2023 (8) TMI 851 - AT - Service Tax

Invocation of extended period of 5 years as per the first Proviso to Subsection(1) of Section 73 of Finance Act, 1994 - period involved in the present case is 01.11.2007 to 31.03.2011 and the show cause notice was issued after one year i.e. 07.06.2012 - Non-payment of service tax - service provided in the capacity of Sub-contractor. HELD THAT - It is found that the issue was not free from doubt and the matter was referred to the Larger Bench and due to conflicting judgments the larger bench has finally decided that in case of service provided by sub-contractor even though the main contractor have paid the service tax on total value the sub-contractor is liable to pay service tax.Since there was serious doubt about the taxability of the sub-contractor and also due to conflicting judgment, which subsequently resolved by the larger bench in the case of M/s Melange developers Pvt. Ltd 2019 (6) TMI 518 - CESTAT NEW DELHI , the bonafide belief of the appellant that they are not liability to pay service tax cannot be doubted, questioned.In such situation the extended period which can be invoked only on the ingredient such as suppuration of fact, mis-statement, fraud, collusion with intent to evade payment of Service Tax, cannot be invoked. This Tribunal has consistently taken a view that on the issue of taxability on sub-contractor the extended period cannot be invoked this has been considered in M/s. Synergy Engineers Group Pvt. Ltd. Delhi 2023 (2) TMI 478 - CESTAT NEW DELHI . Thus, it is consistently held that in the case of Service Tax liability on the sub-contractor demand for the extended period cannot be sustained in the light of the larger bench judgment in the case of M/s Melange developers Pvt. Ltd - the entire demand being issued for extended period i.e. beyond one year from the date of show cause notice shall not sustain on limitation alone. The impugned order set aside - appeal allowed.

Summary

Issues Involved:
1. Liability of sub-contractor to pay Service Tax.
2. Applicability of extended period of limitation for Service Tax demand.
3. Bona fide belief and ambiguity in law regarding Service Tax liability.

Summary:

1. Liability of Sub-contractor to Pay Service Tax:
The appellant was engaged in providing services as a sub-contractor and did not pay Service Tax, believing that the main contractor's payment covered the liability. The commissioner confirmed the demand based on Master Circular No. 96/7/2007-Service Tax, which holds sub-contractors liable for Service Tax even if the main contractor has discharged the tax on the total value.

2. Applicability of Extended Period of Limitation:
The show cause notice was issued after one year, invoking the extended period of five years under proviso to section 73(1) of the Finance Act, 1994. The appellant argued that the extended period should not apply due to the bona fide belief and ambiguity in the law, which was only settled by the larger bench in 2019. The Tribunal found that the issue was not free from doubt and had conflicting judgments, which were resolved by the larger bench in the case of M/s Melange Developers Pvt. Ltd. Therefore, the extended period could not be invoked.

3. Bona Fide Belief and Ambiguity in Law:
The appellant's belief that they were not liable to pay Service Tax was considered bona fide due to the ambiguity and conflicting decisions on the liability of sub-contractors. The Tribunal cited various judgments, including those from the Supreme Court, which held that in cases of conflicting views and bona fide doubt, the extended period of limitation could not be invoked. The Tribunal consistently held that the demand for the extended period is not sustainable in such cases.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal with consequential relief, as the entire demand was issued for the extended period, which was not sustainable due to the bona fide belief and ambiguity in the law regarding the liability of sub-contractors to pay Service Tax.