2023 (4) TMI 1023 - AT - Service Tax

Levy of Service Tax - sub-contractor - non-inclusion of value of services rendered by their sub-contractors - Board Circular in F. No. B/11/1/2002-TRU dated 01.08.2002 - suppression of facts or not - Extended period of limitation - HELD THAT - Though the appellant, as a sub-contractor, was duty bound to discharge the tax liability, perhaps the communication dated 12.07.07 issued by the main contractor i.e., M/s. Aspinwall Co., prompted them to believe that the tax had indeed been remitted. The villain appears to be M/s. Aspinwall Co. who misled the appellant or made the appellant believe that it had remitted tax and in turn, made the appellant rely on the letter dated 12.07.07 issued by it in response to Show Cause Notice issued by the Department. This is a sufficient reason and other than this, there are no documents being brought out on record by the Revenue to prove mala fides on the part of this appellant, so as to justify invoking the larger period of limitation in this case. It is also a fact borne on record that the main contractor has not denied the fact of having collected full consideration including Service Tax from the clients. On a similar set of facts, in the case of another sub-contractor viz. M/s. Vinoth Shipping Services 2021 (8) TMI 1117 - CESTAT CHENNAI , it is found that the Chennai Bench of the CESTAT has given a finding that there was no factual basis for invoking the extended period, though declining to entertain the appeal on merits, but allowing the assessee s contention on invoking of the extended period of limitation - the fact of suppression, etc., has not been established by the Revenue to justify invoking the extended period of limitation and therefore, in view of our discussions in the above paragraphs, the ratio of the order of this Bench in the case of M/s. Vinoth Shipping Services, wherein the order of the Larger Bench in M/s. Melange Developers Pvt. Ltd. 2019 (6) TMI 518 - CESTAT NEW DELHI was followed, squarely applies here too. For these reasons, the impugned order, to this extent, cannot sustain. The appeal fails on merits, but however, the demand pertaining to the larger period, if any, cannot sustain and consequently, the impugned order, to this extent, is set aside - Appeal allowed on limitation.

Summary

Issues involved:
The issues involved in the judgment are:
1. Whether the demand of Service Tax in the case of the appellant, who is a sub-contractor, is justified.
2. Whether the Revenue is justified in demanding the above Service Tax by invoking the extended period of limitation.

Issue 1:
The appellant, a Customs House Agent, rendered services of loading, unloading, and transport of imported Potash as a sub-contractor. The Revenue alleged that the appellant had not paid applicable Service Tax for these services, leading to the issuance of a Show Cause Notice. The Adjudication Authority confirmed the demands, which the appellant challenged in appeal. The main contention was whether the main contractor's payment of Service Tax absolved the sub-contractor from liability. The Tribunal analyzed the main contractor's reply and found that the appellant was misled to believe that the tax had been remitted. The Tribunal held that the sub-contractor was duty-bound to discharge the tax liability but found no evidence of mala fides to justify invoking the extended period of limitation. The Tribunal referred to previous cases and concluded that the demand for the larger period could not be sustained.

Issue 2:
The appellant argued that the extended period of limitation could not be invoked against a sub-contractor based on previous judgments. The appellant relied on a Circular clarifying the liability of sub-contractors to pay Service Tax. The Tribunal referred to a Larger Bench order which held that a sub-contractor is liable to pay Service Tax even if the main contractor has discharged the liability. The Tribunal found that the Revenue failed to establish suppression or mala fides to justify invoking the extended period of limitation. Therefore, the Tribunal held that the demand for the larger period could not be sustained. The appeal was allowed on the grounds of limitation, and the penalties imposed were set aside.

*(Order pronounced in the open court on 24.04.2023)*