Erection, Commissioning and Installation service tax liability: subcontractor liable though extended period demands disallowed; penalty cancelled.

A subcontractor is liable to pay service tax on erection, commissioning and installation services even if the main contractor has discharged tax on the same activity, following the Larger Bench precedent. Extended period of limitation cannot be invoked where the service tax liability of the main contractor and subcontractor arises from a common source agreement, so demands for the earlier period were timebarred while the normal period demand (Oct 2008-Mar 2009) stands. The matter is remanded to quantify tax and interest for the normal period; penalty set aside for lack of intent to evade.

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Issues Involved:
1. Liability of sub-contractor to pay service tax when the main contractor has already paid it.
2. Applicability of extended period of limitation for demanding service tax.
3. Imposition of penalties on the appellant.

Summary:

1. Liability of Sub-Contractor to Pay Service Tax:
The appellant argued that as a sub-contractor, they were not liable to pay service tax since the main contractor had already paid it. They cited various rulings and a trade notice to support their position. However, the Tribunal referred to the Larger Bench decision in CST vs. Melange Developers P. Ltd., which held that a sub-contractor is liable to discharge service tax on the consideration received from the main contractor. The Tribunal concluded that the appellant/sub-contractor is liable to pay the service tax even if the main contractor has discharged the liability.

2. Applicability of Extended Period of Limitation:
The appellant contended that the demand was time-barred as they were under a bona fide belief that no service tax was payable by them. The Tribunal acknowledged that there were various circulars and judicial decisions that could have led to a bona fide belief. It cited the Delhi Tribunal's decision in Max Logistics Ltd. and the Larger Bench decision in Melange Developers P. Ltd., which supported the appellant's position that the extended period of limitation could not be invoked. The Tribunal concluded that the demand for the extended period was not sustainable.

3. Imposition of Penalties:
The appellant argued that no penalty should be imposed as there was no intention to evade tax. The Tribunal agreed, noting that the issue involved interpretation of law and there was no intention to evade payment of duty. It concluded that penalties could not be imposed on the appellant.

Conclusion:
The Tribunal held that the appellant, as a sub-contractor, is liable to pay service tax but the extended period of limitation cannot be invoked. The case was remanded to the original authority to compute the demand for the normal period along with interest. Penalties were not imposed on the appellant. The appeal was partly allowed and remanded back for determining the tax liability for the normal period.

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