2024 (1) TMI 1214 - AT - Service Tax

Levy of service tax - services on which service recipients have discharged tax liability - main contractors have already paid the tax on their behalf - time limitation - HELD THAT - The Tribunals / Courts have been accepting tax payment by the service recipient as valid payment as the same was revenue neutral exercise till 2020, thereafter, the issue stands settled and it is service provider / sub-contractor to pay tax even if the main contractor / service recipient has discharged the tax liability on his behalf (Appellant) - this was a legal dispute which involved interpretation of law and mala-fide intention or suppression with intent to evade payment of service tax cannot be attributed to the Appellant. Extended period of limitation - HELD THAT - The Court has observed that extended period of 5 years is not invokable when there is no willful misstatement or suppression involved. Mere failure to pay duty without any collusion, fraud or willful misstatement not sufficient to invoke extended period of limitation. Thus matter was in the knowledge of the department in 2010 when the first audit was conducted and thereafter regular audit was conducted every year, but the show-cause-notice was issued in 16.10.2014 without carrying out any investigation and without adducing any new corroborative evidence for invoking any suppression in the show-cause-notice in as much as service tax was also demanded on the exempted services valued at Rs.11,67,04,375/- pertaining to construction of PMGSY roads. The impugned order holding that the extended period has been correctly invoked, therefore, cannot be sustained and is set aside. It would, in such circumstances, not be necessary to examine the issues on merits that have been raised by the learned counsel for the Appellant. Appeal allowed.

Summary

Issues involved:
The issues involved in this judgment are:
1. Whether the Appellant is required to pay Service tax on the value of services for which service recipients have already discharged tax liability on their behalf.
2. Whether the demand raised by the Revenue is barred by limitation due to regular audit inspections conducted during the disputed period.

Issue 1: Liability of tax payment by the Appellant:
The Appellant contended that they should not be liable to pay service tax on services for which main contractors have already paid tax on their behalf. The Adjudicating Authority cited Circular No.96/7/2007-ST and case laws to support the position that subcontractors are not immune from service tax liability even if main contractors have paid on their behalf. Various Tribunal and Court decisions were referenced, indicating that subcontractors are still liable to pay tax, even if main contractors have discharged the tax liability. This issue has been a subject of legal dispute, with the conclusion that the subcontractor is responsible for tax payment.

Issue 2: Applicability of extended period of limitation:
The Appellant argued that the demand was barred by limitation as they had been regularly filing ST-3 returns, audited by the Revenue, and complying with audit objections. The Adjudicating Authority did not provide evidence of willful misstatement or suppression to justify invoking the extended period of limitation. The judgment referred to Supreme Court guidelines stating that the extended period is not applicable in the absence of willful misstatement or suppression. Tribunal decisions supported the view that the Revenue should not invoke extended limitation periods when the assessee's records have been audited. The judgment concluded that the extended period was incorrectly invoked and set aside the impugned order.

Separate judgment delivered by the judges:
No separate judgment was delivered by the judges in this case.