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TMI Blog2025 (3) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... lity of the Circular - HELD THAT:- The circular is oppressive in nature in-as-much-as it has taken a diagonally opposite view that has been taken in the Trade Notice. This circular has put the burden of discharging the liability of service tax to the sub- contractor. It has been held in the case of Commissioner of Central Excise, Bangalore Vs. Mysore Electrical Industries Ltd. [2006 (11) TMI 202 - SUPREME COURT] and also in the case of Suchitra Components Ltd Vs Commissioner of C. Ex, Guntur [2007 (1) TMI 4 - SUPREME COURT] that a beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospectively. Thus, the said Circular cannot be applied retrospectively. Invocation of extended period of limitation - HELD THAT:- The appellant have not suppressed any information from the department. The appellant has followed the clarification issued in the Trade Notice. No.53-C.E (service Tax) /97 dated 04.07.1997. They have regularly filed ST-3 returns and declared in the ST- 3 returns that they have not paid service tax as a sub-contractor as the principal contractor paid service tax. The departmental audit conducted on February 20, 2008 has not is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to them are composite in nature. The appellant referred the demand of service tax made in the Notice and submitted that the department has itself extended the benefit of abatement @ 67% in terms of Notification No.1/2006-ST dated 01.03.2006 and demanded service tax on 33% of gross amount. The appellant submits that the construction services rendered by them along with materials is appropriately classifiable under the category of 'Works Contract Service' as defined in Section 65(105)(zzzza) of the Finance Act, 1994 and they were liable to pay service tax on the said services only w.e.f 01.06.2007. The issue of classification of construction services with materials under the category of 'works contract service' has been settled by the Hon'ble Supreme Court in the case of Commissioner of Central Excise & Customs Vs. Larsen & Toubro Ltd. 2015(39) STR 913 (SC). Accordingly, the appellant submits that prior to June 01, 2007, if services are provided along with materials no service tax is payable by the appellant. Further, for the period post June 01, 2007 also, the demand of service tax can be made only under works contract services. 3.1. In the instant case it is evident from the docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd penalty confirmed in the impugned order is not sustainable. 4. Regarding invocation of extended period to demand service tax, the appellant submits that the non-payment of service tax as a sub-contractor during the impugned period was well within the knowledge of the department. They have been regularly filing ST-3 retirns and declared in the ST- 3 returns that they have not paid service tax as a sub-contractor as the principal contractor paid service tax. The departmental audit conducted on February 20, 2008 has not issued any objection for non-payment of service tax as a sub-contractor. Again the department issued a spot memo dated August 25, 2008, on the basis of CERA audit, the appellant duly replied to that spot memo by a letter dated August 26, 2008, enclosing the certificate issued by the Principal contractor, wherein it has been stated main contractor depositing the service tax on entire contract value, hence being sub contractor, the appellant need not pay service tax. 4.1. However, after issuance of Master Circular 96/7/2007-ST dated 23.08.2007, department on the basis of CERA audit, issued letter dated 13.01.2009 raised the demand of service tax for the period 2004- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided by such subcontractors are used by the main service provider for completion of his work does not in any way alter the fact of provision of taxable service by the subcontractor. Services provided by sub-contractors are in the nature of input services. Service tax is, therefore, leviable on any taxable services provided, whether or not the services are provided by a person in his capacity as a subcontractor and whether or not such services are used as input services. The fact that a given taxable service is intended for use as an input service by another service provider does not alter the taxability of the service provided. 7.1. From the above, it is clear that even if the main contractor pays Service Tax on the full amount, the sub-contractor shall be liable to pay Service Tax for the services rendered by them to the main contractor. 7.2. However, we find that there were conflicting views taken by different tribunals in this case and the matter was referred to the Larger Bench and the Larger Bench has settled the issue in the case of Commissioner of ST, New Delhi V. M/s. Melange Developers Pvt. Ltd reported in 2020 (33) G.S.T.L 116 (Tri. -LB), wherein it is observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bangalore Vs. Mysore Electrical Industries Ltd. reported in 2006(204) E.L.T. 517 (SC) and also in the case of Suchitra Components Ltd Vs Commissioner of C. Ex, Guntur 2008 (11) S.T.R. 430 (SC) that a beneficial circular has to be applied retrospectively while an oppressive circular has to be applied prospectively. Thus, we hold that the said Circular cannot be applied retrospectively. 7.5. Regarding, invocation of extended period to demand service tax, we observe that the appellant have not suppressed any information from the department. The appellant has followed the clarification issued in the Trade Notice. No.53-C.E (service Tax) /97 dated 04.07.1997. They have regularly filed ST-3 returns and declared in the ST- 3 returns that they have not paid service tax as a sub-contractor as the principal contractor paid service tax. The departmental audit conducted on February 20, 2008 has not issued any objection for non-payment of service tax as a sub-contractor. Again the department issued a spot memo dated August 25, 2008, on the basis of CERA audit, the appellant duly replied to that spot memo by a letter dated August 26, 2008, enclosing the certificate issued by the Principal cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of complex services or completion and finishing services, are all classifiable under "Works Contract Service" under the Act as long as the conditions laid down in section 65(105)(zzzza) are satisfied. The materials on record conclusively evidence that the said conditions are satisfied in the instant case. However, as would be evident from the show cause notice as well as from the impugned order, there is no proposal made by the Revenue, demanding service tax under "works contract service". Therefore, in the light of consistent decisions of this Tribunals, we hold that no service tax is payable by the appellant for period, post June 01, 2007 also. 7.7. Since the demand of service tax is not sustained, there is no question of demanding interest and imposing penalties. 7.8. Regarding the service tax payable on the normal period of limitation, we observe that after the issuance of the master circular dated 23.08.2007, the appellant approached the principal contractor and on the basis of assurance of the principal contractor, for the period 2007-08, they have paid service tax to the tune of Rs. 9,84,015/- on the realized bill value of Rs. 2,08,63,084/. Thus, we observe that the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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