2023 (2) TMI 478 - AT - Service Tax

Liability of service tax - services provided by the assessee as a main consultant as also to the services provided by the assessee as a sub-consultant of the main consultant - invocation of extended period of limitation - HELD THAT - So far as the confirmation of demand for the services provided by the assessee as a sub-consultant to the main consultant is concerned, the issue has been decided by a Larger Bench of the Tribunal in COMMISSIONER OF SERVICE TAX VERSUS MELANGE DEVELOPERS PVT. LTD. 2019 (6) TMI 518 - CESTAT NEW DELHI . The Larger Bench answered the reference holding that a sub-contractor would be liable to pay service tax even if the main contractor discharged service tax liability on the activity undertaken by the sub-contractor in pursuance of the contract. In coming to the aforesaid conclusion, the Larger Bench placed reliance on the provisions of sections 66, 68 and 94 of the Finance Act. The Larger Bench also noted that the matter had been referred because of conflicting decisions of the Tribunal on the issue as to whether a sub-contractor was required to pay service tax even if the main contractor had discharged the service tax liability - the reasons given by the Larger Bench to hold that a sub-contractor would be liable to pay service tax even if the main contractor has discharged service tax liability would also be applicable in the case of a sub-consultant. Thus, in view of decision of the Larger Bench of the Tribunal, it has to be held that a sub-consultant would have to discharge service tax liability even if the main consultant has discharged the service tax liability - demand for normal period stands confirmed. Whether the Principal Commissioner was justified in holding that the extended period of limitation contemplated under the first proviso to section 73(1) of the Finance Act could not have been invoked in the facts and circumstances of the case? - Benefit of doubt - HELD THAT - It is seen that the Principal Commissioner noted that the assessee in the ST-3 Returns had disclosed the taxable income and also disclosed the exempted services for the relevant period and therefore, the Department could not urge that there was suppression of facts by the assessee with an intent to evade payment of service tax - It also needs to be noted that at the relevant time there were conflicting decisions of the Tribunal regarding payment of service tax by a sub-contractor or a sub-consultant and it is only when the Larger Bench decided the issue on May 23, 2019 that it was settled that a sub-contractor would have to discharge the service tax liability even if the main contractor had discharged the service tax liability. The issue as to whether the extended period of limitation could be invoked in such a situation when there are conflicting views of the Tribunal on a particular issue has been considered by the Supreme Court in various decisions - In JAIPRAKASH INDUSTRIES LTD. VERSUS COMMISSIONER OF C. EX., CHANDIGARH 2002 (11) TMI 92 - SUPREME COURT , the Supreme Court held that when there are divergent views of High Courts, there can be a bona fide doubt as to whether the activity would amount to manufacture and in such circumstances it cannot be urged that there was mis-statement or suppression of facts with intent to evade payment of duty - In M/S CONTINENTAL FOUNDATION JOINT VENTURE SHOLDING, NATHPA HP VERSUS COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH-I 2007 (8) TMI 11 - SUPREME COURT , the Supreme Court held that when there is a scope for entertaining a doubt about the view to be taken, the extended period of limitation cannot be invoked. The finding, therefore, that has been recorded by the Principal Commissioner for denying the invocation of the extended period of limitation does not suffer from any illegality. The appeals filed by the assessee and the Department deserve to be dismissed and are dismissed.

Summary

Issues:
1. Confirmation of demand for service tax on services provided by the assessee as a sub-consultant and as the main consultant.
2. Justification of the Principal Commissioner's decision on the extended period of limitation under the first proviso to section 73(1) of the Finance Act.

Analysis:
1. The first issue pertains to the confirmation of the demand for service tax on services provided by the assessee, both as a sub-consultant and as the main consultant. The Tribunal referred to a previous decision by a Larger Bench in Commissioner of Service Tax, New Delhi vs. Melange Developers Private Limited, which established that a sub-contractor is liable to pay service tax even if the main contractor has already discharged the liability. This principle was extended to sub-consultants as well. Consequently, the Principal Commissioner's decision to confirm the demand for the normal period of limitation was deemed legal.

2. The second issue revolves around the Principal Commissioner's decision regarding the extended period of limitation under the first proviso to section 73(1) of the Finance Act. The Principal Commissioner found that the assessee had disclosed taxable income and exempted services in their ST-3 Returns, indicating no intent to evade service tax payment. Additionally, the Tribunal cited Supreme Court precedents to support the notion that conflicting views within the Tribunal can create a bona fide belief for the assessee, thus precluding the invocation of the extended period of limitation. The Tribunal upheld the Principal Commissioner's decision in this regard, emphasizing that it was not illegal to deny the extension of the limitation period.

In conclusion, the Tribunal dismissed the appeals filed by both the assessee and the Department, affirming the demand for service tax on the services provided by the assessee and supporting the Principal Commissioner's decision on the extended period of limitation.