2020 (1) TMI 528 - AT - Service Tax

Scope of SCN - Activity done by the sub-contractor - demand of service tax from the main contractor (appellant) - Erection, Commissioning or Installation services to Assam State Electricity Board - Non-payment of Service tax - allegation that the sub-contractors appointed by the appellant did not include or pay service tax on services provided to the appellant - HELD THAT - On detailed examination of the case proceedings, the Ld. Commissioner in the impugned order has travelled beyond the scope of the SCN and further, that the directions given by the Tribunal have not been followed by the Ld. Commissioner in the remand proceedings. The Ld. Commissioner has negligently adjudicated the matter in remand proceedings without complying with the directions given by the Tribunal. No observation whatsoever has been made whether he has examined the subject contract entered by the appellant with the State Electricity Boards, the nature of services actually rendered by the appellant, nature or part of the services undertaken by the sub-contractors or the sardars, conditions of payment agreed by the Electricity Board, etc. - No discussion has been made as to whether he has examined the bank records / books and relevant ledgers or the difference in income amount and the collection amount, neither has he recorded anywhere in the order that the assessee has not submitted the documents desired by him for examination purpose. Even though the SCN proposed to raise demand of service tax on the amount paid by the assessee as a main contractor to the sub contractor for the services rendered by them, we fail to understand under which provision of law the assessee can be said to be legally liable to pay service tax as a service recipient during the period in dispute. The SCN as well as the adjudication order impugned herein merely holds that the assessee has contravened the provisions of Section 66, 67 and 68 of the Finance Act, 1994, by not depositing the service tax on services provided by sub-contractors - On perusal of the said provisions, it is found that it is only the service provider who is liable to pay service tax for provision of service in the category of erection, commissioning and installation services. The impugned denovo order passed by the Ld. Commissioner is wholly illegal and cannot be sustained and the same is set aside - appeal allowed - decided in favor of appellant.

Summary

Issues involved:
1. Appeal against de-novo adjudication order confirming demand of service tax for the period 2006-07 to 2008-09.
2. Dispute regarding service tax liability on payments made to subcontractors and sardars.
3. Contention on penalty imposition and extended period of limitation.
4. Compliance with Tribunal directions in the remand proceedings.
5. Allegations exceeding the scope of Show Cause Notice (SCN) in the adjudication.

Analysis:
1. The appeal was filed against a de-novo adjudication order confirming a service tax demand for the period 2006-07 to 2008-09. The appellant, engaged in providing services to Assam State Electricity Board, faced allegations of non-payment of service tax on subcontractor services. The Ld. Commissioner initially dropped the demand, but a subsequent Tribunal order led to a de-novo order confirming the demand, which the appellant contested.

2. The dispute revolved around the service tax liability on payments made to subcontractors and sardars. The appellant argued that certain payments were made through sardars and subcontractors, which were not subject to service tax as per legal provisions. The appellant also highlighted discrepancies in the taxable amounts considered by the Department, supporting their claims with CA certificates.

3. The contention on penalty imposition and the invocation of the extended period of limitation was raised. The appellant strongly contested the penalty imposition, arguing against the validity of the penalty and the extended period of limitation invoked by the Department.

4. The compliance with Tribunal directions in the remand proceedings was a crucial issue. The Tribunal had directed the adjudicating authority to examine the computation of tax payable on amounts received by the appellant and paid to subcontractors. However, the Ld. Commissioner's order was found to have exceeded the scope of the Tribunal's directions, leading to a lack of proper examination of relevant evidence and contracts.

5. The allegations were found to exceed the scope of the Show Cause Notice (SCN) in the adjudication. The Ld. Commissioner's order was deemed to have traveled beyond the allegations made in the SCN, failing to address key aspects such as payment details, nature of services, and contractual agreements. The order was set aside due to the absence of legal liability on the appellant as a service recipient for service tax payments not made by subcontractors.

Overall, the Tribunal found the de-novo order passed by the Ld. Commissioner to be illegal and unsustainable, setting aside the demand of service tax, interest, and penalty, and allowing the appeal with consequential relief as per law.