TaxTMI 
TaxTMI 
2024 (6) TMI 446
X X X X Extracts X X X X
X X X X Extracts X X X X
.... order the same to be recovered from M / s Technosys Services (P) Ltd, Lucknow. I appropriate the service tax of Rs. 63 ,59,874/- deposited by M / s Technosys Services (P) Ltd, vide various Challans. I order to recover interest under Section 75 of the Act on delayed payment of Rs. 63,59,874/. (ii) I order to recover interest at appropriate rate on the above confirmed demand of service tax from M / s Technosys Services (P) Ltd, Lucknow under Section 75 of the Finance Act, 1994. (iii) I impose penalty of Rs. 3,53,30,033 (Rs. Three Crore fifty three Lakhs thirty Thousand and thirty three only) upon M / s Technosys Services (P) Ltd, Lucknow under section 78 of the Act. Since penalty under section 78 of the Act has been imposed, no penalty under section 76 of the Act for non-payment /short payment of Service Tax is required. (iv) I impose penalty of Rs. 5000 /- (Rupees five Thousand only) upon M / s Technosys Services (P) Ltd, Lucknow under section 77 (1) (a) of the Act." 2.1 Appellant-assessee is registered with Service Tax Department for providing taxable services under the category of Business Auxiliary Service, Information Technology Services e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....de payment of service and suppress the value of services provided by them for this reason, extended period of limitation was also invokeable against the appellant. Hence, they were also liable for penal action under Section 76 and 78 of the Finance Act, 1994. Show cause notice dated 20.04.2012 issued to the appellant asking them to show cause as to why:- (i) Service Tax to the tune of Rs.3,43,31,473/- Education Cess Rs. 6,86,629/-and Secondary and higher Education Cess totaling to Rs.3,53,30,033/- (Rupees Three Crore Fifty Three Lakh Thirty Thousand Thirty Three only) from the period 2006-07 to 2010-11, should not be demanded and recovered from them under the proviso to Section 73(1) of the Finance Act, 1994. (ii) Interest should not be charged on the aforesaid amount and recovered from them at the appropriate rate till date of actual payment under Section 75 of the Act; (iii) (a) Penalty should not be imposed on them in terms of Section 76 & 78 of the Act upto the period April 2008 for failing to pay Service Tax and suppressing the value of Service provided with intent to evade Service Tax. (b) Penalty should not be imposed on them in terms of Section 78....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax remain unpaid. • The said goods supplied to the tune of Rs.6,01,72,486.28 on which they were paid VAT to the State Government. This amount has also been included while making this demand in gross receipt of the appellant. • Demand of Rs.70,25,542/- which is in relation to sale of the goods is not sustainable. 3.3 Learned Authorised Representative reiterates the findings recorded in the orders of the lower authority. With regard to departmental appeal he submits that penalties under the Section 76 & 78 was required to be imposed on the appellant for the period prior to 10.05.2008 as has been held by Hon'ble High Court of Delhi in the case of Bajaj Travels Ltd. 2012 (25) STR 417 (Del.). 4.1 We have considered the impugned orders along with the submissions made in appeal and during the course of argument. 4.2 The first issue in the present case is with regard to determination of the classification of the services that are sought to be taxed while the demand has been made under the category of Business Auxiliary Service. Appellants claim that the services provided by them are classifiable under the category of Information Technology Services for wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....components for the creation of and inclusion in other information technology software products, (vi) providing the right to use information technology software supplied electronically is a 'taxable service'. According to Section 65(53a), "Information technology software" means any representation of instructions, data, sound or image, including source code and object code, recorded in a machine readable form, and capable of being manipulated or providing interactivity to a user, by means of a computer or an automatic data processing machine or any other device or equipment." 4.3 Admittedly, appellant was providing these services of printing of voter electoral rolls and voter cards to various government authorities in terms of agreement entered by them with UPDESCO. The fact that these services were to be provided by UPDESCO is evident from the contract dated 29.08.2003 made between UPDESCO and the Government of Uttar Pradesh. The terms of the agreement between appellant and UPDESCO are as follows:- I. Appellant was appointed by UPDESCO as General Marketing Associate (GMA) for Software development works and Services. II. The empanelled f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Initial/amendments in operation Manuals in printed form and on magnetic media • Documentation of the application software (model wise) in printed form. • Related supporting routines/DLLs Further as per the above agreement, sharing of the revenue between UPDESCO and M/s Technosys would takes place as under- The billing to end client will be done by UPDESCO and all payments shall accrue to UPDESCO. The sharing of the revenue shall be as governed as approved by the Board of Directors of UPDESCO (Appendix-D to the Agreement) which is as following:- A. For executing PROJECT sharing of the revenue shall be as specified in the sub clauses 16.1 and B. For delivery of PRODUCT sharing of the revenue shall be as specified in the sub clauses 16.2. 16.1 For Project: The sharing of the revenue in case of executing a PROJECT shall be as specified in the paragraphs (a) to (k) of this sub clause:- a. UPDESCO will charge 16% of the billed amount payable by the client as its marketing charge. In this case the responsibility of software development project management and associated work will be of the GMA. All post sales....