2018 (9) TMI 1724 - AT - Service Tax

Tribunal rules sub-contractor not liable for service tax if main contractor paid

Commissioner of Central Excise, Customs and Service Tax Cochin-cce Versus Yeskay Construction

The Tribunal upheld the decision in favor of the appellant, ruling that the sub-contractor was not liable to pay service tax if the main contractor had ... Works contract - construction of complex services - period from 16/06/2005 to 30/09/2006 - Held that:- The present case is squarely covered by the decisions of the Hon’ble Supreme Court in the case of Larsen & Toubro Ltd. [2015 (8) TMI 749 - SUPREME COURT] wherein the Hon’ble Apex Court has held that works contracts are not liable to service tax prior to 01/06/2007 and in the present case, the period involved is 16/06/2005 to 30/09/2006. The assessee’s case is also covered by various circulars issued by the Board i.e., Circular No.B11/3/98 dt. 07/101998, DGSTS letter F.No.v/dGST/Misc.-7/98 dt. 11/02/1999 and Trade Notice No.7/98-St dt. 13/10/1998 of CCE, Mumbai wherein it was clarified that the service rendered by the subcontractor to the main contractor is not liable to service tax as the main contractor was paying the service tax on the entire work done including that of the respondent. Appeal dismissed - decided against Revenue. Issues:1. Whether the sub-contractor is liable to pay service tax if the main contractor has already paid the taxRs.2. Applicability of service tax on construction services provided by the appellant.3. Interpretation of relevant circulars and trade notices by the Board.4. Impact of the circular issued by CBEC in August 2007 on the tax liability of sub-contractors.5. Relevance of past judicial decisions on the taxation of works contracts.Analysis:1. The appeal was filed by the Revenue against the order passed by the Commissioner(Appeals) in favor of the assessee, setting aside the Order-in-Original. The dispute revolved around whether the sub-contractor is liable to pay service tax if the main contractor has already discharged the tax liability. The Revenue contended that the sub-contractor is still liable to pay tax, citing relevant Board circulars. However, the assessee argued that as per past judicial decisions and Board circulars, if the main contractor has paid the tax, the sub-contractor is not required to pay tax on the same service.2. The appellant, engaged in construction services, was registered with the Central Excise Department. The case involved the construction of residential complexes where materials like steel and cement were supplied free of cost by the builders. The appellant claimed exemption from service tax based on Notification No.18/2005-St. The dispute arose regarding the tax liability on services provided from 16/06/2005 to 30/09/2006. The Jt. Commissioner demanded service tax and imposed penalties, which the Commissioner(Appeals) set aside, leading to the Revenue's appeal.3. The Revenue argued that the impugned order was unsustainable as it did not consider relevant Board circulars clarifying the tax liability of subcontractors. The appellant, on the other hand, relied on past circulars and trade notices to support their claim that the sub-contractor is not liable to pay tax if the main contractor has already paid it. The interpretation of these circulars and their applicability to the present case was crucial in determining the tax liability.4. The appellant highlighted that the CBEC issued a circular in August 2007, clarifying the tax liability of subcontractors. However, the period in question in this case was prior to this circular, and the appellant argued that the circular was not applicable. Past judicial decisions such as Urvi Constructions Vs. CST, Ahmedabad were cited to support the contention that the sub-contractor's tax liability is linked to the main contractor's payment.5. The Tribunal, after considering the arguments and relevant precedents, upheld the impugned order, citing the Supreme Court's decision in the Larsen & Toubro Ltd. case. The Tribunal found that works contracts were not taxable before 01/06/2007, which covered the period in question. Additionally, the Tribunal agreed with the appellant's interpretation of the Board circulars, stating that the sub-contractor was not liable to pay tax if the main contractor had already paid it. The appeal of the Revenue was dismissed based on these findings.This detailed analysis of the judgment covers the issues involved comprehensively, highlighting the key arguments presented by both parties and the Tribunal's reasoning behind the decision.