TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
of 
of 
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of of 
All Case Laws
of of All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of <h1>Appellate tribunal affirms sub-contractor's tax liability despite principal contractor's actions.</h1> The appellate tribunal upheld the decision of the primary authority, rejecting the sub-contractor's appeal. It emphasized the sub-contractor's liability ... Commercial or industrial construction services - Non remittance of service tax - ST-3 Returns not filed - Appellant took plea under Board Circular 7.10.98 - Held that:- Clarifications by the Board are intended to guide field formations, but occasionally tend to achieve the opposite. Provisions of the Finance Act, 1994 clearly enjoin that service tax is remittable (unless otherwise provided in the Statute) by every taxable service provider at every stage of provision of a taxable service. The recipient of a taxable service may be entitled to avail input credit of the service tax remitted, within the ambit of provisions of the Cenvat Credit Rules. The fact that taxable service is provided at various stages or by several agencies sequentially does not alter the trajectory of the legislative provisions. Circulars dealt with customs house agent service and architect service. It is axiomatic that while the Board may be authorized to issue any instruction/guidance to field formations, there is no legislative authority for the Board to be issuing comprehensive commentary on the entire gamut of the Finance Act, 1994 The appellant could hardly claim to have been misled by a Board Circular issued in respect of a wholly distinct service and drawing generic jural principles from such circulars. Had the appellant gone through the provisions of the Finance Act, 1994, there would be no occasion for a doubt as to its liability to service tax - Decided against assessee. Issues:1. Liability of sub-contractor for service tax when principal contractor remits tax.2. Interpretation of Board Circulars and their legal validity.3. Applicability of extended period of limitation in tax liability cases.Issue 1: Liability of sub-contractor for service tax when principal contractor remits taxThe case involved a sub-contractor providing commercial or industrial construction services (CICS) to certain entities but failing to file returns or remit service tax. The sub-contractor argued that since the principal contractor had remitted service tax on the amount received from the ultimate recipient, the sub-contractor was not liable to remit service tax. However, the appellate authority rejected this argument, citing a Board Circular clarifying that a sub-contractor, being a taxable service provider, is required to remit tax even if the services are used by the main service provider. The appellate authority upheld the primary authority's decision, emphasizing that the sub-contractor's liability remains irrespective of the principal contractor's tax remittance.Issue 2: Interpretation of Board Circulars and their legal validityThe sub-contractor relied on Board Circulars dated 7.10.98 and 6.6.97 to support their argument that if the principal contractor pays service tax, the sub-contractor is not liable. However, the presiding judge found these Circulars to misstate the legal position and contradict the provisions of the Finance Act, 1994. The judge highlighted that the Circulars were meant as guidance for field formations but should not override legislative provisions. It was concluded that the Circulars did not absolve the sub-contractor of their service tax liability, as mandated by the Act.Issue 3: Applicability of extended period of limitation in tax liability casesThe sub-contractor contested the invocation of the extended period of limitation for tax liability for the years 2005-06 to 2007-08, arguing a bona fide belief based on the Board Circulars. However, the judge dismissed this argument, stating that the Circulars referred to different services and could not mislead the sub-contractor regarding their liability. The judge emphasized that the Board's instructions do not provide a comprehensive commentary on the Finance Act, 1994. Therefore, the sub-contractor's claim of being misled was deemed unjustified, and the extended period of limitation was held to be justifiable in this case.In conclusion, the appellate tribunal upheld the decision of the primary authority and rejected the sub-contractor's appeal, emphasizing the sub-contractor's continued liability for service tax despite the principal contractor's tax remittance. The judge also highlighted the importance of adhering to legislative provisions over Board Circulars and justified the application of the extended period of limitation in tax liability cases.
TaxTMI 
TaxTMI 
