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2024 (6) TMI 768 - AT - Service TaxLiability of sub-contractor to pay service tax - main contractor had paid the service tax - Exemption as per the Notification No. 25/2012-ST dated 20.06.2012. Liability of sub-contractor to pay service tax - HELD THAT - The issue whether the appellant being a sub-contractor is liable to pay service tax when the main contractor has discharged the total tax liability was referred to the Larger Bench of the Tribunal in COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. 2019 (6) TMI 518 - CESTAT NEW DELHI-LB and the reference was answered that 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 subcontractor in person of the contract. It is found that the agreement submitted by the appellant states that, sure service tax paid by you on the work carried out for us will be reimbursed subject to production/ submission of challan for the service tax paid on the work carried. The terms of the agreement clearly negates the submission of the appellant that the main contractor has paid the duty. In terms of the agreement, the appellant was required to discharge the service tax liability, which was then to be reimbursed by the main contractor. Hence, the appellant is required to discharge the duty liability. No further details have been submitted by the appellant in respect to the payments made or received under the agreement. In absence of the details, the authorities below rightly concluded that it cannot be ascertained that the payments received by the appellant from the main contractor are in respect of works carried out with material and hence the department was justified in resorting to Best Judgement Assessment as per section 72 of the Act on the basis of the limited information available with them. The appellant is engaged in providing the services of Plaster of Paris to M/s Tirath Ram Ahuja Pvt Ltd. for consideration and, therefore, the activity is covered as service under the pre-negative list as well as during the negative list era under section 65 (25b)(c). The adjudicating authority rightly negated the contention of the appellant that the service tax has been deposited by the service recipient and hence they are not liable to pay the same. Exemption as per the Notification No. 25/2012-ST dated 20.06.2012 - HELD THAT - The appellant is not entitled to claim the exemption under the said notification as it speaks services by and not services to . The appellant had not deposited the service tax although they were liable to pay during the relevant period and, therefore, the liability to pay interest which is mandatory in nature accrues - The penalty imposed under sections 76 and 77 of the Act and sections needs no interference as the appellant has failed to pay the service tax and has thereby contravened the provisions of section 66 of the Act. Appeal dismissed.
Issues:
1. Whether service tax can be demanded from a sub-contractor when the main contractor has paid the tax. 2. Applicability of Best Judgement Assessment under section 72 of the Act. 3. Liability of a sub-contractor to pay service tax. 4. Interpretation of the agreement between the appellant and the main contractor. 5. Applicability of service tax provisions to Commercial or Industrial Construction Services. 6. Exemption under Notification No. 25/2012-ST dated 20.06.2012. 7. Liability for interest and penalties for non-payment of service tax. Detailed Analysis: 1. The appellant, a sub-contractor, challenged the demand for service tax on services rendered, arguing that the main contractor had already paid the tax. The Tribunal affirmed that a sub-contractor is liable to pay service tax, even if the main contractor has paid. The appellant failed to register, file returns, or provide records, leading to Best Judgement Assessment under section 72. 2. The agreement between the appellant and the main contractor stated that the appellant was required to discharge the service tax liability, which would be reimbursed by the main contractor. Lack of details on payments made or received led to Best Judgement Assessment by the authorities, as per section 72 of the Act. 3. The appellant's services of Plaster of Paris were considered taxable under Commercial or Industrial Construction Services, as defined under Section 65 (25b). The appellant's argument that the service tax was deposited by the service recipient was negated, as the statute does not allow shifting the onus of depositing service tax liability. 4. The appellant's claim for exemption under Notification No. 25/2012-ST was rejected, as the exemption applied to services by entities registered under section 12 AA of the Income Tax Act, not services to such entities. 5. The appellant's failure to pay service tax during the relevant period resulted in the accrual of mandatory interest. Penalties under sections 76 and 77 were upheld, as the appellant contravened the provisions of section 66 by not paying the service tax. 6. The Tribunal affirmed the impugned order and dismissed the appeal, emphasizing the appellant's liability to pay service tax, interest, and penalties as per the relevant provisions of the Act. [Order pronounced on 07. 06. 2024]
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