TaxTMI 
TaxTMI 
2014 (10) TMI 524
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....d from 1-3-2006 to 31-12-2006 for the works done as a sub-contractor to the main contractor M/s Punj Lloyd Limited who was awarded the contract by M/s Jindal Power Ltd. where M/s Punj Lloyd was paying service tax as the main contractor. Appeal No. ST/423/2012 involves non-payment of service tax by the appellant as a sub-contractor in respect of various main contractors such as M/s Tata Projects Ltd., M/s Hindustan Steelworks Construction Ltd. wherein service tax demand of Rs. 3,05,45,211/- was demanded for the period March 2006 to December 2007, which is similar to the issue at (b) above. 3. This is the second time these appeals are coming up before this Tribunal. In the first round, both the above issues were held in favour of the appellant by this Tribunal vide Final Order No. A/262/09/CSTB/C.II dated 28/08/2009 wherein it was held that if the main contractor has paid service tax on the full value of the contract, then the sub-contractor need not pay service tax on the value of services rendered by him, provided the appellant proves the payment of service tax by the main contractor. As regards the inclusion of value of materials sold, it was held that the appellant's cl....
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.... follows:- 5.1. As regards the non-submission of documents in support of the claim for benefit under Notification No. 12/2003-ST, this was due to certain communication gap between the counsel and the chartered accountant who represented the issue before the adjudicating authority. Though the documents were not produced for verification, all the documents were available with the department. This is evident from para 4 of the show cause notice dated 23/03/2007 wherein it is stated that the appellant had vide letters dated 29/09/2006 had submitted the letter of award for the NTPC contract along with details of bills raised and amounts received and other particulars. The notice further states that vide letter dated 22/09/2006, the appellant had submitted copies of bills raised for the period 31/03/2005 to 31/03/2006 in respect of structural work and from 30/09/2004 to 31/03/2006 in respect of civil works along with other documents in respect of NTPC work. Similarly in respect of the works carried out for Punj Lloyd, the relevant details were submitted vide letters dated 17/11/2006 and 09/03/2007. Thus all the information required for determination of eligibility to exemption under N....
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....f the documentary evidences submitted by the appellant in this regard. In as much the appellant has failed to produce the documentary evidences before the adjudicating authority, the benefit has been rightly denied. 6.2. Regarding the liability of the sub-contractor to pay service tax when the main contractor has paid the service tax, the CBEC circular dated 23/08/2007 has clarified that service tax is leviable on any taxable service provided whether or not the services are provided by a person in the capacity of sub-contractor and whether or not such services are used as input services. As regards the reliance placed by the appellant on the circulars issued in 1997, the said circulars pertained to specific services of CHA, Consulting Engineer, Rent-a-cab and Architect's services. The appellant was not providing any of those services but was providing the service of commercial or industrial construction in respect of which there was no such clarification. Further, the circulars lost relevance after 16/08/2002 when CENVAT credit was extended to service tax whereby it became possible to take CENVAT credit of service tax paid on input services. Therefore, the issue of sub-contr....
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....investigating agency vide letters dated 22nd and 29th September, 2006, 17th September, 2006 and 9th March, 2007, details of the contracts awarded to the appellant, the bills raised by the appellant, payment of service tax made and other details. Therefore, the adjudicating authority should have examined these documents and given a finding thereon. The appellant has also submitted that they have all the requisite documents and if given an opportunity, they can submit all these documents for consideration by the adjudicating authority. Thus we are of the view that in the interest of justice, the matter needs to go back to the adjudicating authority for considering this issue afresh. 7.3. With regard to the question of the liability of sub-contractor to pay service tax when the main contractor has discharged the tax liability, this very same issue was considered by a larger bench of this Tribunal in the case Vijay Sharma & Co. [2010 (20) STR 309 (Tri.LB)]. In the said case, it was held that- "The scheme of service tax law suggests that it is a single point tax law without being a multiple taxation legislation. In the absence of any statutory provision to the contrar....
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....he services sector and in 2004, the scheme was further extended to provide for inter-sectoral credit between the services sector and the manufacturing sector. In any case, the liability to pay service tax arises not from the Board's circulars but from the provisions of Chapter V of the Finance Act, 1994, namely, section 65(105) which defines the taxable service, section 66 which provides for charge of service tax and section 68 which defines the person liable to pay service tax. Therefore, whomsoever provides the taxable service is the person liable to pay service tax, irrespective of the capacity in which he renders the service. Thus the argument adopted by the appellant is one of convenience and has no legal basis and therefore, merits to be rejected outright. 7.5. As regards the decisions of the Tribunal relied upon by the appellant cited in para 5(2), these decisions pertained to consulting engineer's service, interior decorator service and photography services. In respect of these services, there were specific circulars of the board clarifying that if the main service provider pays the tax, the subsidiary service provider need not pay tax. Further all these services....
