TaxTMI 
TaxTMI 
2022 (10) TMI 60
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....ervices against the amount confirmed as at (a) above and the balance amount shall be paid forthwith by them; c) I order payment of interest by Shri Sukhdeo Vasudeo Yadav, the Proprietor of M/s Om Sai Fabricators on the delayed payment of service tax at the appropriate rates and as applicable in force under section 75 of the Finance Act, 1994; d) I impose penalty of Rs.1,25,36,776.00 (Rupees one crore twenty five lakh thirty six thousand seven hundred seventy six only) on Shri Sukhdeo Vasudeo Yadav, the Proprietor of M/s Om Sai Fabricators under the provisions of section 78 of the Finance Act, 1994. e) I do not impose penalty under section 76 of the Finance Act, 1994, as discussed supra; f) I impose a penalty of Rs 5,000/- (Rupees Five thousand only) on Shri Sukhdeo Vasudeo Yadav, the Proprietor of M/s Om Sai Fabricators under the provisions of section 77 the Finance Act, 1994." 2.1 Based on intelligence that the noticee is charging and collecting service tax from their clients on the taxable service provided but not depositing the same with the Government exchequer investigations were initiated against the appellant. It was noticed that the no....
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.... paying ST on the entire contract value, as such, the Appellant was not required to pay ST. Statement of the Appellant were recorded on , 10-11-2008 and 21-11-2008 wherein has admitted of non-payment of St on sub contract value raised to the Main Contractor. • Denial of Abatement of 67% (Notification No. 15/2004-ST: The Gross Amount does not include "Free Supply" and the Abatement under Notification No 15/2004-ST dated 10-09- 2014 should be granted. This issue is no more res-integra in terms of decision in case of Bhayana Builders (P) Ltd 2013(32) S. T. R. 49 (Tri-LB) affirmed by Supreme Court 2018 (10) GSTL 118 (S. C.) • BONAFIDE BELIEF: The Main Contractor who is Multinational Company had issued Certificate dated 18-07 2007 to the Appellant certifying that the Appellant need not pay or charge ST as the Main Contractor is paying the ST on entire Contract. The Appellant had no reason to doubt of the same. The Main Contractor vide letter 30-11- 2009 provided all the Challans evidencing payment of Service Tax on the entire contract value which includes values of sub-contract of the Appellant. The copies of Challans of the Main Contractor are enclosed. These ....
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.... re-iterates the findings of Learned Original Adjudicating authority and relies upon the ratio of the case law of Melange Developers Private Limited [2020 (33) G.S.T.L. 116 (Tri. - LB)] which is squarely applicable in this matter. • As regard the issue of extended limitation period, the whole facts clearly points out the element of suppression of the facts and gross contravention of provision of law with sole intent to evade duty. Investigation was initiated against the appellant on the intelligence input that the appellant is charging and collecting service tax from their clients on the taxable services provided but not depositing the same with govt. exchequer. • During investigation, statement of Shri Sukhdev Vasudev Yadav (Prop. M/s Om Sai Fabricator) was recorded who deposed the following relevant facts: • They were engaged in provision of taxable services since 2006 and were duly registered under service tax. • They were providing taxable services mainly to M/s Gamon India Ltd., Mumbai, M/s Japsin Jacob Wire Drawing Pvt. Ltd., New Delhi, M/s IMC Ltd., JNPT, and M/s man Infra Project Ltd., Mumbai as a sub- contractor. They hav....
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.... 4.1 We have considered the impugned order along with the submissions made in appeal and during the course of arguments. 4.2 Commissioner has in the impugned order recorded following findings- "13. I have carefully gone through the case records, allegations made in the notice. Having considered and granted adequate opportunities for providing natural justice to them I ensue with the quasi-judicial proceedings in the matter. The short issue that necessitates quasi-judicial proceedings is whether the noticee has discharged its duty liability properly and whether its contention that service tax liability on commercial or industrial construction service provided by them as sub contractor arises or not. 14. I find that the noticee has not cared to file any written submissions in the matter even after one year and also not cared to turn up for the personal hearings granted on initial three occasions. to an afterthought they have requested and attend the hearing on 07.11.2012 and made a frail attempt to cover up their duty liability. 15. I find that the noticee has not produced proof of tax payment by Gammon India Ltd in spite of their claim that Gam....
