TaxTMI 
TaxTMI 
2019 (6) TMI 518
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....ndustrial Construction" services (section 65(105)(zzq)), "Works Contract" services (section 65(105)(zzzza) and "Transport of Goods by Road in a Goods Carriage" services (section 65(105)(zzp)) under the Finance Act, 1944 (hereinafter referred to as the Act'). During the period 01 October, 2007 to 31 March, 2012, the Respondent was engaged in providing "Works Contract" service as a sub-contractor to the main contractors and details of the contracts are as follows : S. No. Main Contractor Work Order date Nature of Work Done by sub-contractor 1. M/s S. S. Enterprises 08 January, 2007 Supply and application of Primer and Paints on Tanks and Piping - Works Contract Service 2. M/s Vijay Nirman Co. Pvt. Ltd. 04 April, 2009 Blasting and Painting Works - Works Contract Service 3. M/s D.K. Industries 20 May, 2008 Grill Blasting and Painting - Works Contract Service 3. It was noticed by the Department that in regard to the work orders awarded by M/s S.S. Enterprises, M/s Vijay Nirman Company Private Limited and M/s D.K. Industries, the Respondent had provided services mentioned in the above table as a sub-contractor, but had not paid Servi....
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....of the tax earlier paid would be available at a subsequent stage and this would also ensure correct payment of tax to the government exchequer. The relevant observations of the Commissioner in the order are reproduced below : "20. In this connection, I observed that it is a fact that no tax can be levied on single activity twice as per the statutory provisions of service tax law. Section 66 of the Act, speaks levy of service tax on the taxable services mentioned in Section 65 of the Act ibid. However, in case of service provider liability of paying service tax has cast upon on them whereas the service tax is ultimately collected from the service receiver itself. This all has been done by the legislature to safeguard the government revenue in case the service recipient does not make payment of service tax on the services received by them. In the instant case, the service receivers have themselves discharged whole the service liability on the gross amount received by the sub-contractors from them which is also not disputed in the SCN itself. Therefore, requirement of payment of service tax on the taxable service as per Section 66 of the Finance Act is fulfilled. Hence, I fin....
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....heir procedure liability laid down under the provisions of Finance Act, 1994, as amended read with Service Tax Rules made thereunder, in as much as it is not open to any assessee to determine the stage of discharge of their due Service Tax liability particularly when the same has been clearly provided under the relevant provisions itself. Further, such procedural lapse could have lead to tax evasion which is admittedly not there as per the documents available on record and also the fact of discharge of due Service Tax by the main contractor instead of sub-contractor is not disputed in the SCN itself. Although, I am of the view that the noticee should be punished very heavily in the present case but I am constrained to impose the maximum penalty which I am empowered to impose under the provisions of Section 77 of the Act. 24. Accordingly, I pass the following order :- ORDER In view of the above discussions and findings, I order to drop the proceedings initiated vide SCN No. 53/Audit/2013- 14 dated 23.04.2013 issued under C.No. I- 26(494)ST/AMR/Gr.A7/53/2011-12 against M/r Melange Developers Pvt. Ltd., C-7/231, IInd Floor, Sector-7, Rohini, New Delhi-85, to....
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....any authority of law. The submission, therefore, that was advanced was that in a situation when the main contractor has discharged Service Tax liability, there will be no revenue loss to the Department if the sub-contractor does not pay the Service Tax and in any view of the matter recovery of tax from the sub-contractor shall give rise to a revenue neutrality situation. Reliance was placed by learned Counsel on certain decisions, to which we shall refer to at the appropriate stage, to contend that Service Tax imposed upon a sub-contractor is liable to be set aside on grounds of 'Double Taxation' and 'Revenue Neutrality'. 7. We have considered the submissions advanced by the learned Authorised Representative of the Department and the learned Chartered Accountant and learned Counsel for the Respondent. 8. It is w.e.f. 01 June, 2007 that sub-section (zzzza) was inserted in Section 65(105) of the Act in relation to execution of 'Works Contract'. Taxable Service under Section 65(105)(zzzza) is defined as : "65(105)(zzzza) - to any person, by any other person in relation to the execution of a works contract, excluding works contract in respect of r....
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.... to make Rules. Sub-section (1) provides that the Central Government may, by Notification in the official gazette, make Rules for carrying out the provisions of Chapter V of the Act. Sub-section (2)(a) provides that such Rules may provide for collection and recovery of Service Tax under sections 66 and 68 of the Act. In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 and section 94 of the Act and in supersession of the CENVAT Credit Rules, 2002 and Service Tax Credit Rules, 2002, the Central Government framed the CENVAT Credit Rules, 2004. It is, therefore, clear that every person (which would include a sub-contractor) providing taxable service to any person (which will include a main contractor) shall pay Service Tax at the rate specified in section 66 in the manner provided for. The manner has been provided for in the CENVAT Credit Rules of 2004. 'Input Service' has been defined to mean, any service used by a provider of output service for providing an output service. 'Output Service' has been defined to mean any service provided by a provider of service located in the taxable territory. Rule 3 stipulates that a provider of output se....
