2026 (2) TMI 530 - AT - Service Tax

Service tax treatment where partner's PAN payment offsets firm liability and subcontractor remains independently liable; remand for computation.

Payment of service tax made using a partner's PAN/registration may be credited against the partnership firm's service-tax liability; this adjustment is ... Adjustment of tax paid by partner against firm liability - Liability of sub-contractor to discharge service tax despite main contractor's payment - Remand for fresh consideration of computation of tax liability and abatement on works contract and transportation services - computation of service tax liability on ‘Works Contract Service’ and ‘Transportation of Goods’ services - HELD THAT:- In the instant case, we find that the service tax was paid by one of the partners on behalf of the appellant. It is an admitted fact that service was provided by the appellant and service tax was paid using the service tax registration of the partner Shri K. S. Nair. In this context, we note that Section 4 of the Partnership Act, 1932 which defines Partnership partner, firm and firm name. As observed by the Gujarat High Court in Commissioner of Central Excise Vs. Jai Prakash Motwani [2009 (1) TMI 501 - GUJARAT HIGH COURT] that there is no provision in the central excise law which treats a partnership firm as a separate excisable entity from its partners. Admittedly, a partner is not a separate legal entity and cannot be equated with the employees of a firm” In view of the settled position of law, we hold that payment of service tax by the partner can be adjusted against the liability of the firm. However, the tax liability of Shri K. S. Nair for any services provided by his proprietorship firm would also have to be taken into account. Demand on transportation of goods by road - HELD THAT:- We note that the impugned order has held that the appellant did not provide any details of receipt under this head. Hence, the demand has been confirmed. The appellant has submitted some documents which are required to be examined by the adjudicating authority. As regards their work as subcontractor to main contractor M/s Tecpro systems, we find that the liability of the sub-contractor to pay service tax has been decided by this Tribunal in the case of Commissioner of Service Tax versus M/s Melange Developers Pvt. Ltd [2019 (6) TMI 518 - CESTAT NEW DELHI-LB]. Hence, the liability of the appellant to pay service tax is upheld. Abatement - HELD THAT:- The impugned order has rejected the reconciliation statement observing certain inconsistencies in their manner of calculation of tax as enumerated in para 11.3 of the impugned order. The appellant has submitted copies of payment documents work orders, invoices/bills, challans etc. However, it would be appropriate that these documents are examined by the adjudicating authority. Therefore, it would be appropriate to remand this issue to the adjudicating authority for fresh consideration. Thus, we hold as follows:- The payment of service tax under Shri K. Surendran Nair’s PAN is allowed and same should be adjusted against the liability of the appellant. As regards the computation of the demand on ‘Works Contract Service’ and ‘Transportation of Goods’, we remand the matter to the original authority to consider the issue giving an opportunity to the appellant to submit all the relevant documents in support of their contention. Issues: (i) Whether service tax paid using a partner's service-tax registration/PAN can be treated as payment towards the partnership firm's liability. (ii) Computation and correctness of service tax liability on Works Contract Service and Transportation of Goods including claims of abatement and sub-contractor liability.Issue (i): Whether service tax paid using the partner Shri K. S. Nair's service-tax registration/PAN may be adjusted against the partnership firm's liability.Analysis: The Tribunal examined statutory provisions concerning registration based on PAN and partnership principles. It considered authorities holding that payments made by a partner can be relevant to the firm's liability and noted prior decisions permitting adjustment where tax has been paid though under a partner's registration. The Tribunal also observed that any tax liability of the partner for services he rendered separately must be accounted for.Conclusion: Payment of service tax under the partner's PAN is to be allowed and adjusted against the appellant firm's liability.Issue (ii): Whether the demand for service tax on amounts characterized as Works Contract Service and Transportation of Goods is sustainable, including abatement claims and the appellant's contention of being a subcontractor for which main contractor paid tax.Analysis: The Tribunal reviewed the factual record, the lack of documentary support for certain receipts (Transportation) and the legal position on subcontractor liability. It applied precedent holding that a sub-contractor remains liable to pay service tax even if the main contractor has discharged tax on the overall transaction. The Tribunal found that documents submitted warrant further custodial examination for abatement and reconciliation, necessitating remand to the adjudicating authority for re-computation and opportunity to produce evidence.Conclusion: The demand insofar as it arises from services rendered by the appellant as a sub-contractor is upheld; the computation of demand relating to Works Contract and Transportation receipts is remanded to the original authority for fresh consideration on the basis of documents to be produced by the appellant.Final Conclusion: The appeal is partly allowed by permitting adjustment of tax paid under the partner's PAN against the firm's liability, while upholding the liability of the appellant as sub-contractor; computation issues are remitted for fresh adjudication.Ratio Decidendi: Where a partner has paid service tax using his PAN/registration for services rendered by the partnership, such payment can be adjusted against the partnership firm's liability, but a sub-contractor remains independently liable to discharge service tax even if the main contractor has paid tax on the transaction; computation disputes and entitlement to abatement require remand for documentary verification.