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....en stated. Judgment of Courts are not to be construed as statutes. To interpret words, phrases and provisions of a statute, it may become necessary for judges to embark into lengthy discussions but the discussion is meant to explain and not to define. Judges interpret statutes, they do not interpret judgment. They interpret words of statutes; their words are not to be interpreted as statutes ". If one follows these judicial dictums, it becomes obvious that the ratio of the decisions relied upon by the appellant cannot be applied to the facts of the appeals before us as they are substantially different and distinguishable. Thus there was no reason for the appellant to entertain any belief that he need not discharge service on the services rendered by him. The Cenvat Credit Scheme applicable to the services sector envisages discharge of tax liability at each and every stage of rendering of a taxable service and taking credit of the tax so paid if such services are input services for rendering any taxable output service. The concept and procedure of such a scheme cannot be rendered otiose or ineffective by wrong or incorrect judicial interpretation. 7.6. The appellant has also r....
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.... tax regime, the appellant resorted to non-payment of service tax on input services. Thus the non-payment was a deliberate ploy on the part of the appellant to minimize tax liability. Consequently, the appellant also stopped filing service tax returns and did not furnish any information to the department in respect of the taxable services rendered by them as a sub-contractor. This action on the part of the appellant was deliberate and is a clear admitted position. After the case was made out against the appellant on the basis of investigation conducted, in order to wriggle out of the tax liability, the appellant feigned bona fide belief by placing reliance on non-applicable circulars and decisions. In the light of these glaring evidences available on record and the clear admission on the part of the appellant, we reject the contention of the appellant that extended period of time cannot be invoked. The appellant has taken a weak plea that their records were audited in March, 2008 by the department and therefore, the department had knowledge of the appellant's transactions since 27-3-08, this plea cannot be accepted for the following reason. In Neminath Fabrics case [2010 (256) ....
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....nvoked to demand and confirm service tax in the present case. 7.8. The next issue is with regard to imposition of penalties under sections 76, 77 and 78 of the Finance Act, 1994. Penalty under Section 76 is imposable whenever there is a default /delay in payment of service tax. On the occurrence of the default or delay, the provisions are attracted. There is no mens rea required to be proved for imposition of penalty under Section 76 as held by the Hon'ble High Court of Kerala in the case of Krishna Poduval - 2006 (1) STR 185 (Ker). Further, the hon'ble Apex Court in the case of Chairman SEBI vs. Shriram Mutual Fund & another held that- "In our considered opinion, penalty is attracted as soon as the contravention of the statutory obligation as contemplated by the Act and the Regulation is established and hence the intention of the parties committing such violation becomes wholly irrelevant. A breach of civil obligation which attracts penalty in the nature of fine under the provisions of the Act and the Regulations would immediately attract the levy of penalty irrespective of the fact whether contravention must made by the defaulter with guilty intention o....
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....the work done/executed is essentially in the nature of works contact. No works contract can be completed without use of materials. Even in no accounts case under the sales tax (VAT) Rules of several states 30% (approx) rebate is given for the service component. Thus both material plus service are the essential components of works contract. Thus, I direct the adjudicating authority to allow 67% rebate for material component, as no accounts case. 10. With regard to the second issue (b), as regards liability of sub-contractor, when main contractor have discharged the tax liability, I differ as follows. 10.1 It is noteworthy that works-contract have been made taxable w.e.f. 01.06.2007 under Section 65 (105) (zzzza). It is seen that the appellant have accepted the liability under the head 'commercial or industrial construction'. It is further seen that the appellant have discharged liability to Service Tax where it is the main contractor. Only where the appellant have worked as a sub-contractor, it have not paid after confirming from the main contractor. Further the appellant have paid tax as sub-contractor till 28.02.2006. Thereafter w.e.f. 01.03.2006 Notification No. 15/....
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.... (2) Whether the appellant is liable to penalty under the provisions of Section 76 & 78 of the Finance Act, 1994 as held by the Ld. Member (Technical) relying on the decisions of the Hon'ble High Court of Kerala in the case of Krishna Poduval [2006 (1) STR 185 (Ker)], and of the Hon'ble Apex Court in the case of Chairman SEBI Vs. Shriram Mutual Fund & Another and Rajasthan Spinning & Weaving Mills [2009 (238) ELT 3 (SC)]. OR The appellant is not liable to penalty under Section 76 & 78 of the Finance Act, inasmuch as the appellant had paid the tax with interest before issue of show-cause notice as held by the Ld. Member (Judicial). Per : P K Jain (As Third Member) 15. The points of Difference of Opinion are already detailed in para 14 above and are not being repeated. The brief facts of the case have already been enumerated in the order of my Learned Brothers and are again being not repeated. However, the undisputed facts are the appellants were providing service of Commercial and Industrial Construction Services which is chargeable to service tax. It is also not disputed that the appellants were paying service tax on the same before 1.3.2006. The servi....