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....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 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. 13. The Master Circular clarifies that the services provided by sub-contractors are in the nature of input services and since a sub-contractor is a essentially taxable service provider, Service Tax would be leviable on the taxable services p....
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....provider of output service to take credit of the Service Tax paid at the preceding stage. 16. It is in this light that the main contention of learned Counsel for the Respondent that if a sub-contractor is required to pay Service Tax when the main contractor has actually discharged Service Tax liability, it would amount to 'Double Taxation', has to be examined. For this contention, reliance has been placed by the learned Counsel for the Respondent on the following decisions of this Tribunal : (i) Urvi Construction v. Commissioner of Service Tax, Ahmedabad, reported in 2010 (17) STR 302 (Tri.-Ahmd.); (ii) BCC Developers and Promoters Pvt. Ltd. v. Commissioner of Central Excise, Jaipur, reported in 2017 (52) STR 22 (Tri.-Del.); (iii) M/s Dhaneshra Engineering Works v. Commissioner of Central Excise, Allahabad, reported in 2018 (2) TMI 788 -CESTAT - Allahabad; (iv) Power Mech Projects Ltd. v. Commissioner of Customs, Guntur, reported in 2017 (48) STR 165 (Tri.-Hyd.); and (v) M/s Edac Engg. Ltd. v. CST, Chennai, reported in 2017 (6) TMI 685 CESTAT Chennai. 17. In Urvi Construction a learned Member o....
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....same Board's Circular No. 97/8/2007-ST dated 23.08.2007, relied upon by the Ld. AR has been taken note of by the Tribunal in Urvi Construction (supra)). This being so, we have no hesitation in ruling that when service tax has been paid by the main contractor, charging the sub-contractor again will amount to taxing the same service twice. In the circumstances, the issue at hand also requires to be remanded to the adjudicating authority to verify whether the service rendered by the appellant has suffered tax in the hands of the principal contracts. If that aspect is able to be proved by the appellants, no tax liability will accrue to them. Towards this end, the adjudicating authority will give suitable opportunity to the appellants to present their case. Appellants are also produce all evidence and documents to establish their claim that the tax liability required to be discharged by them has already been paid up by the main contractor. If that is provided, their will obviously be no demand for interest unless such demands have been made belatedly. Once this aspect is also able to be proved by the appellant, imposition of penalty will also not arise." 21. The aforesaid decisio....
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....cise, Raipur, reported in 2017 (47) STR 41 (Tri.-Del.); (ii) Hargovind Electric Decorators v. Commissioner of Central Excise, Jaipur-I, reported in 2016 (43) STR 619 (Tri.-Del.); and (iii) Sew Construction Ltd. v. Commissioner of Central Excise, Raipur, reported in 2011 (22) STR 666 (Tri.-Del.). 26. At this stage, it would also be useful to refer to a larger Bench decision of the Tribunal in Vijay Sharma & Company v. CCE, Chandigarh, reported in 2010 (20) STR 309 (Tri.-LB). The issue that arose before the larger Bench was as to whether service provided by a sub-broker are covered under the ambit of Service Tax and taxable or not. After noticing that a sub-contractor is liable to pay Service Tax, the larger Bench examined as to whether this would result in double taxation if the main contractor has also paid Service Tax and observed that if service tax is paid by a sub-broker in respect of same taxable service provided by the stock broker, the stock broker is entitled to the credit of the tax so paid in view of the provisions of the CENVAT Credit Rules. The relevant paragraph 9 is reproduced below : "9. It is true that there is no provision under Finance Act, 1994 for do....
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....in 2016-TIOL-155-SC- VAT. In this case, the contracts which were secured by the Appellant therein were works contract and a part thereof was assigned to the sub-contractor who had submitted returns and paid taxes for the execution of the works contract. During the course of the assessment, the Appellant submitted that the sub-contractors had already been taxed and, therefore, the Appellant cannot be taxed again under Section 6B of the Karnataka Sales Tax Act. The submission, therefore, was that the value of the work entrusted to the sub-contractors could not be taken into account while computing the total turnover of the Appellant for the purpose of taxation under the Karnataka Sales Tax Act. It is in view of the provisions of the Karnataka Sales Tax Act that the Supreme Court observed that the value of the work entrusted to the sub- contractors or payments made to them shall not be taken into consideration while computing total turnover for the purposes of Section 6-B of the Karnataka Sales Tax Act. This decision of the Supreme Court will not come to the aid of the Respondent in this case in view of the specific provisions of Section 66 and 68 of the Act as also the CENVAT Rules d....