TaxTMI 
TaxTMI 
2014 (10) TMI 525
X X X X Extracts X X X X
X X X X Extracts X X X X
....filed a claim for refund of this amount with lower authority as the tax liability being discharged by the main contractor, they as a sub-contractor were not required to pay the tax again. A show-cause notice in January, 2008 was issued to the respondent asking them to show cause as to why their claim should not be rejected as tax was correctly paid by the respondent on the service provided to the main contractor. The respondent had submitted in their reply to the show-cause notice that the sub-contractor is not required to pay Service Tax when the main contractor pays Service Tax. There were clarifications to this effect from the Board. The only condition was that both the main and sub-contractor should have provided the same service. In their case the same category of service was provided by M/s Devi Constructions and them. No tax paid was reimbursed to them by the main contractor. They had relied on some case laws also and had in their personal hearing submitted that the amount had not been recovered from the customers. C.A.'s certificate was also submitted. They had also contended that their civil contracts were in the nature of works contract which came to be taxed only w.e....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... contractor have paid the Service Tax with respect to the same work and the sub-contractor has also deposited the tax and claimed for refund, the refund was rightly claimed. It was further observed that the adjudicating authority has erred in observing that as the respondent assessee is sub-contractor, has executed almost the whole of the contract and therefore, the respondent cannot be treated as a sub-contractor. The learned appellate authority did not agree with the finding of the adjudicating authority and further observed that the intention behind making the main contractor pay tax is not to let the margin of the main contractor go out of the service tax net. In fact in the instant case, the main contractor has charged tax on the value charged by the respondent to the main contractor and the margin of main contractor charged on the customer. If the reasoning of the adjudicating authority is accepted, the margin on the service provided by the main contractor will go untaxed. The billing is done by the main service providers and the agreement is between the main service provider and the customer. Thus, it was held that to be illogical that tax is paid by the main service provide....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax on input services, used for providing such taxable service, has been availed under the provisions of the Cenvat Credit Rules, 2004. 3.3 The next ground taken is that the Commissioner (Appeals) has erred in relying on the Trade Notices No. 5/98 and 53/97 and holding that when the main contractor have discharged the Service Tax in respect of the sub-contracted service, the sub-contractor is not liable for the same. 3.4 The learned AR appearing for the Revenue further relies on the third Member ruling of this Tribunal in the case of Sunil Hi-tech Engineers Ltd. Vs. Commissioner of Central Excise, Nagpur - 2014-TIOL-541-CESTAT-MUM, wherein at para 7.3, learned Member (Technical) has held as follows:- "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 le....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was clarified by Revenue vide master circular No. 96/7/2007 dated 23.08.2007, that a sub-contractor is obligated to pay Service Tax, irrespective of whether the main contractor have paid, it is categorically held that the appellant will be liable to pay Service Tax as a sub-contractor, w.e.f. 23.08.2007." Due to Difference of Opinion, the question was framed as follows:- (1) Whether the sub-contractor of a main contractor is liable to discharge the service tax liability on the services provided by him as held by the Ld. Member (Technical) relying on the decision of the Larger Bench of this Tribunal in the case of Vijay Sharma & Co. [2010 (20) STR 309 (Tri-LB)] = and the decision of this Tribunal in the case of Sew Construction Ltd. [2011 (22) STR 666 (Tri.-Del.)] OR The appellant being a sub-contractor is not liable to pay service tax prior to 23/08/2007 in view of the clarification issued by the Revenue vide Master Circular No. 96/7/2007 dated 23/08/2007 (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 de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 that services provided by such sub-contractors are used by the main service provider for completion of his work does not in any way alter the fact of provision of taxable service by the sub-contractor. Services provided by sub-contractors are in the nature of input services. Service tax is, therefore, leviable on any taxable services provided, whether or not the services are provided by a person in his capacity as a sub-contractor and whether or not such services are used as input services. The fact that a given taxable service is intended for use as an input service by another service provider does not alter the