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....ot liable to pay service tax. Their plea cannot be acceptable in view of the discussion above. Part payment of tax by them after the investigation initiated does not belittle their offence either. As discussed supra, had the department not noticed, the tax evasion would have been unnoticed. The noticee is, therefore, liable to penal action as proposed under section 78 ibid. It is also seen that they had not filed ST-3 returns on due dates. Hence, they are liable to penal action under section 77 ibid. However, I refrain from imposing penalty under section 76 as the notice is liable for penal action under section 78 ibid" 4.3 On merits we find that issue has been decided by larger bench of tribunal in the case of Melange Developers Private Limited [2020 (33) G.S.T.L. 116 (Tri. - LB] wherein larger bench has held as follows: "12. It is true that prior to 2007, various Service Tax, Trade Notices/ Instructions/ Circulars/ Communications had been issued exempting certain category of persons from payment of Service Tax. A sub-contracting Customs House Agent was exempted from payment of Service Tax on the bills raised on the main Customs House Agent. When an architect or interi....
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.... 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 provided. It has also been clarified that even if a taxable service is intended for use as an input service by another service provider, it would still continue to be a taxable service. 14. It can be used that if a main contractor has paid Service Tax on the entire amount of the main contract out of which a portion has been given to a sub-contractor, then if a sub- contractor is required to pay Service Tax, it may amount to 'Double Taxation', but this issue has to be examined in the light of the credit mechanism earlier introduced through Service Tax Credit Rules, 2002 granting benefit of tax paid on input services if the input services and the output services fell under the same taxable services and the subsequent amendment made on 14 May, 2003 granting benefit of tax paid on input services even if the input service and the output service belonged to different taxable categories. The aforesaid Service Tax Credit Rules were later superseded on 10 September, 2004 by Cenvat Credit Rules, 2004. Rule 3 of these Rules provi....
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.... (v) M/s. Edac Engg. Ltd. v. CST, Chennai, reported in 2017 (6) TMI 685 CESTAT Chennai. 17. In Urvi Construction a Learned Member of the Tribunal observed : "2. ................... Further the learned advocate also submits that in the Master Circular issued by the Board vide Circular No. 96/7/2007-S.T., dated 23-8-2007, a stand has been taken that there is no exemption to a sub-contractor from payment of service tax merely because the contractor pays the tax. However, he submits that for the period circular issued late by the Board in 1997 was applicable and according to this Circular where the services have been provided by the sub-contractors such sub-contractors are not liable to pay service tax and service tax liability is on the main contractor. Taking note of the fact of the contention that main contractor has paid the service tax and charging service tax on the sub-contractor again would amount to taxing the same service twice and also taking note of the circular cited by the learned advocate and the decisions of the Tribunal cited, I find that if the appellant is required to pay the service tax it would amount to taxing the same service twice and t....
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....st 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 decisions do not take into consideration the impact of the Cenvat Rules. It would, therefore, not be correct to conclude that double taxation would result if a sub-contractor is required to discharge the Service Tax liability even if the main contractor has discharged the tax liability. 22. The decisions of the Tribunal holding that double taxation will not result if a sub-contractor discharges the tax liability because of the Cenvat Rules, now need to be referred to. 23. In Max Tech Oil & Gas Services Pvt. Ltd. v. Commissioner of Service Tax, Delhi, reported in 2017 (52) S.T.R. 508 (Tri. - Del.), the Division Bench has held : "6. Regarding the contention of the appellant that they have acted only as a sub-contractor and demanding service tax from them will amount to double taxation as the main contractor also is rendering similar service to ONGC, we find no legal basis for the contention of the appellant. The service tax leviable at the hands of each service provid....
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....r, 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 double taxation. The scheme of service tax law suggest that it is a single point tax law without being a multiple taxation legislation. In absence of any statutory provision to the contrary, providing of service being event of levy, self same service provided shall not be doubly taxable. 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 on such service if entire chain of identity of sub-broker and stock broker is established and transactions are provided to be one and the same. In other words, if the main stock broker is subjected to levy of service tax on the self same taxable service provided by sub-broker to the stock broker and the sub-broker has paid service tax on such service, the stock broker shall be entitled to the credit of service tax. Such a proposition finds support from the basic rule of Cenvat credit and service....
