Independent service tax liability of sub-contractors upheld; bona fide belief and limitation defence rejected on clear disclosure facts.

A sub-contractor rendering construction service is independently liable for service tax on its own taxable service, even if the main contractor has already discharged tax, so the demand on merits was sustained. The plea that the extended period was barred by limitation failed because the relevant Board circular had been amended in 2005, the liability was then clear, and the assessee neither sought departmental clarification nor obtained registration. In the absence of bona fide belief or disclosure, invocation of the extended period was upheld and the full service tax demand remained confirmed.

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Issues: (i) Whether a sub-contractor providing construction service was independently liable to pay service tax even when the main contractor had discharged the tax; (ii) Whether the demand for the extended period was barred by limitation on the ground of bona fide belief and absence of suppression.

Issue (i): Whether a sub-contractor providing construction service was independently liable to pay service tax even when the main contractor had discharged the tax.

Analysis: The liability to tax was examined with reference to the settled position that a sub-contractor is separately liable for service tax on the service provided by it, notwithstanding payment of tax by the main contractor. The demand on merits was therefore sustainable.

Conclusion: The sub-contractor was independently liable to pay service tax, and the demand on merits was upheld against the assessee.

Issue (ii): Whether the demand for the extended period was barred by limitation on the ground of bona fide belief and absence of suppression.

Analysis: The plea of limitation was rejected because the Board circular had already been amended in 2005, after which the liability of the sub-contractor was clear. The assessee neither approached the department to establish any bona fide belief nor obtained registration. In these circumstances, the claim of bona fide belief was not accepted and the extended period was held invocable.

Conclusion: The demand for the extended period was not time-barred and was sustained against the assessee.

Final Conclusion: The order confirming service tax demand was sustained in full, and the appeal failed.

Ratio Decidendi: A sub-contractor is independently liable for service tax on its own taxable service, and where the liability had become clear after the relevant circular amendment, absence of registration and failure to disclose the position negate bona fide belief and justify invocation of the extended period.

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