2023 (9) TMI 233 - AT - Service Tax

Sub-contractor liable for Service Tax with cum-tax benefit; Larger Bench clarifies taxability. Penalty upheld for failure to register.

M/s. P.T. Kachore Construction Versus Commissioner of Central Excise & Service Tax, Nagpur

M/s. P.T. Kachore Construction Versus Commissioner of Central Excise & Service Tax, Nagpur - TMI Issues involved: Confirmation of Service Tax demand on sub-contractor for works contract service, applicability of extended period for demand, liability of sub-contractor when main contractor has paid Service Tax, interpretation of Section 67(2) of the Finance Act, 1994.Confirmation of Service Tax demand: The Appellant, a sub-contractor providing works contract service, challenged the Service Tax demand by the Commissioner of Customs & Central Excise, Nagpur. The Appellant had not paid Service Tax on the amount received for works contract service provided to a main contractor, despite not being registered under Service Tax during the relevant period. The Commissioner confirmed the duty amount under Section 73(1) and penalties under Sections 78 and 77 of the Finance Act, 1994. The legality of this order was contested in the appeal.Appellant's arguments: The Appellant argued that when Service Tax is paid by the recipient of the service, recovering the same from the service provider would result in double taxation. Citing various decisions, the Appellant contended that the demand should be based on cum-tax value and not the gross value. The Appellant also asserted that the extended period cannot be invoked due to the absence of suppression of facts or misstatement. The Appellant highlighted confusion regarding the taxability and liability of sub-contractors when the main contractor has paid the Service Tax.Respondent's submission: The Authorised Representative for the Respondent Department countered the Appellant's arguments by referring to a Larger Bench decision which clarified that the sub-contractor is liable to pay Service Tax even if the main contractor has already paid it. The Representative emphasized that the concept of CENVAT Credit prevents double taxation and that the extended period was rightly invoked due to the Appellant's failure to register and file returns despite crossing the threshold limit.Judgment: The Tribunal held that the Appellant is liable to pay Service Tax but is entitled to cum-tax benefit as per Section 67(2) of the Finance Act, 1994. The Tribunal acknowledged the confusion surrounding the taxability of sub-contractors when the main contractor pays the Service Tax, leading to the establishment of a Larger Bench for clarity. The Tribunal concluded that the extended period cannot be invoked against the Appellant for suppression of facts. However, the Appellant was penalized under Section 77 for failure to register despite providing taxable services above the threshold. The Commissioner's order was modified, limiting the Service Tax liability to the normal period with cum-tax benefit, along with confirming the penalty and interest recovery.Separate Judgment: No separate judgment was delivered by the judges in this case.