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....ng total turnover for the purposes of Section 6B 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 discussed in the foregoing paragraphs of this order. It also needs to be noted that there is no provision for input tax credit on deemed sales in levy of VAT. 29. The submission of the Learned Counsel for the Respondent regarding 'revenue neutrality' cannot also be accepted in view of the specific provisions of Section 66 and 68 of the Act. A sub- contractor has to discharge the Service Tax liability when he renders taxable service. The contractor can, as noticed above, take credit in the manner provided for in the Cenvat Credit Rules of 2004. 30. Thus, for all the reasons stated above, it is not possible to accept the contention of the Learned Counsel for the Respondent that a sub-contractor is not required to discharge Service Tax liability if the main contractor has discharged liability on the work assigned to the sub-contractor. All decisions, including those referred to in this order, taking a contra....
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....tion of abatement. In light of above observation we refer to the Notification No 15/2004-ST dated 10.09.2004. Notification No 15/2004-Service Tax, dated the 10th September, 2004 was rescinded vide n Notification No 2/2006-ST dated 01.03.2006. Hence this claim made by the appellant is under a notification which was not available after 01.03.2006. Hence the claim made under this notification is denied. 4.8 To argue on the limitation appellant have pressed the ground of bonafide belief and for that reason they rely upon the certificate issued to them by M/s Gammon. They also submit that there were conflicting views in the matter. However on query from the bench the counsel for appellant was unable to point out to a single decision available during the relevant period giving a contrary view. Further the submission to the effect that there were conflicting circulars is also not borne out by any evidence. Larger bench has in case of Melange Developer Pvt Ltd. clearly in para 12 noted that all Trade Notices/ Instructions/ Circulars/ Communications were superseded by the Master Circular dated 23 August, 2007, and this circular had clarified the liability of sub contractor to pay the ser....
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....8-09 (till Oct 2008); that he would pay the service tax amount by December 2008 after rechecking his liability and agreed to submit VAT returns and balance sheet on 05.12.2008. 4.11 On verification of sample work order bearing number 8450/112 dated 07/04/2007, issued by M/s Gammon India Limited in favor of the appellant, it is observed that as per Clause/ Condition No. 23 of the said contract, "Sub-Contractor has agreed that the service tax is included in his offer and so no claim whatsoever shall not be entertained in this regard & Gammon shall not be liable to pay the same." This condition clearly indicates that contract itself placed service tax liability on the appellant. In contradiction to specific provision of the contract, the submission of the appellant on the basis of the certificate issued by the M/s Gammon India only need to be negated. This condition in contract itself shows that appellant was aware of his liability to pay service tax. 4.12 The Appellant concealed the correct taxable amount with the service tax department, until the Departmental officers initiated an inquiry in this regard. These facts were suppressed with intent to evade the payment of service t....
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....the other hand referred to Section 271(1)(c) of the Income Tax Act, 1961 (in short the IT Act') taking the stand that Section 11AC of the Act is identically worded and in a given case it was open to the assessing officer not to impose any penalty. The Division Bench made reference to Rule 96ZQ and Rule 96ZO of the Central Excise Rules, 1944 (in short the "Rules') and a decision of this Court in Chairman, SEBI v. Shriram Mutual Fund & Anr. [2006 (5) SCC 361] and was of the view that the basic scheme for imposition of penalty under section 271(1)(c) of IT Act, Section 11AC of the Act and Rule 96ZQ(5) of the Rules is common. According to the Division Bench the correct position in law was laid down in Chairman, SEBI's case (supra) and not in Dilip Shroff's case (supra). Therefore, the matter was referred to a larger Bench." After referring to a number of decisions on interpretation and construction of statutory provisions, in paragraphs 26 and 27 of the decision, the court observed and held as follows : "26. In Union Budget of 1996-97, Section 11AC of the Act was introduced. It has made the position clear that there is no scope for any discretion. In para 136 of the U....
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.... clause referred to wilful action. According to learned counsel what was inferentially provided in some respects in Rule 173Q, now stands explicitly provided in Section 11AC. Where the outer limit of penalty is fixed and the statute provides that it should not exceed a particular limit, that itself indicates scope for discretion but that is not the case here." 23. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textile decides." 4.14 As appellant had not taken registration and had not filed ST-3 returns within the prescribed time, penalty imposed under Section 77 is justified. 4.15 As we uphold the demand for service tax, demand for interest follows, and needs to be upheld. It is now settled law that once the tax is demandable the interest as prescribed by law will automa....