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2017 (4) TMI 1024 - AT - Service TaxSub-contract - Management, Maintenance or Repair Services - Manpower Recruitment & Supply Agency Services - The Department entertained a view that as per CBEC Circular No. 96/7/2007-ST dated 23.08.2007 the sub contractor is also liable to pay service tax even though main contractor has paid the tax - Held that - In the case of Nana Lal Suthar Vs. CCE, Jaipur-I 2015 (9) TMI 1446 - CESTAT NEW DELHI the Tribunal had analyzed a similar issue and held that the sub contractor is absolved from the liability when the main contractor has discharged the liability on the same services - demand unsustainable. Renting of Immovable Property Service - The first contention put forward by the appellant is that they would fall within the exemption limit of ₹ 10,00,000/- if RIPS is solely considered to be the taxable service provided by them - Held that - The services provided by the appellant as sub-contractor are also taxable services, though the liability is discharged by main contractor. Where a taxable service provider provides one or more taxable service from one or more premises, the exemption under notification No. 06/2005-ST dated 01.03.2005 shall not apply if the aggregate of all such services is more than ₹ 10,00,000/-. The MRA and MMR services provided by appellant also being taxable services, the appellant cannot get the exemption of threshold limit of ₹ 10 lakhs. The renting of immovable property service came into force w.e.f. 01.06.2007 in terms of N/N. 23/2007-ST dated 22.05.2007. Thus the levy on renting of property against the previous levy on services relating to renting of property prior to 01.07.2010 was created retrospectively and therefore, the demand for the extended period is highly irregular - interest cannot be demanded for the demands made on the basis of retrospective amendments. Appeal allowed - decided partly in favor of assessee.
Issues Involved:
1. Liability of sub-contractors to pay service tax on Management, Maintenance or Repair Services (MMRS) and Manpower Recruitment and Supply Services (MRSS) when the main contractor has already discharged the tax. 2. Applicability of service tax on Renting of Immovable Property Services (RIPS). 3. Invocation of extended period of limitation for demanding service tax on RIPS. 4. Applicability of interest and penalties on the service tax demands. Issue-wise Detailed Analysis: 1. Liability of Sub-contractors to Pay Service Tax on MMRS and MRSS: The appellant argued that they did not discharge service tax on MMRS and MRSS because the main contractor had already paid the service tax. The Department, relying on CBEC Circular No. 96/7/2007-ST dated 23.08.2007, contended that sub-contractors are also liable to pay service tax. The Tribunal, however, referenced decisions such as Nana Lal Suthar Vs. CCE, Jaipur-I and M/s Visesh Engineering Co. Vs. CCE & ST, Guntur, which held that sub-contractors are absolved from liability when the main contractor has paid the service tax. Consequently, the demand for service tax on MMRS and MRSS was deemed unsustainable and set aside. 2. Applicability of Service Tax on Renting of Immovable Property Services (RIPS): The appellant contended they fell within the exemption limit of ?10,00,000/- if only RIPS was considered as taxable. The Tribunal clarified that all taxable services provided by the appellant, including those as a sub-contractor, must be aggregated to determine eligibility for the exemption. Since the aggregate exceeded ?10,00,000/-, the appellant could not claim the threshold exemption. 3. Invocation of Extended Period of Limitation for Demanding Service Tax on RIPS: The appellant argued that the demand for service tax on RIPS for the period prior to July 2010 was invalid due to retrospective amendments and the contentious nature of the taxability of RIPS. The Tribunal acknowledged that the issue was contentious and the amendment made RIPS taxable retrospectively from 01.06.2007. The show cause notice was issued on 18.04.2013, beyond the normal period, and the Tribunal found the extended period invocation improper for the period before 01.07.2010. However, it upheld the demand for the period after 01.07.2010. 4. Applicability of Interest and Penalties on the Service Tax Demands: The Tribunal noted that the appellant should have paid service tax after the amendment w.e.f. 01.07.2010. While sustaining the demand for the period post-01.07.2010, the Tribunal reduced the penalty under Section 78 of the Finance Act, 1994, to 25% of the demand, as the appellant was not given the option of a reduced penalty by the lower authorities. Conclusion: The Tribunal set aside the demand for service tax on MMRS and MRSS, upheld the demand for RIPS post-01.07.2010, and revised the penalties accordingly. The appeal was partly allowed with consequential reliefs.
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