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s marketing charge. In this case the responsibility of customization, delivery, installation, implementation, project management and associate work will be of the GMA. All post sales responsibilities like Maintenance, Training etc. shall be handled by the GMA. b. However if the Project Management work is done by UPDESCO 16% of the amount received from the client for project management work will be transferred to the GMA, rest 84% of the amount will be retained by UPDESCO. C. In case UPDESCO & GMA take up the AMC for solutions provided to clients for the application software supplied by UPDESCO and the GMA, UPDESCO would charge 16% of the AMC billing amount, however total AMC services will have to be provided by the GMA. d. Share of GMA will be 16% of the billed amount in case the GMA markets the software developed by UPDESCO. e. UPSECO will be 16% of the billed amount for Data Entry work undertaken by the GMA of behalf of UPDESCO. f. Actual reimbursements from the client, if any, towards the cost of travelling, food and lodging of Personnel from the GMA will be paid to the GMA without any deductions. g. The expenses on third par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s (ULB) in 4 states of India and one State Level Agency (SLA) has been finalized as the nodal agency for project implementation in each of the selected States which also includes the State of Uttar Pradesh 4. Technosys - second party has approached the UPLC First party for the above job and agreed to render it services and to execute the project on Behalf of UPLC- first party. 5. point 7 of agreement revealed however, Technosys - second party shall be entitled for its share of money only as per norms prevailing in UPLC i.e. out of the total charges received from RCUES, Technosys- second party would get 93% share subject to completion of all necessary formalities, Whereas UPLC first party shall retain 7% share towards its institutional charges and other overheads 6. Nature of work provided by M/s Technosys Services supply of Computer Hardware and customized software for various offices of Nagar Nigams and Jal Sansthans on the basis of work awarded by Regional Centre for Urban and environmental Studies ( RCUES), Lucknow. 4.6 The nature of work is governed by the agreement between M/s UPDESCO and the appellant according to which it is very clear that 16% ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e and scope clearly fall within the broad definition of BAS as defined under sub Section (19) of Section 65 of the Act. There are only a few invoices where software solutions have been offered and these are also of a date later than May'2008 when information technology software was brought in the ambit of Service Tax. The noticee has not produced any invoice which relates to software designing prior to May' 2008. Whatever invoices are there they relate to the period when the information technology software were chargable to Service Tax. Further, the nature of work is governed by the agreement entered into with UPDESCO and the noticee which clearly establishes that the amount received by the noticee is "Commission" which falls under BAS and not under the category of IT. Also, "Information Technology Software Service" means any service related to designing or developing of computer software or system networking or any other service primarily in relation to operation of computer systems. Preparation of PDFs and uploading it on internet is not necessary for operation of computer systems and comes under "Business Auxiliary Service" but doesn't appears to fall under ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the transaction between the transacting party i.e. service provider and the service recipient. In the present case service provider is appellant and the service recipients are UPDESCO, UPELC etc. The services provided by the appellant to these organizations are correctly classifiable under taxable category of Business Auxiliary Services. We are not inclined to accept the contentions of the appellant in this regard. 4.9 Appellant has contended that as UPDESCO and UPELC are services recipients in respect of these services and they were as sub-contractor, not required to pay any service tax in respect of services provided by them as sub-contractor. The said contention has been rejected by the Commissioner and we find that the liability of sub-contractor to pay service tax even if main contractor was pas paying the service tax on the services rendered has been decided by the Larger Bench of the Tribunal in the case of Melange Developers P. Ltd. [2020 (33) GSTL 116 (LB)] wherein following has been held: "15. It is not in dispute that a sub-contractor renders a taxable service to a main contractor. Section 68 of the Act provides that every person, which would include a sub-co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 the circular and the Tribunal's decision are squarely applicable to the facts of this case and accordingly appeal is allowed with consequential relief to the appellant." 18. In BCC Developers and Promoters Pvt. Ltd. it was observed : "6.1 We agree with the submission of the Ld. Counsel that no double taxation is permissible under the law. The Constitution (Article 265) provides to take the exact amount of tax i.e. neither more nor less. In the instant case, if the principal has already paid the Service Tax, then the same cannot be demanded from the appellant. As per the clarification of the Board's Circular dated 23-8-2007 as well as dated 7-10-1998, if the principal had not paid the Servi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....issioner 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 provider is decided by nature of activities undertaken by them. If the same is covered by scope of the taxable entry under Finance Act, 1994 tax liability arises. The said service becomes part of final service rendered by main contractor is of no consequence to determine the tax liability of each and every service provider. If at all, the service tax paid by a sub-contractor which becomes part of service further provided by the main contractor, the scheme of credit as envisaged by the Cenvat Credit Rules, 2004 will come into play subject to fulfilment of conditions therein. It is nobody's case that the sub-contractors per se are not liable to service tax even if they rendered taxable service............" [emphasis supplied]....