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2019 (8) TMI 827 - AT - Service TaxRecovery of service tax - liability of sub-contractor to pay service tax - case of appellant is that main contractor has paid service tax on entire quantum of service including services rendered by subcontractor - Circular dated 23.08.2007 issued by CBEC - HELD THAT - The issue decided in the case of SAI CONSULTING ENGINEERS PVT. LTD. VERSUS C.C.E. S. TAX, AHMEDABAD 2018 (2) TMI 230 - CESTAT AHMEDABAD where it was held that if the main contractor has paid the service tax on the entire contract value which also include the value of the contract as given to sub-contractor, there is no necessity to pay the service tax by the sub-contractor - appeal allowed - decided in favor of appellant.
Issues:
Recovery of service tax from sub-contractor for services provided to main contractor, applicability of Circular dated 23.08.2007, eligibility of main contractor for exemption under Notification No.1/2006, double taxation concern, interpretation of law regarding service tax liability for sub-contractor. Analysis: The judgment by the Appellate Tribunal CESTAT ALLAHABAD involved the issue of recovery of service tax from a sub-contractor who provided services to a main contractor. The appellant, a sub-contractor for M/s BSBK Pvt. Ltd., was found to have not paid service tax on the services provided to the main contractor, leading to proceedings for recovery of around &8377; 5 lakhs. The main contention raised by the appellant was that since the main contractor had already paid service tax on the entire quantum of services, including those provided by the sub-contractor, collecting tax from the sub-contractor would result in double taxation. The authorized representative for the revenue argued that as per Circular dated 23.08.2007, the sub-contractor is liable to pay service tax. Additionally, it was mentioned that the Commissioner (Appeals) had determined that the main contractor was eligible for exemption under Notification No.1/2006, thereby asserting that the sub-contractor should bear the service tax liability. The appellant's counsel contended that the eligibility of the main contractor for the said notification was not the subject matter of the proceedings, and the Commissioner (Appeals) introduced this issue without proper factual verification. The appellant relied on a previous Tribunal decision to support the argument that if the principal contractor had already discharged the service tax liability on the total contract, the sub-contractor is not required to pay service tax. The Tribunal, after considering the submissions from both sides and examining the records, referred to a previous case involving M/s Sai Consulting Engineers Pvt. Ltd. where a similar situation was addressed. The Tribunal concluded that when the main contractor has paid the service tax on the entire contract value, including the sub-contractor's portion, there is no need for the sub-contractor to pay service tax. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant, granting them consequential relief as per the law. The judgment reiterated the principle established in the previous case, emphasizing that the sub-contractor is not liable to pay service tax if the main contractor has already discharged the tax liability on the total contract amount.
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