2013 (12) TMI 1073 - AT - Service Tax

Modification of Stay order - Admission of additional evidence - Held that - Prior to issue of the said circular there was no tax liability on sub-contractors. Tax liabilities are not created through circulars issued by the Board. During the relevant period the applicant was providing service as defined in Finance Act, 1994 and was liable to pay tax but did not pay tax. Now through the present application for submitting additional evidence, an effort is being made to show that the main contractor has discharged such liability. In the first place the scheme for levy and collection of tax does not support such a system. Secondly it is almost impossible to confirm that the tax paid by the main contractor was inclusive of the value of service under taken by the applicant. Thirdly it is recorded in the stay order that applicant failed to produce any evidence of payment of tax. It is seen that after passing of the stay order, the applicant filed an application for producing additional evidence. At any event, there is no dispute that this evidence was not placed before the lower authorities and even before Tribunal at the time of hearing of stay application. Applicant has not filed any evidence before the authorities for payment of tax either by himself or any clear evidence to prove that tax was paid by the main contractor for service done by the applicant. The effort is only to file some papers and cast the onus on the Tribunal and the Revenue to cause necessary verification which cannot be supported. It was in such circumstances that the Tribunal directed the applicant to deposit entire amount of tax. There is no subsequent development after passing of the stay order. As such, there is no reason for modification of the stay order - Modification denied.

Summary

Issues:
1. Modification of stay order based on additional evidence.
2. Interpretation of circular regarding tax liability of sub-contractors.
3. Applicability of tax liability on sub-contractors prior to circular issuance.

Analysis:
1. The appellant sought modification of a stay order to deposit tax based on additional evidence. The advocate argued that the main contractor had already paid the tax, eliminating the need for the appellant to predeposit the entire amount. The advocate relied on a circular stating that service tax is leviable on taxable services provided by sub-contractors, regardless of whether the main contractor has paid. However, the Tribunal found no merit in the submission that tax liability on sub-contractors did not exist before the circular's issuance. The Tribunal noted that the appellant failed to provide evidence of tax payment, and the attempt to shift the burden of proof was unjustified. The Tribunal rejected the modification of the stay order, granting 8 weeks for compliance.

2. The circular clarified that sub-contractors are taxable service providers, and their services are considered input services. The circular emphasized that tax liability exists on all taxable services provided by sub-contractors, irrespective of whether the services are used as input services. The appellant argued that the circular's applicability began only after its issuance on 23-08-2007. However, the Tribunal held that tax liabilities are not created by circulars and that the appellant was liable to pay tax during the relevant period, as per the Finance Act, 1994.

3. The Tribunal emphasized that tax liabilities for the appellant's services existed before the circular's issuance. The appellant's attempt to demonstrate that the main contractor had paid the tax through additional evidence was deemed insufficient. The Tribunal highlighted that the appellant failed to provide any evidence of tax payment, either by themselves or by the main contractor, to support their claim. The Tribunal concluded that the application for modification of the stay order lacked merit, as the burden of proof was on the appellant to establish tax payment, which they failed to do.

In conclusion, the Tribunal upheld the original stay order, rejecting the modification request due to the lack of substantial evidence supporting the appellant's claim of tax payment by the main contractor. The Tribunal granted additional time for compliance but emphasized the appellant's responsibility to provide concrete evidence of tax payment in future proceedings.