2023 (3) TMI 439 - AT - Service Tax

Appeal on Service Tax Liability & Classification: Tribunal Remands for Re-Adjudication

Commissioner, Service Tax, New Delhi Versus M/s S Gupta & Contracts India Pvt. Ltd.

The appeal challenged an order where the Tribunal upheld that a sub-contractor is liable to pay service tax even if the main contractor has paid, ... Waiver of service tax - demand dropped on the ground that the respondent need not pay service tax as sub-contractor when the main contractor itself has discharged the service tax liability - service tax is liable to be paid on works contract prior to 1.6.2007 or not - extended period of limitation - HELD THAT:- This is deemed to be a fit case to remand the matter to the original authority to re-adjudicate the matter taking into account the liability of sub-contractor to pay service tax as per Melanage Developers Private Limited and the classification of the service and exigibility of the service tax on composite works as per COMMISSIONER, CENTRAL EXCISE & CUSTOMS VERSUS M/S LARSEN & TOUBRO LTD. AND OTHERS [2015 (8) TMI 749 - SUPREME COURT] - As there was confusion regarding the exigibility of the service tax, we find that the respondent had reason to believe that it was not liable to pay service tax and, therefore, extended period of limitation could not have been invoked. Therefore, only the demand of the normal period of limitation can be sustained. The appeal is remanded to the original authority to re-determine the service tax liability. Appeal allowed by way of remand. Issues:1. Sub-contractor's liability to pay service tax when the main contractor has already paid.2. Liability of service tax on works contract prior to 1.6.2007.3. Invocation of the extended period of limitation.Issue 1 - Sub-contractor's liability: The appeal challenges an order where the Commissioner dropped a service tax demand on the grounds that the respondent sub-contractor need not pay service tax when the main contractor already discharged the liability. The Revenue argued citing a Larger Bench decision that the sub-contractor is liable to pay service tax even if the main contractor has paid. The respondent contended that conflicting decisions led to their belief that they were not liable. The Tribunal upheld the Larger Bench decision, remanding the matter to re-adjudicate considering the sub-contractor's liability.Issue 2 - Liability on works contract: The second issue pertains to the liability of service tax on works contracts before 1.6.2007. The respondent argued that the Supreme Court held no service tax was due on works contracts before this date. The assessing officer conducted a best judgment assessment due to lack of information. The Tribunal noted the need for re-classification under 'works contract service' and not commercial construction service, remanding the matter for re-determination based on the actual nature of the contract.Issue 3 - Extended period of limitation: The final issue concerns the invocation of the extended period of limitation. Due to confusion regarding taxability, the Tribunal held that the extended period could not be invoked. The respondent's belief that they were not liable to pay service tax due to the confusion was considered. Only the demand within the normal period of limitation was upheld, and the matter was remanded for re-determination considering the liability of the sub-contractor and the classification of services. The Tribunal emphasized that the respondent's belief justified not invoking the extended period of limitation.