Sub-contractor liable for Service Tax despite main contractor's payment but extended limitation period rejected due to no suppression

CESTAT Kolkata ruled that sub-contractor appellant was liable to pay Service Tax despite main contractor's payment, following Board's 2007 clarification. However, extended limitation period could not be invoked as no suppression of facts was established and the issue was within Department's knowledge. Demand for extended period was set aside, but normal period demand confirmed with interest. No penalty imposed due to absence of intentional tax evasion. Appeal disposed of accordingly.

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Issues involved:
The issue involved in the present appeal is whether the appellant, as a sub-contractor, is liable to pay Service Tax when the main contractor has paid Service Tax on the services rendered.

Summary:

Issue 1: Liability of sub-contractor to pay Service Tax
The appellant provided services as a sub-contractor to the main contractor, who had paid Service Tax on the entire bill amount. The Circular dated 23.08.2007 clarified that a sub-contractor is liable to pay Service Tax separately, even if the main contractor has already paid. The Tribunal held that the appellant is indeed liable to pay Service Tax as a sub-contractor.

Issue 2: Invocation of extended period of limitation
The demand was raised for the period from April 2006 to March 2011 by invoking the extended period of limitation. The Tribunal observed that there were contradictory decisions during the relevant period regarding the liability of a sub-contractor. As there was no evidence of suppression of facts with intent to evade tax, the Tribunal held that the extended period of limitation cannot be invoked.

Issue 3: Duty liability for the normal period of limitation
The appellant argued that the demand for the normal period from October 2010 to March 2011 should have been issued by 25.04.2012. However, the Show Cause Notice was issued on 16.08.2012, within the eighteen-month time period for issuing the demand for the normal period of limitation. The Tribunal held that the demand for the normal period was valid and confirmed it along with interest.

Conclusion:
The Tribunal set aside the demand for the extended period of limitation, confirmed the demand for the normal period, and imposed no penalty on the appellant due to the absence of suppression of facts.

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