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2023 (5) TMI 811 - AT - Service TaxPartial Reverse Charge Mechanism - Requirement to pay the balance 50% of service tax as recipient of service in terms of N/N. 30/2012 ST. dated 20/06/2012 - contract for construction of a multi-storied building for the bank purpose to Tripura Housing and Construction Board, Agartala (THCB) - HELD THAT - As per section 68(1) the Service Tax liability dwells upon the person, providing the taxable service. However, in terms of Notification No. 30/ 12-ST, dated 30.6.12, this liability is divided equally between the service provider and the service recipient - each sharing 50% tax payable. The following facts distinctly emerge in the matter 1. TSCBL awards contract for construction of a multi-storeyed building to THCB for a consideration of Rs.45600000. The service recipient is TSCBL from THCB. 2. THCB engages M/s Dipak Paul, for the construction of the said building for a consideration of Rs.4,0616850.00.- herein the service provider is M/s Dipak Paul, while the service recipient is THCB 3. M/s Dipak Paul upon completion of the building hands it over to THCB.- thus M/s Dipak Paul provider of works contract service to THCB. 4. TSCBL releases entire funds and takes over the possession of the building from THCB. Under the circumstances no liability by way of RCM is accruable upon TSCBL, the appellant with regard to the aforesaid services rendered by M/s Dipak Paul. M/s Dipak Paul has provided the services to THCB who as per law can avail credit of tax paid by M/s Dipak Paul, as input service credit-who and was required to discharge the service tax liability. No show cause notice therefore merits issuance to the appellant herein as they are not recipient of service directly from M/s Dipak Paul. As there exist, no relationship between TSCBL and M/s Dipak Paul as a service receiver and a service provider for the impugned works order. No liability accrues upon the noticee to pay Service Tax. Therefore the order of the Learned Commissioner (Appeals) cannot be sustained and is therefore set aside. The appeal filed by TSCBL is allowed.
Issues Involved:
1. Determination of Service Tax Liability under Reverse Charge Mechanism (RCM). 2. Relationship between the parties involved and their respective service tax liabilities. 3. Validity of the Show Cause Notice issued to the appellant. Summary: Issue 1: Determination of Service Tax Liability under Reverse Charge Mechanism (RCM) The Tripura State Cooperative Bank Ltd (TSCBL) awarded a contract for constructing a multi-storied building to Tripura Housing and Construction Board (THCB) for Rs. 4,56,00,000/-. THCB subcontracted the construction to Shri Dipak Paul for Rs. 4,06,16,850/-. The service tax liability on this amount was Rs. 19,13,494/-, with 50% to be paid by the service provider (Dipak Paul) and 50% by the service receiver. Dipak Paul discharged his liability of Rs. 10,21,525/-. Issue 2: Relationship between the parties involved and their respective service tax liabilities The Commissioner (Appeals) held TSCBL liable for the remaining service tax, considering them as the end user/beneficiary of the service. However, it was observed that the services were directly provided by Dipak Paul to THCB, not to TSCBL. As per the law, the credit of tax paid by the works contractor (Dipak Paul) can be discharged by the recipient of the service (THCB). TSCBL did not engage Dipak Paul directly, and thus, no service receiver-provider relationship existed between them. Issue 3: Validity of the Show Cause Notice issued to the appellant The Tribunal noted that no show cause notice was issued to THCB for the differential payment of tax. The liability under RCM was between THCB and Dipak Paul. Since TSCBL did not receive any service directly from Dipak Paul, no liability could accrue to them under RCM. Consequently, the show cause notice issued to TSCBL was deemed invalid. Conclusion: The Tribunal concluded that TSCBL was not liable to pay the service tax under RCM for the services rendered by Dipak Paul to THCB. The order of the Commissioner (Appeals) was set aside, and the appeal filed by TSCBL was allowed. (Dictated and pronounced in the open court on 18.05.2023)
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