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TMI Blog2024 (6) TMI 446X X X X Extracts X X X X X X X X Extracts X X X X ..... 29.08.2003 made between UPDESCO and the Government of Uttar Pradesh - appellant is a sub-contractor to M/s UPDESCO for providing these services. For providing these services appellant is getting 16% of the billed amount as commission and these activities of providing services on commission basis. From the above it is evident all the ingredients to classify the services rendered by the appellant to UPDESCO and UPECL contains all the element of definition of Business Auxiliary Services, particularly sub clause vi. Since the amount is in the form of commission and in planned manner, therefore, the type of work is squarely covered under Business Auxiliary Service. Service tax is a transaction based tax and liability to tax is to be determined on the basis of the transaction between the transacting party i.e. service provider and the service recipient. In the present case service provider is appellant and the service recipients are UPDESCO, UPELC etc. The services provided by the appellant to these organizations are correctly classifiable under taxable category of Business Auxiliary Services. Liability to pay service tax in respect of services provided by them as sub-contractor - Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015 is directed by revenue both against Order-in-Original No.28/Commr./Lko/ST/2014-15 dated 17/12/2014 passed by Commissioner of Central Excise Service Tax, Lucknow. By the impugned order following has been held:- ORDER (i) I confirm the demand of Rs. 3,53,30,033 (Rs. Three Crore fifty three lakhs thirty Thousand and thirty three only) under proviso to section 73 (1) of the Finance Act, 1994 along-with interest u/sec 75 of the Act for violation of section 68 read-with Rule 6 of the Rules and order the same to be recovered from M / s Technosys Services (P) Ltd, Lucknow. I appropriate the service tax of Rs. 63 ,59,874/- deposited by M / s Technosys Services (P) Ltd, vide various Challans. I order to recover interest under Section 75 of the Act on delayed payment of Rs. 63,59,874/. (ii) I order to recover interest at appropriate rate on the above confirmed demand of service tax from M / s Technosys Services (P) Ltd, Lucknow under Section 75 of the Finance Act, 1994. (iii) I impose penalty of Rs. 3,53,30,033 (Rs. Three Crore fifty three Lakhs thirty Thousand and thirty three only) upon M / s Technosys Services (P) Ltd, Lucknow under section 78 of the Act. Since penalty under section 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 181129 90565 9328147 2009-10 52449986.00 10.30 5244999 104900 52450 5402349 2010-11 84715112.00 10.30 8471511 169430 84715 8725657 Total= 308956454.00 Total= 308956454.00 Total= 308956454.00 2.3 It was also observed that appellant-assessee has calculated the service tax with intend to evade payment of service and suppress the value of services provided by them for this reason, extended period of limitation was also invokeable against the appellant. Hence, they were also liable for penal action under Section 76 and 78 of the Finance Act, 1994. Show cause notice dated 20.04.2012 issued to the appellant asking them to show cause as to why:- (i) Service Tax to the tune of Rs.3,43,31,473/- Education Cess Rs. 6,86,629/-and Secondary and higher Education Cess totaling to Rs.3,53,30,033/- (Rupees Three Crore Fifty Three Lakh Thirty Thousand Thirty Three only) from the period 2006-07 to 2010-11, should not be demanded and recovered from them under the proviso to Section 73(1) of the Finance Act, 1994. (ii) Interest should not be charged on the aforesaid amount and recovered from them at the appropriate rate till date of actual payment under Section 75 of the Act; (iii) (a) Penalty should no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 16.05.2008 to 30.07.2010. Service Tax on services provided after 01.07.2010 amounting to Rs.63,59,874/- has been paid by the appellant under the category of IT Services and no service tax remain unpaid. The said goods supplied to the tune of Rs.6,01,72,486.28 on which they were paid VAT to the State Government. This amount has also been included while making this demand in gross receipt of the appellant. Demand of Rs.70,25,542/- which is in relation to sale of the goods is not sustainable. 3.3 Learned Authorised Representative reiterates the findings recorded in the orders of the lower authority. With regard to departmental appeal he submits that penalties under the Section 76 78 was required to be imposed on the appellant for the period prior to 10.05.2008 as has been held by Hon ble High Court of Delhi in the case of Bajaj Travels Ltd. 2012 (25) STR 417 (Del.). 4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument. 