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2021 (8) TMI 1117 - AT - Service TaxLevy of service tax - liability on activity of sub-contractor when main contractor has discharged the service tax liability - suppression of facts or not - extended period of limitation - penalty - HELD THAT - It is seen that the amount received from the clients have been subjected to Service Tax at the hands of the main contractor. However, since the appellant, as a sub-contractor, has provided services to the main contractor, is liable to discharge Service Tax on the consideration received from the main contractor namely, M/s. ACL - This issue is no longer res integra and is settled by the decision of the Larger Bench of the Tribunal in the case of COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. 2019 (6) TMI 518 - CESTAT NEW DELHI where it was held that A sub-contractor would be liable to pay Service Tax even if the main contractor has discharged Service Tax liability on the activity undertaken by the sub-contractor in pursuance of the contract. Thus, the appellant / sub-contractor is liable to pay the Service Tax even if the main contractor has discharged the liability. The issue on merits is found against the assessee and in favour of the Department. Extended period of limitation - penalty - HELD THAT - There is no clear allegation that the appellants have wilfully suppressed facts with the intention to evade payment of Service Tax. In the present case, the main contractor / M/s. ACL collected the full consideration including Service Tax from the clients, which is clear from the records. Appellants from the very beginning have raised the contention that they were instructed by M/s. ACL that they are not required to pay the Service Tax - there are no factual basis for invoking the extended period. Appeal fails on merits - However, we hold that the demand for the extended period of limitation, if any, cannot sustain and the impugned order to this extent is set aside, without disturbing any demand that falls within the normal period. Decided partly in favor of assessee.
Issues Involved:
1. Liability of sub-contractors to pay Service Tax. 2. Invocation of the extended period of limitation for raising the demand. 3. Applicability of penalties under Sections 76, 77, and 78 of the Finance Act. Detailed Analysis: 1. Liability of Sub-Contractors to Pay Service Tax: The appellant, engaged in providing services under "Cargo Handling Services," argued that as a sub-contractor to M/s. ACL, they were not liable to pay Service Tax since M/s. ACL had already discharged the tax liability on the full value of the services. The appellant provided transportation services, and the main contractor, M/s. ACL, included the cost along with applicable Service Tax in their billing to clients and paid the tax. The Department contended that the appellant, as a sub-contractor, was liable to pay Service Tax on the consideration received from M/s. ACL. The Tribunal referred to the Larger Bench decision in Commr. of S.T., New Delhi v. M/s. Melange Developers Pvt. Ltd., which clarified that a sub-contractor must discharge the tax liability even if the main contractor has paid the tax on the entire service value. The Tribunal concluded that the appellant was liable to pay Service Tax, and the main contractor could claim this as input tax credit. 2. Invocation of the Extended Period of Limitation: The appellant contested the demand on the grounds of limitation, arguing that the Show Cause Notice issued on 03.12.2009 for the period 2006-07 invoked the extended period without proper justification. The appellant claimed they believed they were not liable to pay Service Tax as M/s. ACL had informed them that the tax would be discharged by the main contractor. The Tribunal noted that during the relevant period, there were conflicting views and litigations regarding the liability of sub-contractors when the main contractor had paid the tax. The Tribunal referenced the decision in M/s. Max Logistics Ltd. v. Commissioner of Central Excise, Jaipur, which highlighted that in cases involving interpretational issues and bona fide belief, the extended period of limitation might not be applicable. The Tribunal found no positive act of wilful suppression or mis-statement by the appellant and concluded that the demand raised by invoking the extended period could not be sustained. 3. Applicability of Penalties: The Department had imposed penalties under Sections 76, 77, and 78 of the Finance Act, citing contravention of the Act by the appellant through suppression of facts and non-payment of Service Tax. The Tribunal, however, noted that there was no clear allegation of wilful suppression with intent to evade tax. Given that the main contractor collected and paid the Service Tax and the appellant raised the contention from the beginning, the Tribunal found no factual basis for invoking the extended period or imposing penalties. Conclusion: The Tribunal held that while the appellant was liable to pay Service Tax on merits, the demand for the extended period of limitation could not be sustained. Consequently, the penalties imposed were also set aside. The appeal was disposed of, affirming the liability on merits but allowing the appeal on the ground of limitation, thereby setting aside the extended period demand and penalties.
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