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hain 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 of a sub-broker may be input service provided for a stock-broker if there is integrity between the services. Therefore, tax paid by a sub-broker may not be denied to be set off against ultimate service tax liability of the stock broker if the stock broker is made liable to service tax for the self same transaction. Such set off depends on the facts and circumstances of each case and subject to verification of evidence as well as rules made under the law w.e.f. 10-9-2004. No set off is permissible prior to this date when sub-broker was not within the fold of law during that period." 27. The Commissioner did express in the impugned order that under the Cenvat Scheme every stage of provision of service is requi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iced 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 contrary view stand overruled." 4.10 However, we find that after taking into note of the said decision of Larger Bench, Chandigarh Bench of this Tribunal in the case of M/s Megh Raj Bansal, Final Order No.60187 of 2023 dated 07.07.2023 have held that the demand will be barred by limitation if not issued within the normal period. The relevant aspects of the said decision are reproduced bellow:- "8. After consideration the submissions made by both the sides and perusal of the material on record, we find that the issue whether subcontractor is liable to pay service tax on the services on which the main contractor had paid the service tax, there were contrary decisions on this issue among the various benches of the Tribunal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in connection with the services rendered by them. The issue involved has been a subject matter of interpretation by the Tribunal and High Courts. In fact the earlier Circular issued by the Board, covering the period prior to the introduction of Cenvat Credit Rules gave an impression that when the main service provider discharged the service tax on gross value there may not be tax liability on the sub-contractor rendering similar service to the main contractor The Tribunal in various cases held in such a case involving interpretation of law and also a bona fide belief regarding service tax liability, will not attract the demand for extended period. We also take note that service tax liability on the appellant when discharged will be available as a credit to RSIC which can be used by RSIC for discharging their overall service tax liability. As such, to impute motivation to the appellant for intention to evade payment of duty is not sustainable. A reference can be made to the Tribunal's decisions in British Airways v. CCE (Adjn.), Delhi reported in 2014 (36) STR. 598 (Tri. - Del.), Atul Ltd. v. CCE, Surat-Il reported in 2009 (237) E.LT. 287 (Tri. - Ahmd.). In the facts a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f by the Tribunal in various judgments and its stand held that where the entire service tax has been paid on the full consideration of the services, the sub-contractors' liability would not arise to pay service tax again on the part of principle service. One such reference can be made by following circulars: TRU letter F. No. 341/18/2004-TRU (Pt.) dated 17-12-2004 -Circular No. 23/3/97-5.T., dated 13-10-1997 - Master Circular No. 96/7/2007-ST dated 23-8-2007 In fact, also from various following decisions of the Tribunal:- - Urvi Construction v. CST, Ahmedabad 2010 (17) S.T.R. 302 (Tri. Ahmd.) = 2009- TIOL-1890-CESTAT-AHM -CCE, Indore v. Shivhare Roadlines - 2009 (16) S.T.R. 335 (Tri.-Del.) =2009-TIOL-526-CESTAT-DEL 9 ST/1124/2010 - Harshal & Company v. CCE, Vadodara - 2008 (12) S.T.R. 574 (Tri.- Ahmd.) - Semac Pvt. Limited v. CCE, Bangalore-2006 (4) S.T.R. 475 (Tri.- Bang.) 2006-TIOL- 1546-CESTAT-BANG Shiva Industrial Security Agency v. CCE, Surat - 2008 (12) S.T.R. 496 (Tri.-Ahmd.) - Synergy Audio Visual Workshop P. Ltd. v. CST, Bangalore 2008 (10) S.T.R. 578 (Tri.-Bang.)= 2008-TIOL-809-CESTAT-BANG ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t for the period 2010-11 appellant was required to pay service tax of Rs.87,25,657/- whereas, as per the submissions made by the appellant that they have paid Rs.63,59,874/- for the period from 1st July, 2010 onwards, show cause in the present case has been issued to the appellant on 20th April, 2012 for the period from 2006-07 w.e.f. October, 2006 to 2010-11 as we hold that the demand again have been made by invoking the extended period, demand has to be limited for the period which falls in the normal period of limitation. It needs to be verified whether the amount deposited by the appellant as claimed by them for services provided by them during the period post 01.07.2010 covers the tax due needs to be verified by the jurisdictional authorities after computing the demand for the normal period. Appellants have during the course of argument submitted the detailed chart year wise for computation of the value of services. This chart should be taken into account by the original authority for re-computing the demand the demand for normal period and apportioning the same against the payments made. 4.13 As we are not in position to uphold the invocation of extended period of demand t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tically 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 Union Budget reference has been made to the provision stating that the levy of penalty is a mandatory penalty. In the Notes on Clauses also the simila....