TaxTMI 
TaxTMI 
2025 (9) TMI 622
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....longwith interest under Section 75 ibid. 2. I also impose a penalty of Rs.10,49,780/- (Rupees Ten Lakhs Forty Nine Thousand Seven Hundred Eighty only) upon M/s Tapasya Projects Limited, 170/500(16) Lajpat Nagar, Kanpur under Section 78 of the Finance Act, 1994." 2.1 Appellant is holding Service Tax Registration No. AABCT4247NST002 and is engaged in providing service of Renting of Immovable Property and Security Detective Agency Service under Partial Reverse Charge Mechanism. 2.2 During the course of audit of records of the party, it was observed that appellant has received commission from M/s Ritu Tandon, Kanpur for mobilizing funds in insurance policies. M/s Ritu Tandon is an insurance agent of M/s Birla Sunlife insurance Co. Ltd. Appellant supports the business of M/s Ritu Tandon by way of arranging clients for M/s Ritu Tandon and in lieu thereof they receive commission from M/s Ritu Tandon. 2.3 Prior to introduction of negative list based taxation regime i.e. before 01.07.2012, services provided by the appellant were taxable under the category Business Auxiliary Services as defined under Section 65(19) of the Finance Act 1994. The said Section 65(19) ibid state....
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....notice answerable to the Assistant Commissioner, Service Tax, Division, Kanpur." 2.6 The said show cause notice was adjudicated as per the Order-in-Original dated 22.02.2017 referred in para 1 above. 2.7 Aggrieved appellant have filed appeal before Commissioner (Appeals) which has been dismissed as per the impugned order. 2.8 Aggrieved appellant have filed this appeal. 3.1 We have heard Shri Amit Awasthi, Advocate for the appellant and Shri A.K. Choudhary, Authorized Representative for the revenue. 3.2 Arguing for the appellant learned Counsel submits that- • The first point is to be determined is that if service tax liability stands to be discharged on full and complete value by the insurance agent (M/s Ritu Tandan) then the sub-contractor cannot be taxed again in respect of the same services for this proposition if appellant is asked to pay service tax then it would amount to double taxation. Reliance is placed on the following decisions- • M/s Vijay Sharma & Co.2010 (20) STR 309 (Tri.-LB); • CCE, Kanpur Vs M/s PK Khandelwal and Co 2016-TIOL-45-CESTAT-All; • M/s Amar Travels (India) Ltd. Vs CCE, Delhi 2018 (10) GS....
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.... FINANCE ACT, 1994. Relevant portion of Section 65 is reproduced as; [(19) "business auxiliary service" means any service in relation to,- (i) Promotion, or marketing or sale of goods produced or provided by or belonging to the client; or (ii) Promotion or marketing of service provided by the client; or (iii) Any customer care service provided on behalf of the client; or (iv) Procurement of goods or services, which are Inputs for the client; or [Explanation For the removal of doubts, It is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client;] [(v) Production or processing of goods for, or on behalf of, the client;] (vi) Provision of service on behalf of the client; or (vii) a service incidental or auxillary to any activity specified in sub-clauses (i) to (vl), such as billing, Issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, Inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes servi....
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....e service tax has been demanded from the sub-contractor appellant under the taxable category of "Business Auxiliary Services" on the commission received from the M/s Ritu Tandon for arranging the clients for her. Service tax on the services rendered by M/s Ritu Tandon under the category of 'insurance agent service' has been discharged by the insurance company (M/s Birla Sun Life Insurance Company) on reverse charge basis. Thus we find that neither the tax has been demanded from the appellant under the same category nor the tax has been demanded on the same transaction. Thus we do not find any merits in the submissions made by the appellant that demand of service tax made from him under this category would result in the double levy of tax, and reject the same. 4.5 Further, in the case of M/s Om Sai Fabricators 2023 (6) Centax 208 (Tri.-Bom) this Tribunal has held as follows:- "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/ Inst....
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....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 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 subseq....
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....in 2017 (52) S.T.R. 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) S.T.R. 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 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 chargin....
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.... 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 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 contenti....
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....ble 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 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 sto....
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....otal 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 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,....
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....the contention that the Appellant had bona fide belief of for non-payment of tax, so as to invoke Section 80 of the Act." 4.9 A statement of Shri Sukhdeo Vasudeo Yadav (proprietor of appellant} was recorded on 10.11.2008 wherein he stated that he has paid the service tax but has not filed any service tax return so far and submitted copies of taxable invoices, bank pass book and bank statement for 2006-07; that as a sub-contractor, he has provided commercial & industrial construction service to Gammon India Ltd, Mumbai, Japsin Jacob Wire Drawing P Ltd, New Delhi and Man Infra Project Ltd, Mumbai but has not paid any service tax till 31.03.2008 being a sub-contractor; that from 01.04.2008, he started charging service tax on the service provided as sub-contract and that the same would be credited to the service tax department; that he does not have any agreement with these 3 firms but has letter of indent from Gammon India Ltd. 4.10 Shri Sukhdeo Vasudeo Yadav, in his statement dated 21.11.2008 deposed that he paid service tax for the year 2006- 07 but did not pay service tax for 2007-08 and 2008-09(up to October 2008); that in 2006-07, he discharged service tax on th....
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....every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in that manner. In Dharamendra Textile the court framed the issues before it, in paragraph 2 of the decision, as follows : "2. A Division Bench of this Court has referred the controversy involved in these appeals to a larger Bench doubting the correctness of the view expressed in Dilip N. Shroff v. Joint Commissioner of Income Tax, Mumbai & Anr. [2007 (8) SCALE 304]. The question which arises for determination in all these appeals is whether Section 11AC of the Central Excise Act, 1944 (in short the "Act') inserted by Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is a scope for levying penalty below the prescribed minimum. Before the Division ....
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....ed Section 11AC in the manner as suggested because in that case that was not even the stand of the revenue. In paragraph 5 of the decision the court noted the submission made on behalf of the revenue as follows : "5. Mr. Chandrashekharan, Additional Solicitor General submitted that in Rules 96ZQ and 96ZO there is no reference to any mens rea as in section 11AC where mens rea is prescribed statutorily. This is clear from the extended period of limitation permissible under Section 11A of the Act. It is in essence submitted that the penalty is for statutory offence. It is pointed out that the proviso to Section 11A deals with the time for initiation of action. Section 11AC is only a mechanism for computation and the quantum of penalty. It is stated that the consequences of fraud etc. relate to the extended period of limitation and the onus is on the revenue to establish that the extended period of limitation is applicable. Once that hurdle is crossed by the revenue, the assessee is exposed to penalty and the quantum of penalty is fixed. It is pointed out that even if in some statues mens rea is specifically provided for, so is the limit or imposition of penalty, that is the m....