2024 (4) TMI 906 - AT - Service Tax

Liability of sub-contractor to pay service tax - main contractor discharges tax on the gross value - Extended period of limitation - suppression of facts or not - penalties - HELD THAT - After issue of the Circular No. 96/7/2007-S.T. dated 23.08.2007, there is no ambiguity regarding the liability of a sub-contractor to pay Service Tax even in cases where the main contractor pays Service Tax on the gross value. The demand involved in this Notice pertains to the period from 2007-08 to 2011-12 i.e., after the issue of the Circular mentioned hereinabove. Thus, the submission of the appellant that they were not aware of the liability to Service Tax as a sub-contractor, is not agreed upon. The Larger Bench of the Tribunal in the case of Commissioner of Service Tax v. M/s. Melange Developers Pvt. Ltd. 2019 (6) TMI 518 - CESTAT NEW DELHI-LB has decided that even when the main contractor has discharged Service Tax, the sub-contractor is required to pay Service. In view of the decision of the Larger Bench and by relying on the Board Circular, it is held that the sub-contractor is liable to pay Service Tax even if the main contractor pays Service Tax on the gross value of the services. Extended period of limitation - suppression of facts or not - penalties - HELD THAT - The appellant has been filing their returns regularly, thereby intimating the liability to Service Tax. Thus, no suppression of facts with intention to evade payment of tax exists in this case - the extended period of limitation cannot be invoked against the appellant. For the same reason, the penalties imposed on the appellant are set aside. Appeal disposed off.

Summary

Issues involved:
The issues involved in the judgment are the liability of a sub-contractor to pay Service Tax even if the main contractor has paid tax on the gross value, and whether the demand raised is barred by limitation.

Liability of Sub-Contractor to Pay Service Tax:
The appellant, a proprietorship firm, contended that they were not liable to pay Service Tax as the main contractor had already paid it on the entire value of the transaction. However, Circular No. 96/7/2007-S.T. clarified that a sub-contractor is liable to pay Service Tax regardless of whether the main contractor has paid tax on the gross value. The Tribunal cited precedents, including a decision by a Larger Bench, emphasizing the sub-contractor's obligation to pay tax. Consequently, the Tribunal held that the sub-contractor is indeed liable to pay Service Tax even if the main contractor has discharged the tax on the whole contract value.

Limitation of Time:
The appellant argued that the demand raised was beyond the normal period of limitation, and thus, should be set aside. The Tribunal noted that the appellant had regularly filed returns, indicating no intention to evade tax. Since there was no evidence of suppression of facts by the appellant, the extended period of limitation could not be invoked. Therefore, the Tribunal ruled that the demand was barred by limitation, and the penalties imposed on the appellant were set aside.

Conclusion:
The Tribunal set aside the demand of Service Tax raised by invoking the extended period of limitation, holding the appellant liable to pay the tax for the normal period along with interest. The penalties imposed on the appellant were also set aside. The appeal was disposed of accordingly.