4.2 The first issue in the present case is with regard to determination of the classification of the services that are sought to be taxed while the demand has been made under the category of Business Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents for the creation of and inclusion in other information technology software products, (vi) providing the right to use information technology software supplied electronically is a 'taxable service'. According to Section 65(53a), Information technology software means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment. 4.3 Admittedly, appellant was providing these services of printing of voter electoral rolls and voter cards to various government authorities in terms of agreement entered by them with UPDESCO. The fact that these services were to be provided by UPDESCO is evident from the contract dated 29.08.2003 made between UPDESCO and the Government of Uttar Pradesh. The terms of the agreement between appellant and UPDESCO are as follows:- I. Appellant was appointed by UPDESCO as General Marketing Associate (GMA) for Software development works and Services. II. The empanelled firms/ organizations which become GMA of UPDESCO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the above agreement, sharing of the revenue between UPDESCO and M/s Technosys would takes place as under- The billing to end client will be done by UPDESCO and all payments shall accrue to UPDESCO. The sharing of the revenue shall be as governed as approved by the Board of Directors of UPDESCO (Appendix-D to the Agreement) which is as following:- A. For executing PROJECT sharing of the revenue shall be as specified in the sub clauses 16.1 and B. For delivery of PRODUCT sharing of the revenue shall be as specified in the sub clauses 16.2. 16.1 For Project: The sharing of the revenue in case of executing a PROJECT shall be as specified in the paragraphs (a) to (k) of this sub clause:- a. UPDESCO will charge 16% of the billed amount payable by the client as its marketing charge. In this case the responsibility of software development project management and associated work will be of the GMA. All post sales responsibilities like Maintenance, Training etc. shall be handled by the GMA. b . However if the Project Management Work is done by UPDESCO 16% of the amount received from the client for project management work will be transferred to the GMA, rest 84% of the amount will be retaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k will be transferred to the GMA, rest 84% of the amount will be retained by UPDESCO. C. In case UPDESCO GMA take up the AMC for solutions provided to clients for the application software supplied by UPDESCO and the GMA, UPDESCO would charge 16% of the AMC billing amount, however total AMC services will have to be provided by the GMA. d. Share of GMA will be 16% of the billed amount in case the GMA markets the software developed by UPDESCO. e. UPSECO will be 16% of the billed amount for Data Entry work undertaken by the GMA of behalf of UPDESCO. f. Actual reimbursements from the client, if any, towards the cost of travelling, food and lodging of Personnel from the GMA will be paid to the GMA without any deductions. g. The expenses on third party items like registration of Domain Name under development of website/portal, rent of web space, rent of semi-dedicated server, leased line etc. will be reimbursed to the GMA without any deductions. However, the GMA will have to hire/ procure the services in the name of client for which work is being executed. Concerning bill etc. from the 3 rd party in the name of client will have to be submitted by GMA to UPDESCO. h. UPDESCO will charge 16% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PLC i.e. out of the total charges received from RCUES, Technosys- second party would get 93% share subject to completion of all necessary formalities, Whereas UPLC first party shall retain 7% share towards its institutional charges and other overheads 6. Nature of work provided by M/s Technosys Services supply of Computer Hardware and customized software for various offices of Nagar Nigams and Jal Sansthans on the basis of work awarded by Regional Centre for Urban and environmental Studies ( RCUES), Lucknow. 4.6 The nature of work is governed by the agreement between M/s UPDESCO and the appellant according to which it is very clear that 16% of amount out of the total work would be shared by the party on certain condition and elaborate scrutiny of agreement clearly stipulates that the nature of such amount is being received by the party as commission. In terms of the agreements between UPDESCO and the organizations of Government of UP, it is evident that appellant is not providing any services particularly to U.P. Government in relation to printing of voter electoral rolls and voter cards, but these services are the services which are being provided by UPDESCO to Government of U.P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ork is governed by the agreement entered into with UPDESCO and the noticee which clearly establishes that the amount received by the noticee is Commission which falls under BAS and not under the category of IT. Also, Information Technology Software Service means any service related to designing or developing of computer software or system networking or any other service primarily in relation to operation of computer systems. Preparation of PDFs and uploading it on internet is not necessary for operation of computer systems and comes under Business Auxiliary Service but doesn't appears to fall under Information Technology Software Service . 