2008 (7) TMI 137 - AT - Service Tax

Tribunal rules on Service Tax in composite contract, directs additional deposit.

The Tribunal found that the applicant, in a composite contract for business auxiliary service, was not paying Service Tax on loading, unloading, and ... Business auxiliary service - composite contract - service tax liability on gross amount received - sub-contracting and principal's liability - pre-deposit/waiver of pre-depositComposite contract - business auxiliary service - sub-contracting and principal's liability - service tax liability on gross amount received - pre-deposit/waiver of pre-deposit - Whether total waiver of pre-deposit of the service tax demand relating to crushing, loading/unloading and transportation under a composite contract is justified - HELD THAT: - The applicant had entered into a single composite contract with the service recipient covering crushing of iron ore together with loading, unloading and transportation, although parts of the activities (loading/unloading and transportation) were performed through sub-contractors who paid service tax. The Tribunal observed that the terms and conditions of the composite contract determine the legal liability, and mere subcontracting of portions of the performance does not automatically disentitle the principal-contractor from tax liability where the contract is composite and consideration is received as a whole. In view of the composite nature of the agreement and the revenue's contention that amounts charged to the recipient included higher bundled rates, the Tribunal found the case unsuitable for a complete waiver of the demand. Exercising its discretion on pre-deposit, the Tribunal directed a part deposit rather than full waiver, while recording that some amount had already been paid by the applicant.Application for total waiver of pre-deposit refused; applicant directed to deposit Rs. Ten lakhs in addition to amounts already deposited; compliance to be reported on 15-9-2008.Final Conclusion: The application for total waiver of pre-deposit was rejected because the services formed part of a composite contract and subcontracting did not absolve the applicant; a partial pre-deposit of Rs. Ten lakhs (over amounts already deposited) was ordered and compliance was to be reported on the specified date. Issues:Waiver of pre-deposit of duty and penalties for Service Tax on loading, unloading, and transportation charges in a composite contract.Analysis:The applicant sought a waiver of pre-deposit of duty amounting to Rs. 61,15,208/- and penalties related to Service Tax on loading, unloading, and transportation charges in a composite contract. The applicant contended that they were not liable to pay Service Tax as they subcontracted the loading, unloading, and transportation services, with the subcontractors paying the Service Tax. Additionally, the applicant claimed to have already paid around Rs. 9 lakhs. On the other hand, the Revenue argued that the composite contract included crushing of iron ore, loading, unloading, and transportation services, and the applicant was charging higher rates from the service recipient than what they were actually paying. The Revenue maintained that the applicant should be liable to pay Service Tax on the gross amount received by them.The Tribunal found that the applicant had entered into a composite contract for providing business auxiliary service, but they were not paying Service Tax on the loading, unloading, and transportation charges, citing that these services were provided by subcontractors. The terms and conditions of the agreement between the applicant and the service recipient indicated a composite nature of the contract. Consequently, the Tribunal ruled that it was not a suitable case for a total waiver of the Service Tax demand. The Tribunal directed the applicants to deposit an additional amount of Rs. Ten lakhs on top of the already deposited sum. The matter was scheduled to come up for reporting compliance on 15-9-2008.