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....ion of the Hon'ble Tribunal in Vijay Sharma & Co. case is not proper. In fact, para 10 of the LB judgement, supports the case of the appellant. (viii) The said LB Judgement has been relied upon by the DB in two cases, in favour of the appellant (JAC Air Services & Multi Mercantile Center). 16.1 Learned Advocate further stated that Member (Judicial) observation that the tax has been paid before the issue of show cause notice is factually incorrect in fact the disputed amount of tax in both the issues are yet to be paid. Ld. Advocate further clarified that what was being talked in different paragraphs was relating to delay in payment of certain amounts which are not matter of present dispute. Learned Advocate further relied upon the judgement of this Tribunal in the case of Commissioner of Central Excise & Service Tax, Pune III Vs. Monarch Surveyors & Contractors reported in 2013-TIOL-109-CESTAT-MUM to claim that no penalty should be imposed in the present case as the fact and circumstances are similar. 17. Learned A.R. on the other hand argued as under: I) Libaility of sub-contractor to pay Service Tax if main contrctor has paid. &nb....
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....would be payable at last stage only. Such an interpretation of law would be very regressive step and will finally lead to a loss to trade and commerce in our country. (v) Referred to the case law of Sew Construction Ltd. Vs. CCE as reported in 2011 (22) S.T.R. 666 (Tri-Del), which also pertained to the same service of Commercial and Industrial Construction and pertained to similar period of 8/07/05 to 7/08/06. In this case, the division bench of Tribunal had held that there is no provision in Finance Act, 1994 to grant immunity to the sub-contractor from levy of Service Tax when indisputably taxable services provided by them. The invocation of extended period was also upheld by the Tribunal even though the main contractor was paying Service Tax. The appellant has submitted several case laws in his compilation but they do not pertain to the service of Commercial and Industrial Construction except one case law which was decided by Single Member Bench and hence, not binding on the Division Bench in this case. (vi) Appellant has submitted that in the case of CCE V/s Monarch Surveyors & Contractors - 2013-TIOL-109-CESTAT-MUM Mumbai has observe....
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....urt, Hon'ble High Court or this Tribunal or for some other reason that the circulars are modified or superseded. However, the circulars are to be applied only as per law as it exists at that point of time and with reference to the commodity/services. This is true even in case of service tax. In 2007 an initiative was taken by the Board so that circulars in respect of various services were consolidated in one single circular, known as master circular. At that point of time it was also realized that the large number of circulars have lost their relevance long back due to amendment in the law. Accordingly, such circulars were not part of the new master circular or were stated to be withdrawn. At that point, a general clarification as under was issued- 999.03 /23.08.07 A taxable service provider outsources a part of the work by engaging another service provider, generally known as sub-contractor. Service tax is paid by the service provider for the total work. In such cases, whether service tax is liable to be paid by the service provider known as sub-contractor who undertakes only part of the whole work. A sub-contractor is essentially a taxable service provider. The fact ....
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....ascading effect on service tax. Perhaps, a better way would have been to issue notification achieving the same objective. Be that it may be, this Tribunal cannot be extended the scope of such circulars to other services, particularly which were not in existence at that time. Service tax law has been extended to a large number of services from 2002 onwards and scheme of Cenvat Credit was extended to services, no such circular has been issued in respect of any of the services which became taxable in 2002 or afterwards. Even in respect of services which were taxable before 2002, the earlier circulars became redundant in view of the change in law. Learned Advocate's argument that the old circulars were withdrawn only with the issue master circular on23.8.2007 is not relevant at all, particularly in view of the fact that the service being dealt in the present case is "Commercial or industrial construction service" which become taxable when the Cenvat credit scheme was already available. The four circulars which were issued in 1997-1998 in respect of four specified services were in any case redundant even in respect of those four services from 2002 onwards. In 2007, all that was clar....
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....e oppressive circular. Concept of oppressive circular is relevant when government changes its view on a particular provision of law. The Ld. Advocate has also given a lot of emphasis that the Larger Bench decision in the case of Vijay Sharma & CO. Vs. Commissioner of C.Ex, Chandigarh reported in 2010 (20) STR 309 (Tri.LB) is in favour of the appellant in para 10 of the order. The said judgment is relating to stock-brokers and definition of stock-brokers included sub-broker. The said para is not relevant in the facts of the present case viz., Notification NO. 1/2006-S.T. Learned Advocate has cited number of judgments. I have gone through the said judgments and do not consider it necessary to discuss the same in view of the earlier analysis. I agree with the Member (Technical) on the first issue that the sub-contractor of a main contractor is liable to discharge the service tax liability on the services provided by him. 21. Coming to the question of penalty in the present facts and circumstances of the case, assumption of the Member (Judicial) that the appellants have paid tax before issuance of show cause notice is incorrect as pointed by the Learned Advocate for the appellant as....