2025 (2) TMI 954 - AT - Service Tax

Liability of sub-contrator to pay service tax when main contractor has paid the service tax - Invocation of extended period of limitation - suppression of facts or not. Whether in case the main contractor has paid the service tax the appellants are required to pay service tax on the services rendered by the appellants being sub-contractor or not? - HELD THAT - Admittedly the appellant is a service provider and they are required to pay service tax on the services rendered by them as clarified by CBEC Circular No.96/7/2007-ST dated 23.08.2007 wherein it has been clarified that for the services rendered by the sub-contractor the sub-contractor is required to pay service tax - the appellant is liable to pay service tax as demanded. Whether the extended period of limitation in the facts and circumstances is applicable or not? - HELD THAT - Admittedly without investigation it could have been revealed that whether the appellants are providing man power services to the main contractor or not nor after investigation it came to the notice to the Department that the appellant is providing man power services and entitled in not to pay service tax. It is a fact on record that the appellants did not take service tax registration also. In that circumstances unless and until there is a bonafide act on the part of the appellants the extended period of limitation has rightly invoked. Conclusion - The appellants are liable to pay service tax as demanded and that the extended period of limitation was rightly invoked. There are no merit in the appeals filed by the appellants - appeal dismissed.

The issues presented and considered in the judgment are as follows:1. Issue (a): Whether in case the main contractor has paid the service tax, the appellants are required to pay service tax on the services rendered by the appellants being sub-contractor.2. Issue (b): Whether the extended period of limitation in the facts and circumstances is applicable or not.Issue (a) Analysis:The court considered the CBEC Circular No.96/7/2007-ST dated 23.08.2007, which clarified that sub-contractors are required to pay service tax for the services they render. The court held that the appellant, as a service provider, is liable to pay service tax as demanded, even if the main contractor has already paid the tax.Issue (b) Analysis:The court found that the extended period of limitation was rightly invoked in this case. It noted that without investigation, it was not evident whether the appellants were providing manpower services to the main contractor. The court emphasized that the appellants did not take service tax registration, and unless there is a bona fide act on their part, the extended period of limitation is applicable.Key evidence and findings:The court considered the facts of the case where show-cause notices were issued to the appellants demanding service tax for specific periods. The appellant argued against the demands, stating that they were not suppressive of any facts and that the main contractor had already paid the tax, resulting in revenue neutrality. The Revenue, however, supported the demands based on the CBEC Circular.Application of law to facts:The court applied the CBEC Circular to establish the liability of the appellants to pay service tax. It also analyzed the circumstances surrounding the invocation of the extended period of limitation and concluded that it was justified in this case.Treatment of competing arguments:The court heard arguments from both the appellants and the Revenue. While the appellants contended that the demands were not sustainable due to the main contractor's payment and lack of suppression of facts, the Revenue relied on the CBEC Circular to support the demands.Significant holdings:The court held that the appellants are liable to pay service tax as demanded and that the extended period of limitation was rightly invoked. The court dismissed the appeals filed by the appellants, upholding the impugned orders.In conclusion, the court found the appellants liable for service tax and upheld the imposition of penalties. The judgment highlights the importance of complying with tax regulations and the consequences of failing to do so, even in cases where the main contractor has paid the tax.

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