6,322,147 during the period of 2013-14. The Original Adjudication Authority rejected the proposal, stating that the law does not differentiate between the contractor and sub contractor regarding Service Tax liability. However, the Department's appeal was allowed by the Order-in-Appeal, holding the appellant liable despite the main contractor having paid the Service Tax. The appellant contended that the Show Cause Notice was time-barred as it was issued in 2018 for the period from 2013-14, invoking the extended 5-year limitation period. The appellant argued that there was confusion in the industry regarding the sub contractor's liability, citing the decision of a Larger Bench clarifying the sub contractor's individual liability for Service Tax payment. The Tribunal held that the sub contractor's liability was unclear during the period in question, and since the main contractor had already paid the Service Tax, there was no intentional evasion by the appellant. The Tribunal referred to previous decisions and concluded that the Show Cause Notice was barred by limitation, setting it aside and allowing the appeal.

Issue 2: Extended period of limitation for Show Cause Notice
The Tribunal examined whether the extended period of limitation could be invoked for the Show Cause Notice issued to the appellant. The appellant argued that there was no wilful intention to avoid Service Tax payment, given the industry confusion and previous decisions supporting the sub contractor's non-liability when the main contractor had paid. The Tribunal noted that the Department had failed to prove any intentional evasion by the appellant and cited a precedent where the extended period of limitation could not be invoked if there was a genuine belief of no liability or conflicting court views on the issue. The Tribunal concluded that the Show Cause Notice was indeed barred by limitation, as the appellant had already paid the Service Tax amount received for providing services to the main contractor. Therefore, the demand raised by the Show Cause Notice was deemed unsustainable, and the order under challenge was set aside, allowing the appeal.

This detailed analysis of the judgment highlights the key issues of Service Tax liability of the sub contractor and the extended period of limitation for the Show Cause Notice, providing a comprehensive overview of the legal reasoning and conclusions reached by the Tribunal.