2023 (7) TMI 362 - AT - Service Tax

Levy of Service Tax on sub-contractor, when the main contractor had paid the service tax - Commercial or Industrial Construction Service - demand of service tax on the services rendered to the main contractors - applicability of trade notice 98 ST dated 14.10.1998 - Extended period of limitation - HELD THAT - The issue whether sub-contractor 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 . Further, it is found that in the case of M/S. VINOTH SHIPPING SERVICES VERSUS COMMISSIONER OF CENTRAL EXCISE SERVICE TAX, TIRUNELVELI 2021 (8) TMI 1117 - CESTAT CHENNAI where the Division Bench of the Tribunal after following the Larger Bench Decision has held 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. Thus, 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 on 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 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 - extended period cannot be invoked to demand service tax from the appellant and in the present case the entire demand is barred by limitation as the demand pertains to the year 2004-05 and 2005-06 whereas show cause notice was issued on 28.03.2009 which is completely time barred. Appeal disposed off.

Summary

Issues Involved:
1. Liability of sub-contractor to pay service tax when the main contractor has already paid.
2. Applicability of the extended period of limitation for the demand of service tax.

Summary:

1. Liability of Sub-Contractor to Pay Service Tax:
The appellant, a partnership concern registered under 'Commercial or Industrial Construction Service,' contended that as a sub-contractor, they were not liable to pay service tax since the main contractor had already discharged the tax on the entire work. They relied on trade notices and various judicial precedents supporting this view. However, the Tribunal referred to the Larger Bench decision in CST Vs. Melange Developers P. Ltd., which clarified that a sub-contractor is liable to pay service tax even if the main contractor has already paid it. The Tribunal stated, "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."

2. Applicability of Extended Period of Limitation:
The appellant argued that the demand was time-barred as the show cause notice was issued on 25.03.2009 for the period 2004-05 and 2005-06. The Tribunal considered various decisions and circulars, concluding that the extended period of limitation could not be invoked in such cases. It was noted that the issue involved interpretation of law and there was no intention to evade payment of duty. The Tribunal cited Max Logistics Ltd. Vs. Commissioner of Central Excise, Jaipur, and other cases to support this view, stating, "In the facts and circumstances of this case, we find that the demand for extended period is not sustainable."

Conclusion:
The Tribunal held that while the appellant/sub-contractor is liable to pay service tax, the demand is barred by limitation. The extended period of limitation was deemed inapplicable, and the entire demand was set aside. The appeal was allowed on the ground of limitation, providing consequential relief as per law.