Service Tax Demand on Sub-contractors Time-barred; Main Contractor Already Paid, CESTAT Dismisses Revenue Appeals.

The CESTAT upheld the adjudicating authority's decision, confirming that the demand for Service Tax from sub-contractors was barred by limitation. Although the sub-contractors were liable under the Master Circular, the main contractor had already discharged the tax liability. The Show Cause Notices issued in 2011 were deemed time-barred, as the Revenue was aware of the non-payment since 2008. Consequently, the appeals filed by the Revenue were dismissed, and the impugned orders were affirmed.

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Issues involved:
The main issue in this case is whether the sub-contractors were liable to pay Service Tax during a specific period and if the demand for Service Tax is barred by limitation.

Summary:
The case involved two appeals with a common issue, both disposed of by a common order. The respondents, as sub-contractors in construction activities, were not paying Service Tax from April 2006 to March 2009, as the main contractor was discharging the liability. The Revenue contended that the sub-contractors were required to pay Service Tax as per Master Circular No. 96/7/2007-S.T. Show Cause Notices were issued to the respondents invoking the extended period of limitation. The adjudicating authority dropped the proceedings against the respondents as the main contractor had already paid the Service Tax. The Revenue appealed, arguing that the sub-contractors were aware of their liability to pay Service Tax. However, the respondents claimed that the Notices issued in 2011 were time-barred as the activities were known to the Revenue in 2008 during an audit.

Upon hearing both parties, it was found that although the sub-contractors were liable to pay Service Tax as per the Circular, they did not do so since the main contractor had already paid. The Revenue was aware of this non-payment in 2008 but did not investigate the respondents. The Show Cause Notices issued in 2011 were considered time-barred. Consequently, the demand for Service Tax was held to be barred by limitation. The impugned orders were upheld, and the appeals filed by the Revenue were dismissed.

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