2023 (7) TMI 60 - AT - Service Tax

Liability of Service Tax - liability of Appellant as a sub-contractor when main contractor M/s Reliance Group Security Services Pvt. Ltd., Jamnagar has paid the Service tax - period April 2002 to December 2003 - time limitation - HELD THAT - C.B.E.C. had clarified that if the main contractor discharges the ServiceTax liability, the sub-contractor need not to pay Service Tax on the same activity and only in August, 2007 the Board issued a clarification in the matter vide Circular No. 96/7/2007-S.T., dated 23-8-2007 wherein it was clarified that the services rendered by the sub-contractors are in the nature of input service and, therefore, Service Tax is leviable on any taxable service provided, whether or not the services are provided by a person in his capacity as a sub-contractor and whether or not such services are used as input service. In the present case, the period involved is 2002-2003 i.e prior to the issue of the circular. In number of decisions in the case of URVI CONSTRUCTION VERSUS COMMISSIONER OF SERVICE TAX, AHMEDABAD 2009 (10) TMI 97 - CESTAT, AHMEDABAD , FOTO FLASH VERSUS COMMISSIONER OF SERVICE TAX 2007 (10) TMI 133 - CESTAT, BANGALORE and SYNERGY AUDIO VISUAL WORKSHOP P. LTD. VERSUS COMMR. OF ST, BANGALORE 2008 (1) TMI 188 - CESTAT BANGALORE it has been held that once the main contractor has discharged the Service Tax liability on a value which includes service provided by the sub-contractor, then the demand for ServiceTax on sub-contractor is not sustainable in law. As per the clarification in the Board s Circular dated 23-8-2007 as well as dated 7-10-1998, if the principal had not paid the Service Tax then the same can be charged. If the Service Tax has already been paid by the principal, then the same cannot be demanded again - on this particular issue once again the matter needs to be remanded to Adjudicating Authority for verification of payment particular of Principal i.e M/s Reliance Group Security Services Pvt. Ltd. In the present matter the facts on records is that on 11.07.2006 statement of Shri Kaustabh Bosh, representative of M/s Reliance Group Security Services Pvt. Ltd. was recorded by Service tax department, Jamnagar, wherein he stated that they have paid Service tax of Rs. 51,41,907/- with respect to services rendered by Appellant. Appeal allowed by way of remand.

Summary

Issues:
The issues involved in the judgment are whether the sub-contractor is liable for service tax payments if the main contractor has already paid, whether the demand is time-barred, and whether the appellant's situation was revenue neutral.

Issue 1: Liability of Sub-contractor for Service Tax Payments

The appellant, a security service provider, contended that as a sub-contractor to M/s Reliance Group Security Services Pvt. Ltd., they should not be liable for service tax payments since the main contractor had already paid. The appellant argued based on various trade notices, circulars, and judgments supporting the principle that no liability is cast on the sub-contractor if the main contractor has paid the tax. However, the tribunal noted that during the period in question, prior to a relevant circular, service tax was leviable on any taxable service provided, irrespective of whether the services were used as 'input service'. The tribunal also cited precedents where if the main contractor had discharged the service tax liability on a value that included services provided by the sub-contractor, the demand for service tax on the sub-contractor was deemed unsustainable in law.

Issue 2: Time-Barred Demand

The appellant argued that the show cause notice issued for the period April 2002 to December 2003 was time-barred as it was issued after three years of the relevant date. The appellant relied on judgments supporting the contention that the demand in the present matter was time-barred. However, the tribunal did not provide a detailed analysis of this issue in its decision.

Issue 3: Revenue Neutrality

The appellant claimed that since M/s Reliance Group Security Services Pvt. Ltd. would be eligible for credit, the situation was revenue neutral, making the demand unsustainable. The appellant cited judgments to support this argument. However, the tribunal did not delve deeply into this aspect in its decision.

Conclusion:
The appellate tribunal allowed the appellant's appeal by way of remand to the adjudicating authority for passing a fresh order. The tribunal highlighted that the commissioner had not properly considered the issue in light of the tribunal's previous decisions and had not adequately verified the payment of service tax by M/s Reliance Group Security Services Pvt. Ltd. The tribunal emphasized the need for a thorough examination of the payment particulars of the principal contractor before making a final determination on the liability of the sub-contractor.