38. The noticee has also pleaded that they had executed the work of printing of voter list during the period of dispute and as per notification no. 14/2004-ST dated 10.09.2004, printing is exempted from the levy of service tax under Section-66 of Finance Act, 1994. The contention of the noticee is not tenable as from the reading of notification no. 14/2004-ST dated 10.09.2004, it is clear that the exemption has been given to service provided to a client by a commercial concern in relation to the business auxiliary service, related to (a) proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... them as sub-contractor. The said contention has been rejected by the Commissioner and we find that the liability of sub-contractor to pay service tax even if main contractor was pas paying the service tax on the services rendered has been decided by the Larger Bench of the Tribunal in the case of Melange Developers P. Ltd. [2020 (33) GSTL 116 (LB)] wherein following has been held: 15. It is not in dispute that a sub-contractor renders a taxable service to a main contractor. Section 68 of the Act provides that every person, which would include a sub-contractor, providing taxable service to any person shall pay Service Tax at the rate specified. Therefore, in the absence of any exemption granted, a sub-contractor has to discharge the tax liability. The service recipient i.e. the main contractor can, however, avail the benefit of the provisions of the Cenvat Rules. When such a mechanism has been provided under the Act and the Rules framed thereunder, there is no reason as to why a sub-contractor should not pay Service Tax merely because the main contractor has discharged the tax liability. As noticed above, there can be no possibility of double taxation because the Cenvat Rules allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.1 We agree with the submission of the Ld. Counsel that no double taxation is permissible under the law. The Constitution (Article 265) provides to take the exact amount of tax i.e. neither more nor less. In the instant case, if the principal has already paid the Service Tax, then the same cannot be demanded from the appellant. As per the clarification of 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. 19. M/s. Dhaneshra Engineering Works followed the aforesaid decision in BCC Developers and Promoters Pvt. Ltd. 20. In M/s. Edac Engg. Ltd., the Division Bench, after placing reliance upon the decision of the Tribunal in Urvi Construction, observed : 6.2 We are therefore of the considered opinion that these case laws are distinguishable from the decision taken by this very Bench in the case of the present appellants Edac Engineering Ltd. in Final order dated 19-12-2016. We also find that the very same Board s Circular No. 97/8/2007-S.T., dated 23-8-2007, relied upon by the Ld. AR has been taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice tax paid by a sub-contractor which becomes part of service further provided by the main contractor, the scheme of credit as envisaged by the Cenvat Credit Rules, 2004 will come into play subject to fulfilment of conditions therein. It is nobody s case that the sub-contractors per se are not liable to service tax even if they rendered taxable service............ [emphasis supplied] 24. The same view was taken by the Division Bench of the Tribunal in CCE S.T., Raipur v. M/s. J.K. Transport, reported in 2017 (9) TMI 993 - CESTAT New Delhi. The relevant paragraph is reproduced below : 5. We find that the CBEC vide Circular dated 23-8-2007 has clarified that the services provided by the sub-contractor is a taxable service, even if the same is used for completion of the work by the main service provider. Thus, for providing the taxable service, the sub-contractor is liable for payment of service tax on provision of such service.......... 25. Similar views were taken by the Tribunal in (i) Max Logistics Ltd. v. Commissioner of Central Excise, Raipur, reported in 2017 (47) S.T.R. 41 (Tri. - Del.); (ii) Hargovind Electric Decorators v. Commissioner of Central Excise, Jaipur-I, report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to verification of evidence as well as rules made under the law w.e.f. 10-9-2004. No set off is permissible prior to this date when sub-broker was not within the fold of law during that period. 27. The Commissioner did express in the impugned order that under the Cenvat Scheme every stage of provision of service is required to be taxed and if a sub-contractor discharges the Service Tax liability, it will not result in double taxable even if the main contractor discharges the Service Tax liability because the credit of the earlier tax paid is available at a subsequent stage, but it is because of the decision of the Tribunal in Urvi Construction, that the Commissioner held that double taxation would result if a sub-contractor is also required to discharge Service Tax liability when the main contractor has discharged the entire liability. 28. Learned Counsel for the Respondent has, however, relied upon the decision of the Supreme Court in Larsen and Toubro Ltd. v. Additional Deputy Commissioner of Commercial Taxes and Anr., reported in 2016-TIOL-155-SC-VAT. In this case, the contracts which were secured by the Appellant therein were works contract and a part thereof was assigned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the sides and perusal of the material on record, we find that the issue whether subcontractor is liable to pay service tax on the services on which the main contractor had paid the service tax, there were contrary decisions on this issue among the various benches of the Tribunal and the matter was referred to the Larger Bench and the Larger Bench has settled the issue in the case of CST Vs. Melange Developers P. Ltd., 2020 (33) GSTL 116 (LB). Further, we find that in the case of Vinoth Shipping Services Vs. Commissioner of Ex. S.T., Tirunelveli reported in 2021 (55) GSTL 313 (Tri.