taxability of the service provided. At times circulars are also used by the board to take care some administrative difficulties in the administration of tax as particular way of implementation may cause undue hardship. Service tax was introduced in 1994 on three services, in 1996 another three services were added and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....edit 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 clarified was that sub-contractor is also a service provider, and is liable to pay tax. 19. I also note that in the present case the appellant had no doubt about the provisions of law and the fact that his activity was chargeable to service tax. This is evident from the fact that the appellant was paying service tax before 1.3.2006. From 1.3.2006 the reason for stopping to make payment is only that the main contractor was specifically made ineligible to take credit of input services vide notification no. 1/2006. In my opinion if law specifically prohibits doing something, the same cannot be circumvented by stopping to pay duty and claiming benefit of circulars which were not issued even in respect of that service and was also prior to the law at the relevant time i.e. introduction of Cenvat credit scheme to services. Learned Advocate has stated that there is no rationale to restrict the credit of input services in 2006. The Learned Advo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....destination based taxation and accordingly, the tax cannot be collected twice in respect of the same transaction or services. He further relies upon the ruling in the case of All India Tax Federation Vs. Union of India - 2007 (7) STR 625 (SC), wherein the Hon'ble Supreme Court have observed that the concept of Value Added Tax (VAT), which is a general tax, shall apply in principal to all of commercial activities involving production of goods and provisions of service. VAT is a consumption tax and is borne by the consumer. In the light of this observation, it was further observed that it is clear that Service Tax is a VAT which in turn is destination based consumption tax, in the sense that it is not commercial activities and not charged on the destination but on the consumer and it would be logical to levy tax on service provided within the country, Service Tax as well as VAT. 4.1 He further relies on the Division Bench ruling of this Tribunal in the case of Viral Builders Vs. Commissioner of Central Excise, - 2011 (21) STR 457, wherein Viral Builder was the main contractor under the heading Commercial/Industrial Construction services and have undertaken construction service d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere cannot be double taxation in cases where services are rendered by a person through another person to the ultimate consumer as long as the main person who has the contract with the customer is paying the Service Tax on the gross amount. Reliance was placed by the Tribunal in the case of Viral Builder on the ruling of the Tribunal in the case of Urvi Construction Vs. Commissioner of Service Tax - 2010 (17) STR 302. (Tri-Ahmd), Commissioner of Central Excise, Indore Vs. Shivhare Roadlines - 2009 (16) STR 335 (Tri-Del) wherein the law stands clarified and the lower authorities are bound by the same. 4.2 The appellant further relies on the ruling dated 12.10.2006 in the case of Larsen & Toubro Ltd. Vs. State of Andhra Pradesh - 2006-TIOL-327-HC-HYD-VAT, wherein it has been held that when a contractor awards either wholly or partially, the contractual obligation to sub-contractor there is another agreement between the contractor & sub-contractor which is pro tanto identical in nature with the agreement between the employer and the contractor. Therefore, there are two works contracts in existence between the three parties mentioned above for carrying out the one and the same task. It....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of India (supra) the position becomes clear, namely, that even if there is no privity of contract between the contractee and the sub- contractor, that would not do away the principle of transfer of property by the sub-contractor by employing the same on the property belonging to the contractee. This reasoning is based on the principle of accretion of property in goods. It is subject to the contract to the contrary. Thus, in our view, in such a case the work, executed by a sub-contractor, results in a single transaction and not as multiple transactions. This reasoning is also borne out by Section 4(7) which refers to value of goods at the time of incorporation in the works executed. In our view, if the argument of the Department is to be accepted it would result in plurality of deemed sales which would be contrary to Article 366(29A)(b) of the Constitution as held by the impugned judgment of the High Court. Moreover, it may result in double taxation which may make the said 2005 Act vulnerable to challenge as violative of Articles 14, (1)(g) and 265 of the Constitution of India as held by the High Court in its impugned judgment. 20. Before concluding, we may....