2024 (3) TMI 693 - AT - Service Tax

Liability to service tax - construction activities - main contractor was discharging Service Tax liability - Revenue is of the view that during the impugned period, sub-contractors are required to pay Service Tax in terms of Master Circular No. 96/7/2007-S.T. dated 23.08.2007 - Time limitation - HELD THAT - Although in terms of the Master Circular No. 96/7/2007-S.T. dated 23.08.2007 the respondents were liable to pay Service Tax being the sub-contractor, on the premise that the main contractor had discharged their Service Tax liability, the respondents did not pay Service Tax. The fact of non-payment of Service Tax had come to the knowledge of the Revenue in 2008 when the audit was conducted at the end of the main contractors, who were discharging Service Tax liability on the activity of the respondents who were sub-contractors. Despite that, no investigations were conducted at the end of the respondents. Time Limitation - HELD THAT - Moreover, the Show Cause Notices were issued after almost three years of knowing the fact that the respondents were not paying Service Tax being sub-contractors - The whole of the demand is barred by limitation. There are no merit in the appeals filed by the Revenue. The same are dismissed.

Summary

Issues involved:
The main issue in this case is whether the sub-contractors were liable to pay Service Tax during a specific period and if the demand for Service Tax is barred by limitation.

Summary:
The case involved two appeals with a common issue, both disposed of by a common order. The respondents, as sub-contractors in construction activities, were not paying Service Tax from April 2006 to March 2009, as the main contractor was discharging the liability. The Revenue contended that the sub-contractors were required to pay Service Tax as per Master Circular No. 96/7/2007-S.T. Show Cause Notices were issued to the respondents invoking the extended period of limitation. The adjudicating authority dropped the proceedings against the respondents as the main contractor had already paid the Service Tax. The Revenue appealed, arguing that the sub-contractors were aware of their liability to pay Service Tax. However, the respondents claimed that the Notices issued in 2011 were time-barred as the activities were known to the Revenue in 2008 during an audit.

Upon hearing both parties, it was found that although the sub-contractors were liable to pay Service Tax as per the Circular, they did not do so since the main contractor had already paid. The Revenue was aware of this non-payment in 2008 but did not investigate the respondents. The Show Cause Notices issued in 2011 were considered time-barred. Consequently, the demand for Service Tax was held to be barred by limitation. The impugned orders were upheld, and the appeals filed by the Revenue were dismissed.