2024 (9) TMI 553 - AT - Service Tax

Recovery of short paid service tax with interest and equal penalty - Demand of service tax where the payment of 50% of tax is by the appellant and the remaining 50% is made by the service recipient - HELD THAT - The issue whether the demand of service tax is sustainable when the payment of 50% of tax by the appellant and the remaining 50% by the service recipient, is no longer res-integra and has been decided by the Karnataka High Court in M/S. ZYETA INTERIORS PVT. LTD. SHRI. AMIT PRAKASH, DIRECTOR OF M/S. ZYETA INTERIORS PVT. LTD, VERSUS THE VICE CHAIRMAN SETTLEMENT COMMISSION, CHENNAI, THE PRINCIPAL COMMISIONER OF GST AND CENTRAL EXCISE, BANGALORE 2021 (10) TMI 233 - KARNATAKA HIGH COURT where it was held that 'once the tax liability is discharged regardless of the persons who discharge, the Assessee cannot be asked to pay the tax again.' Following the decision of the Karnataka High Court, the Principal Bench in M/S. AADARSH SRI SAI MANPOWER SOLUTION (P) LTD., SHRI MADAN SINGH RAWAT, DIRECTOR AND SHRI TRILOK SINGH RAWAT, DIRECTOR VERSUS COMMISSIONER, CUSTOMS, CENTRAL EXCISE SERVICE TAX, DEHRADUN, UTTRAKHAND 2023 (7) TMI 917 - CESTAT NEW DELHI also observed that when the entire tax due has been deposited in the account of the Central Government though not entirely by the appellant as the service provider but also by the service recipients, it will not be possible to sustain the demand. Since the appellant has paid the 50% of the tax due and remaining 50% has been paid by the service recipient with regard to the impugned taxable service, the duty liability stands discharged as 100% tax is deposited in the government exchequer. There is no loss to the Revenue for which they can claim that the duty has been short paid. The issue has been decided on merits in favour of the appellant and hence it is not necessary to go into the question of invocation of the extended period of limitation or the levy of interest and penalty. The impugned order, is unsustainable and deserves to be set aside. The appeal is, accordingly allowed.

Summary

Issues:
Challenge to demand of service tax, applicability of Notification No.30/2012, sustainability of tax demand when paid by appellant and service recipient, principle of discharge of tax liability, liability of service tax on interchange fees.

Analysis:
The appellant, a construction service provider, contested the demand of service tax imposed under the Finance Act, 1944. The issue revolved around the appellant's payment of service tax at a reduced rate of 6.18% under the Works Contract Service, availing benefits under Notification No.30/2012. However, the Revenue argued that the services provided did not fall under the works contract category, leading to a show cause notice for short-paid service tax of Rs.32,01,077. The demand was upheld in the order-in-original and the subsequent appeal.

The Tribunal referred to the Karnataka High Court's decision in Zyeta Interiors Pvt. Ltd. v. Vice Chairman, establishing that once tax liability is discharged, regardless of the payer, the assessee cannot be asked to repay the tax. Citing various Tribunal decisions and the principle that full tax payment to the government discharges the liability, the Tribunal found in favor of the appellant. The judgment emphasized that if the government received the entire tax amount, the assessee cannot be compelled to pay again, even if only a portion was initially paid by them.

Drawing on the Supreme Court's ruling in Commissioner of GST & Central Excise v. M/s Citi Bank N.A., the Tribunal rejected the Revenue's claim for additional tax payment. The Court's stance on not taxing a single service more than once was pivotal in deciding that the appellant's partial payment, coupled with the service recipient's contribution, fulfilled the tax liability. Consequently, the Tribunal deemed the demand unsustainable, as the entire tax due was remitted to the government, causing no loss to the Revenue.

Given the merit-based decision in favor of the appellant, the Tribunal deemed it unnecessary to delve into the extended limitation period invocation, interest, or penalty imposition. Consequently, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

In conclusion, the judgment highlighted the significance of discharging tax liability in full to the government, irrespective of the payer, to preclude double taxation. The ruling underscored the principle that complete tax payment absolves the assessee of further tax obligations, ensuring fairness and preventing revenue loss.