-Chennai) where the Division Bench of the Tribunal after following the Larger Bench Decision has held as under:- 8.1 . 9. Following the above decisions, we have no hesitation to hold that 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. 10. Further, we find that the issue whether in such cases extended period of limitation can be invoked or not was also considered by various benches of Tribunal and in this regard the Delhi Tribunal in the case of Max ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence can be made to the Tribunal's decisions in British Airways v. CCE (Adjn.), Delhi reported in 2014 (36) STR. 598 (Tri. - Del.), Atul Ltd. v. CCE, Surat-Il reported in 2009 (237) E.LT. 287 (Tri. - Ahmd.). In the facts and circumstances of this case, we find that the demand for extended period is not sustainable. We have also perused the reasons recorded by the Original Authority for invoking extended period of demand. He recorded that but for the Department's investigation the non- payment of tax would not have come to the notice. Further, the balance sheet for certain years have not been furnished in time by the appellant which was obtained from Registrar of Companies. As such, it was held that the appellants wilfully suppressed material facts. We find that the service tax demand against the appellant was sought to be confirmed mainly on the basis of the terms of agreement between the appellant and RSIC. The gross receipt of RSIC and service tax payment thereupon is available with the Department. A portion of that receipt is now being taxed under BIS at the hands of the appellant. The service. tax liability is as such on the arrangement based on agreement which is als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ynergy Audio Visual Workshop P. Ltd. v. CST, Bangalore 2008 (10) S.T.R. 578 (Tri.-Bang.)= 2008-TIOL-809-CESTAT-BANG - OIKOS v. CCE , Bangalore 2007 (5) S.T.R. 229 (Tri-Bang)= 2006- TIOL-1760-CESTAT-BANG In the Tribunal's decision in the case of OIKOS v. CCE, Bangalore - III reported in 2007 (5) S.T.R. 229 confirmed against the subcontractor. To the similar effect the Tribunal decision in the case of Viral Builders v. CCE, Surat reported in 2011 (21) S.T.R. 457 (Tri.- Ahmd.) =2010-TIOL-1575-CESTAT- AHM observed that service stands provided only once and as such tax is not payable twice for the same service. Further in the case of Sunil Hi-Tech Engineers Ltd. v. CCE, Nagpur reported in 2010 (17) S.T.R. 121 (Tri.-Mumbai) 2009- TIOL-1867-CESTAT-MUM, the service tax confirmed against the subcontractor was set aside on the ground that the main contractor has already paid the Service Tax and the matter was remanded to verify the above effect. The same ratio was laid down by the Tribunal in the case of Newton Engg. Chemicals v. CCE, Vadodara reported in 2008 (12) S.T.R. 378 (Tri- Ahmd.) and by the Larger Bench decision of the Tribunal in the case of Vijay Sharma Co. v. CCE, Chandigarh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are not in position to uphold the invocation of extended period of demand the penalties imposed under Section 78 of the Finance Act, 1994 cannot be upheld, as the ingredients for invoking extended period and Section 78 are identical. So if extended period cannot be invoked penalties under Section 78 need to be set aside. In case of Rajasthan Spinning and Weaving Mills Ltd [2009 (238) ELT 3 (SC)] following has been held: 19 . From the aforesaid discussion it is clear that penalty under Section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section. 20 . At this stage, we need to examine the recent decision of this Court in Dharamendra Textile (supra). In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Clauses also the similar indication has been given. 27. Above being the position, the plea that the Rules 96ZQ and 96ZO have a concept of discretion inbuilt cannot be sustained. Dilip Shroff s case (supra) was not correctly decided but Chairman, SEBI s case (supra) has analysed the legal position in the correct perspectives. The reference is answered......... . 21 . From the above, we fail to see how the decision in Dharamendra Textile can be said to hold that Section 11AC would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the section for its application. 22 . There is another very strong reason for holding that Dharamendra Textile could not have interpreted Section 11AC in the manner as suggested because in that case that was not even the stand of the revenue. In paragraph 5 of the decision the court noted the submission made on behalf of the revenue as follows : 5. Mr. Chandrashekharan, Additional Solicitor General submitted that in Rules 96ZQ and 96ZO there is no reference to any mens rea as in section 11AC where mens rea is prescribed statutorily. This is clear from the extended period of limitation permissi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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