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2025 (4) TMI 690 - AT - Service TaxLiability of appellant a sub-contractor to pay Service Tax for services rendered to the main contractor when the main contractor has already paid Service Tax on the entire value of the service - extended period of limitation - Levy of penalty - Demand of service tax on works contract service rendered by the appellant to M/s. DVC in their construction of store shed with CGI Sheet Roof and to M/s. Paharpur Cooling Towers Limited in their construction of Shuttering Reinforcement and Concreting work - Demand confirmed @4.12% for the works contract service rendered. Liability of appellant a sub-contractor to pay Service Tax for services rendered to the main contractor when the main contractor has already paid Service Tax on the entire value of the service - HELD THAT - The said issue has already been clarified by the Board vide Circular No. 96/7/2007-S.T. dated 23.08.2007 at Point No. 999.03/23-8-07 where it is clarified that even if the main contractor pays Service Tax on the full amount the sub-contractor shall remain liable to pay Service Tax for the services rendered by them to the main contractor. Extended period of limitation - penalty - HELD THAT - The entire issue is revenue neutral as the main contractor will be eligible to avail CENVAT Credit of the service tax paid by the sub-contractor. Thus there is no intention to evade payment of Service Tax existing in this case. In these circumstances the demand of Service Tax confirmed by invoking the extended period of limitation is not sustainable. Accordingly the demand confirmed under this category is set aside by invoking the extended period of limitation and uphold the demand within the normal period. No penalty is imposable on the demand confirmed for the normal period of limitation. Demand of service tax on works contract service rendered by the appellant to M/s. DVC in their construction of store shed with CGI Sheet Roof and to M/s. Paharpur Cooling Towers Limited in their construction of Shuttering Reinforcement and Concreting work - HELD THAT - The appellant has agreed their service tax liability and raised the bill with Service Tax @ 4.12%. We agree with the submission of the appellant that they have rendered service with materials and hence service tax is liable to be paid @4.12% only for the works contract service rendered by them to the above clients and therefore we hold that the appellant is liable to pay service tax @4.12 % claimed by them from their clients. In this regard it is observed that even when they collected Service Tax in the bills raised the appellant has filed nil return. Thus suppression of fact with intention to evade the tax stands established in this case and hence the extended period has been rightly invoked to demand Service Tax on this issue - penalty also set aside. Demand confirmed @4.12% for the works contract service rendered - HELD THAT - The appellant has claimed the service tax from the clients and not paid the same in the Government account. It is also found that the appellant has not filed the ST-3 returns and disclosed the taxable value received by them. Even when they filed returns they have filed nil returns. Even for the period when they collected Service Tax from their customers they have filed Nil returns. This establishes the intention of the appellant to evade service tax. Since the appellant has not paid the service tax claimed by them to the exchequer the suppression of fact with intention to evade the tax is established. Accordingly the appellant is liable for penalty equal to the Service Tax demand confirmed on this count. Conclusion - i) In respect of the work contract service rendered to M/s. Bridge and Roof Co. (I) Ltd. in West Bengal the demand confirmed under this category is set aside by invoking the extended period of limitation and the demand within the normal period is confirmed. No penalty is imposable on the demand confirmed in this regard. ii) Regarding the works contract service rendered by the appellant to DVC and to Paharpur Cooling Towers Limited it is held that the appellant is liable to pay service tax @4.12 % which they have claimed from their clients. The appellant is liable to pay penalty equal to the tax confirmed in this regard. iii) For the purpose of quantifying the demand of service tax and penalty confirmed in this order the matter is remanded back to the adjudicating authority. Appeal disposed off by way of remand.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS Liability of Sub-Contractor for Service Tax The relevant legal framework is provided by the Finance Act, 1994, specifically under clause 105(zzzza) of Section 65, which pertains to 'works contract service'. Additionally, Circular No. 96/7/2007-S.T. dated 23.08.2007 clarifies that sub-contractors are liable to pay Service Tax even if the main contractor has discharged Service Tax on the total value of the service. The Court interpreted this to mean that the appellant, as a sub-contractor, remains liable for Service Tax on services rendered to the main contractor. The appellant's argument that the principal had paid the appropriate Service Tax was rejected based on this clarification. Application of Extended Period of Limitation The Court considered whether the extended period of limitation could be invoked. It was observed that there was confusion regarding the liability of sub-contractors during the relevant period, which was revenue neutral since the main contractor could claim CENVAT Credit. The Court concluded that there was no intention to evade tax, and therefore, the extended period of limitation was not applicable. The demand was set aside for the extended period but upheld for the normal period. Service Tax Liability at 4.12% The appellant admitted liability for Service Tax at 4.12% for services rendered to DVC and Paharpur Cooling Towers Limited. The Court agreed with the appellant's submission that they were liable to pay Service Tax at this rate. However, the appellant's filing of 'nil' returns despite collecting Service Tax indicated suppression of facts with intent to evade tax. Therefore, the extended period was rightly invoked for this issue, and penalties were deemed applicable. Suppression of Facts and Penalties For services rendered to M/s. Bridge and Roof Co. (I) Ltd., the demand was limited to the normal period due to the absence of suppression of facts. No penalty was imposed for this demand. However, for services to DVC and Paharpur Cooling Towers Limited, the appellant's actions of not paying collected Service Tax and filing 'nil' returns demonstrated intent to evade tax. Consequently, penalties equal to the Service Tax demand were upheld. SIGNIFICANT HOLDINGS The Court's significant holdings include:
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