Sub-contractor not liable for service tax if main contractor paid. Extended limitation period not applicable. Department's appeal dismissed.

The Tribunal ruled in favor of the sub-contractor, holding that they were not liable to pay service tax for services rendered to main contractors if the main contractor had already paid it. The Tribunal also found that the extended period of limitation could not be invoked in this case, considering the sub-contractor's genuine belief based on past Tribunal decisions. As a result, the Department's appeal was dismissed, confirming that the service tax demand on the sub-contractor could not be upheld for the extended period of limitation.

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Issues:
1. Whether a sub-contractor is liable to pay service tax if the main contractor has already paid it.
2. Whether the extended period of limitation can be invoked in a case where the sub-contractor believed they were not liable to pay service tax due to past Tribunal decisions.

Analysis:

Issue 1: Liability of Sub-contractor for Service Tax Payment
The Department appealed against the Commissioner's decision dropping the demand for service tax on services rendered by a sub-contractor to main contractors. The Department argued, citing a Larger Bench decision, that a sub-contractor is liable to pay service tax even if the main contractor has paid it. The Tribunal agreed with the Department, stating that a sub-contractor is indeed liable to pay service tax, regardless of whether the main contractor has already paid it. The Commissioner's decision to drop the demand was set aside based on this legal principle.

Issue 2: Invocation of Extended Period of Limitation
The sub-contractor contended that the extended period of limitation should not have been invoked as they believed, based on past Tribunal decisions, that they were not required to pay service tax if the main contractor had already done so. The Tribunal acknowledged that prior to the issuance of the show cause notice and the relevant Master Circular, sub-contractors were not paying service tax due to Tribunal decisions. Considering the bona fide belief of the sub-contractor and the legal precedent cited, the Tribunal held that the extended period of limitation could not be invoked in this case. Consequently, the Tribunal dismissed the Department's appeal, ruling that the service tax demand for the work performed by the sub-contractor could not be confirmed for the extended period of limitation.

In conclusion, the Tribunal upheld the sub-contractor's position regarding the non-invocation of the extended period of limitation, leading to the dismissal of the Department's appeal. The judgment clarified the liability of sub-contractors for service tax payment and highlighted the significance of past legal precedents in determining the applicability of the extended period of limitation in tax matters.

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