2023 (7) TMI 260 - AT - Service Tax

Liability of Service tax - Erection, Commissioning and Installation services - appellant being a sub-contractor required to pay service tax when the main contractor has paid the service tax on the entire work - extended period of limitation - penalty - HELD THAT - The issue whether sub-contract is liable to pay service tax on the services on which the main contractor had paid the service tax, there were contrary decisions on this issue among the various benches of the Tribunal and the matter was referred to the Larger Bench and the Larger Bench has settled the issue in the case of COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. 2019 (6) TMI 518 - CESTAT NEW DELHI wherein the Larger Bench has observed 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. There are no hesitation to hold that the appellant/sub-contractor is liable to pay the Service Tax even if the main contractor has discharged the liability. The issue no merits is found against the assessee and in favour of the Department. Extended period of limitation - HELD THAT - The issue whether in such cases extended period of limitation can be invoked or not was also considered by various benches of Tribunal and in this regard the Delhi Tribunal in the case of M/S MAX LOGISTICS LIMITED VERSUS CCE, JAIPUR 2016 (9) TMI 1024 - CESTAT NEW DELHI where it was held that The service. tax liability is as such on the arrangement based on agreement which is also the basis for payment of full service tax by RSIC. In other words, the service tax liability of both RSIC and the appellant has common source agreement. As such, we find the demand for extended period is not sustainable in the present case. The appellant being sub-contractor is liable to pay service tax on Erection, Commissioning and Installation service. But, extended period cannot be invoked to demand service tax from the appellant. In the present case, the period of dispute is from October, 2004 to March 2009 and as per the appellant the demand for the period April, 2004 to September 2008 amounting to Rs. 6019732/- is beyond limitation and is not sustainable and the demand for the normal period from October,2008 to March 2009 amounting to Rs. 11,53,446/- can be upheld. Hence for the purpose of computing the demand of service tax for the normal period along with interest, the matter remanded to the original authority with the direction to do this exercise within a period of two months after receiving the certified copy of this order. Penalty - HELD THAT - The penalty cannot be imposed as there was no intention to evade payment of service tax. The appeal is partly allowed and remanded back to the original authority for determining the tax liability of the appellant for the normal period along with interest.

Summary

Issues Involved:
1. Liability of sub-contractor to pay service tax when the main contractor has already paid it.
2. Applicability of extended period of limitation for demanding service tax.
3. Imposition of penalties on the appellant.

Summary:

1. Liability of Sub-Contractor to Pay Service Tax:
The appellant argued that as a sub-contractor, they were not liable to pay service tax since the main contractor had already paid it. They cited various rulings and a trade notice to support their position. However, the Tribunal referred to the Larger Bench decision in CST vs. Melange Developers P. Ltd., which held that a sub-contractor is liable to discharge service tax on the consideration received from the main contractor. The Tribunal concluded that the appellant/sub-contractor is liable to pay the service tax even if the main contractor has discharged the liability.

2. Applicability of Extended Period of Limitation:
The appellant contended that the demand was time-barred as they were under a bona fide belief that no service tax was payable by them. The Tribunal acknowledged that there were various circulars and judicial decisions that could have led to a bona fide belief. It cited the Delhi Tribunal's decision in Max Logistics Ltd. and the Larger Bench decision in Melange Developers P. Ltd., which supported the appellant's position that the extended period of limitation could not be invoked. The Tribunal concluded that the demand for the extended period was not sustainable.

3. Imposition of Penalties:
The appellant argued that no penalty should be imposed as there was no intention to evade tax. The Tribunal agreed, noting that the issue involved interpretation of law and there was no intention to evade payment of duty. It concluded that penalties could not be imposed on the appellant.

Conclusion:
The Tribunal held that the appellant, as a sub-contractor, is liable to pay service tax but the extended period of limitation cannot be invoked. The case was remanded to the original authority to compute the demand for the normal period along with interest. Penalties were not imposed on the appellant. The appeal was partly allowed and remanded back for determining the tax liability for the normal period.