Sub-contractor liable for service tax despite main contractor's payment under section 66

CESTAT NEW DELHI held that a sub-contractor remains liable to pay service tax even when the main contractor has discharged tax liability, following the precedent in Commissioner of Service Tax v. Melange Developers Pvt. Ltd. The agreement clearly stated that service tax paid by the sub-contractor would be reimbursed upon submission of payment proof, negating the appellant's claim that the main contractor had paid the duty. The appellant was not entitled to exemption under Notification No. 25/2012-ST as it applied to services "by" and not "to" the specified entities. The tribunal upheld the Best Judgement Assessment under section 72 due to insufficient documentation and confirmed penalties under sections 76 and 77 for non-compliance with section 66. Appeal dismissed.

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Issues:
1. Whether service tax can be demanded from a sub-contractor when the main contractor has paid the tax.
2. Applicability of Best Judgement Assessment under section 72 of the Act.
3. Liability of a sub-contractor to pay service tax.
4. Interpretation of the agreement between the appellant and the main contractor.
5. Applicability of service tax provisions to Commercial or Industrial Construction Services.
6. Exemption under Notification No. 25/2012-ST dated 20.06.2012.
7. Liability for interest and penalties for non-payment of service tax.

Detailed Analysis:

1. The appellant, a sub-contractor, challenged the demand for service tax on services rendered, arguing that the main contractor had already paid the tax. The Tribunal affirmed that a sub-contractor is liable to pay service tax, even if the main contractor has paid. The appellant failed to register, file returns, or provide records, leading to Best Judgement Assessment under section 72.

2. The agreement between the appellant and the main contractor stated that the appellant was required to discharge the service tax liability, which would be reimbursed by the main contractor. Lack of details on payments made or received led to Best Judgement Assessment by the authorities, as per section 72 of the Act.

3. The appellant's services of Plaster of Paris were considered taxable under Commercial or Industrial Construction Services, as defined under Section 65 (25b). The appellant's argument that the service tax was deposited by the service recipient was negated, as the statute does not allow shifting the onus of depositing service tax liability.

4. The appellant's claim for exemption under Notification No. 25/2012-ST was rejected, as the exemption applied to services by entities registered under section 12 AA of the Income Tax Act, not services to such entities.

5. The appellant's failure to pay service tax during the relevant period resulted in the accrual of mandatory interest. Penalties under sections 76 and 77 were upheld, as the appellant contravened the provisions of section 66 by not paying the service tax.

6. The Tribunal affirmed the impugned order and dismissed the appeal, emphasizing the appellant's liability to pay service tax, interest, and penalties as per the relevant provisions of the Act.

[Order pronounced on 07. 06. 2024]

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