Contractor not liable for service tax due to main contractor's payment. Demand barred by limitation. Appeal allowed.

The appellant was found not liable to pay service tax as a sub-contractor, as the main contractor had already discharged the liability on the full contract value. The Tribunal ruled that the demand was barred by limitation due to the appellant's bonafide belief supported by legal precedents and circulars. Despite the technical sustainability of the demand, it was set aside, and the appeal was allowed.

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Issues involved:
Whether the appellant is liable to pay service tax as a sub-contractor when the main contractor discharged the liability on the full contract value, and if the extended period of limitation can be invoked.

Issue 1: Liability to pay service tax as a sub-contractor and invocation of extended period of limitation

The appellant contended that the demand is not sustainable on limitation as it was beyond the normal period, citing bonafide belief based on circulars and legal precedents. The appellant argued that there was no revenue loss to the exchequer as the main contractor had already paid the service tax on the total contract value. The appellant relied on various judgments to support their position. On the contrary, the Revenue argued that the appellant's failure to obtain service tax registration during the relevant period indicated a malafide intention.

Issue 2: Interpretation of relevant circulars and legal precedents

The Tribunal analyzed the facts and legal framework, noting that the main contractor had already discharged the service tax liability on the total contract value, including the sub-contractor's services. The Tribunal highlighted the contradictory circulars issued by the Board over time, initially stating that sub-contractors need not pay service tax when the main contractor has already done so, but later reversing this stance. The Tribunal also referenced the decision of a Larger Bench in a specific case, which clarified the sub-contractor's liability to pay service tax. Considering these factors, the Tribunal found that the demand, though technically sustainable, was barred by limitation due to the appellant's bonafide belief based on legal precedents and circulars. Consequently, the impugned order was set aside, and the appeal was allowed.

Separate Judgment by Judges:
No separate judgment was delivered by the judges in this case.

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