2016 (5) TMI 785 - AT - Service Tax

Tribunal upholds service tax demand and interest liability for direct payments to sub-contractors

The appeal was dismissed by the tribunal as it found no issues with the order confirming the service tax demand, education cess, and interest. The ... Liability to pay interest on delayed service tax - meaning of 'receive' for tax liability - deemed receipt - principal contractor's liability for services rendered through sub-contractors - payments made on behalf of the assesseeDeemed receipt - meaning of 'receive' for tax liability - liability to pay interest on delayed service tax - payments made on behalf of the assessee - principal contractor's liability for services rendered through sub-contractors - Whether appellant is liable to pay interest for delayed service tax in respect of amounts directly paid by the principal (SAIL) to subcontractors pursuant to court orders - HELD THAT: - The Tribunal held that the services in question were rendered to SAIL under contracts between the appellant and SAIL, while the subcontractors merely performed portions of those obligations under sub-contracts with the appellant. Payments made by SAIL directly to subcontractors pursuant to the High Court's orders discharged the appellant's liability towards those subcontractors and were therefore payments made on behalf of the appellant. Consequentially, for tax purposes the appellant must be treated as having received those payments (deemed receipt) and bears the responsibility for timely discharge of service tax thereon. Since service tax relating to such amounts was paid after the due date, interest is chargeable against the appellant. The appellant's contention that it did not 'receive' those payments and therefore cannot be made liable for interest was rejected as untenable.Appellant is deemed to have received payments made directly by SAIL to subcontractors and is liable to pay interest on delayed service tax in respect of those payments.Final Conclusion: Appeal dismissed; no error found in the impugned order sustaining interest liability on delayed service tax in respect of payments made directly by the principal to subcontractors. Issues:Appeal against order confirming service tax demand, education cess, and interest. Appellant contests only the demand of interest.Analysis:The appeal was filed against an order confirming a service tax demand, education cess, and interest. The appellant contested only the demand of interest, not the service tax or education cess. The appellant had entered into contracts with a company and also sub-contracted some services. The company made payments directly to the sub-contractors as per a court order. The appellant argued that since it did not receive these direct payments, it should not be liable for interest. However, the tribunal found that the services were rendered to the company as per the contracts, and the direct payments to sub-contractors were made on behalf of the appellant. The tribunal noted a court order where the appellant was the judgment debtor and the sub-contractor was the decree holder, indicating the liability of the appellant towards the sub-contractors. Therefore, the tribunal held that the appellant was deemed to have received those payments and was liable to pay interest if the service tax was paid later than the due date.The tribunal concluded that there was no infirmity in the order under appeal that would warrant appellate intervention. As a result, the appeal was dismissed.