2024 (6) TMI 446 - AT - Service Tax

Classification of service - Service classifiable under the category of Information Technology Services or not - Liability to pay service tax in respect of services provided by them as sub-contractor - Extended period of limitation - penalty - Imposition of penalty under Section 76 for the period prior to 09.05.2008. Determination of the classification of the services that are sought to be taxed while the demand has been made under the category of Business Auxiliary Service - Service classifiable under the category of Information Technology Services or not - HELD THAT - Admittedly, appellant was providing these services of printing of voter electoral rolls and voter cards to various government authorities in terms of agreement entered by them with UPDESCO. The fact that these services were to be provided by UPDESCO is evident from the contract dated 29.08.2003 made between UPDESCO and the Government of Uttar Pradesh - appellant is a sub-contractor to M/s UPDESCO for providing these services. For providing these services appellant is getting 16% of the billed amount as commission and these activities of providing services on commission basis. From the above it is evident all the ingredients to classify the services rendered by the appellant to UPDESCO and UPECL contains all the element of definition of Business Auxiliary Services, particularly sub clause vi. Since the amount is in the form of commission and in planned manner, therefore, the type of work is squarely covered under Business Auxiliary Service. Service tax is a transaction based tax and liability to tax is to be determined on the basis of the transaction between the transacting party i.e. service provider and the service recipient. In the present case service provider is appellant and the service recipients are UPDESCO, UPELC etc. The services provided by the appellant to these organizations are correctly classifiable under taxable category of Business Auxiliary Services. Liability to pay service tax in respect of services provided by them as sub-contractor - Appellant has contended that as UPDESCO and UPELC are services recipients in respect of these services and they were as sub-contractor, not required to pay any service tax in respect of services provided by them as sub-contractor - HELD THAT - The said contention has been rejected by the Commissioner and the liability of sub-contractor to pay service tax even if main contractor was pas paying the service tax on the services rendered has been decided by the Larger Bench of the Tribunal in the case of Melange Developers P. Ltd. 2019 (6) TMI 518 - CESTAT NEW DELHI-LB wherein it was held that ' it is not possible to accept the contention of the Learned Counsel for the Respondent that a sub-contractor is not required to discharge Service Tax liability if the main contractor has discharged liability on the work assigned to the sub-contractor.' Extended period of limitation - penalty - HELD THAT - It needs to be verified whether the amount deposited by the appellant as claimed by them for services provided by them during the period post 01.07.2010 covers the tax due needs to be verified by the jurisdictional authorities after computing the demand for the normal period. Appellants have during the course of argument submitted the detailed chart year wise for computation of the value of services. This chart should be taken into account by the original authority for re-computing the demand the demand for normal period and apportioning the same against the payments made - the invocation of extended period of demand the penalties imposed under Section 78 of the Finance Act, 1994 cannot be upheld, as the ingredients for invoking extended period and Section 78 are identical. Imposition of penalty under Section 76 for the period prior to 09.05.2008 - HELD THAT - As it is held that the demand for this period barred by limitation, there are no merits in the appeal filed by revenue. Appeal filed by the appellant is partially allowed. Matter is remanded to the original authority for re-computing the demand for normal period of limitation as per Section 73 of the Finance Act, 1994.

Summary

Issues Involved:
1. Classification of Services
2. Liability of Sub-Contractor for Service Tax
3. Invocation of Extended Period of Limitation
4. Penalty under Section 76 and 78

Summary:

1. Classification of Services:
The primary issue was whether the services provided by the appellant-assessee should be classified under "Business Auxiliary Service" (BAS) or "Information Technology Services" (ITS). The appellant argued that their services, including printing of voter electoral rolls and voter cards, were ITS and not BAS. However, the Tribunal upheld the classification under BAS, citing that the services provided by the appellant to UPDESCO and UPELC were on a commission basis and fit the definition of BAS as per Section 65(19) of the Finance Act, 1994.

2. Liability of Sub-Contractor for Service Tax:
The appellant contended that as a sub-contractor, they were not liable to pay service tax if the main contractor (UPDESCO/UPELC) had already paid it. This argument was rejected based on the Larger Bench decision in Melange Developers P. Ltd., which clarified that sub-contractors are liable to pay service tax independently, and any tax paid can be availed as credit by the main contractor.

3. Invocation of Extended Period of Limitation:
The Tribunal found that the demand for service tax was barred by the extended period of limitation. It noted that the issue involved interpretation of law and bona fide belief regarding service tax liability. Citing the decision in Vinoth Shipping Services and other precedents, the Tribunal held that the extended period could not be invoked, and the demand should be limited to the normal period of limitation.

4. Penalty under Section 76 and 78:
The Tribunal set aside the penalties under Section 78, noting that the conditions for invoking the extended period and penalties under Section 78 are identical. Since the extended period could not be invoked, the penalties were also not sustainable. The appeal by the revenue for imposing penalty under Section 76 for the period prior to 09.05.2008 was dismissed as the demand for this period was barred by limitation.

Conclusion:
The appeal by the appellant was partially allowed, and the matter was remanded to the original authority for re-computing the demand for the normal period of limitation. The appeal by the revenue was dismissed. The original authority was directed to finalize the matter within three months of receipt of the order.