Service tax liability on sub-consultant services turned on a prima facie view that the prime consultant was the proper recipient.

Waiver of pre-deposit for service tax and penalty was granted on a prima facie view that the tax liability, if any, attached to the prime consultant rather than the sub-consultant. The departmental circular relied upon indicated that services must be rendered directly to the client, and that services rendered to the prime consultant do not shift the levy to the sub-consultant. On that basis, the applicant was held to have made out a strong prima facie case against the demand.

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Issues: Whether waiver of pre-deposit of service tax and penalty was justified on a prima facie view that the tax liability, if any, fell on the prime consultant rather than the applicant acting as a sub-consultant.

Analysis: The Board circular relied upon stated that services must be rendered directly to the client, and that where services are rendered to the prime consultant, the levy does not fall on the sub-consultant but on the prime or main consulting engineer. On that basis, the applicant was found to have made out a strong prima facie case against the demand.

Conclusion: Waiver of pre-deposit of the service tax and penalty was granted.

Ratio Decidendi: Where the departmental circular indicates that service tax liability lies on the prime consultant receiving the service, a sub-consultant can establish a prima facie case for waiver of pre-deposit.

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