TaxTMI 
TaxTMI 
2023 (11) TMI 1450
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....since 17.12.2005. The Appellant was regularly filing the returns and depositing the admitted taxes. The records of the Appellant like Balance-Sheet, Ledger account, Copies of Work Orders, Bills, TDS certificate - Form 16A, for the period 2004-05 to 2009-10, were scrutinized. Further, in the course of investigation, statement of Shri Choppa Suribabu, power-of-attorney holder of the Appellant was recorded on 24/09/2010 who, inter alia, stated that they have received the amounts from the clients/ main contractors for the services rendered, but they neither charged nor paid service tax, nor filed ST3 returns during the year 2005-06, due to non receipt of service tax amount from their principal contractors. They presumed that their clients might have paid the service tax as they have not mentioned such tax details in the Work Orders. So far the service tax amount received during the year 2009-10 from their clients for the service rendered, the same has been deposited under challans, as well as shown in ST3 returns filed. They have not received any free supply material from their principal contractor during the period 2005-06 to 2009-10. Further the amount received by them does not inclu....
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.... 4,26,78,949/- 12.36% 52,75,118/- -- 52,75,118/- 2009- 10 10,52,60,820/- 10.30% 1,08,41,864/- 31,25,490/- 77,16,374/- Total (a) 24,76,91,551 2,79,33,296/- 31,25,490/- 2,48,07,806/- Grand Total (a+b) 27,94,45,483/- 3,16,21,509/- 47,52,079/- 2,68,69,430/- 4. It further appeared that Appellant have paid only an amount of Rs. 47,52,079/- (Rs.16,26,589/- towards MRS and Rs. 31,25,490/- towards CAI) including cess and accordingly, they are liable to pay the balance tax. It is further alleged that Appellant have not filed the periodical ST3 returns for October 2005 to March 2006, for April 2007 to September 2007, for April 2008 to September 2008 for Maintenance and Repair service and for April 2009 to September 2009 for Erection, Commissioning and Installation service. Accordingly, it appeared to Revenue that extended period of limitation is applicable as per proviso to section 73(1) of the Finance act. Thus SCN dated 20.10.2010 was issued proposing to demand differential service tax of Rs. 2,68,69,430/- plus Rs. 20,61,624/- including cess with interest and further penalty was p....
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....r with respect to the whole contract Value in their returns vide their letter dated 9/3/10. 8. The Appellant have mainly provided the job of Erection, Commissioning and Installation services on sub-contract basis for the various principal contractors, besides providing Maintenance or Repair services mainly to Utility Power TECH Ltd, Vishakhapatnam and NTPC Ltd, Vishakhapatnam. In Para 10 of the SCN it is admitted that Appellant have not received any free supply of material from the principal contractor in execution of the composite work under the head ECIS during the period 2005-06 to 2009-10, and the amount received by them does not include any cost of materials. It appeared to Revenue that Appellant is not entitled to abatement for the material component used in the execution of composite contracts - ECIS. It further appeared that in view of the Board Circular No. 96/7/2007-ST dated 23/8/2007, a sub-contractor is essentially a taxable service provider. The fact that the services provided by the sub-contractor are used by the main contractor-service provider, for completion of the work, does not in any way alter the fact of provision of taxable services by the sub-contract....
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.... services provided in the SEZ premises, the Appellant is not liable to pay service tax, in support thereof letter issued by L & T dated 15/9/2010 and a certificate issued vide F.No.MPSEZ/IUA/02/2009 dated 1/4/2009 issued by the Officer on Special Duty, MPSEZ was also furnished. Despite furnishing such evidence, the Adjudicating Authority has erred in observing and disallowing the claim alleging absence of appropriate documentary evidence. 12. Learned Counsel also stated that admittedly Appellant was registered with the department and was filing regularly returns and paying the admitted tax. It was the view of Revenue till 23/8/2007, that a sub-contractor is not liable to pay service tax where the main contractor has discharged the service tax liability on the whole contract Value. This view was not erroneous, but under the conscious understanding that service tax is a destination-based tax and tax cannot be collected twice on the same service. It was only after issue of the Board Circular dated 23/8/2007, wherein, it was provided that the subcontractor should also deposit the tax which will be available to the main contractor as Cenvat credit. Under such premises, the demand fro....
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....ervices and/or two transfer of services, one from the subcontractor to the main contractor and again from the main contractor to the principal. In the case of works contract - composite contract, the transfer of materials/service is based on the theory of accretion as has been held by the Hon'ble Supreme Court in the case of Imagic Creative Pvt Ltd [2008 (09) STR 337 (SC)]. Thus, the demand of service tax from the Appellant as subcontractor, is hit by the ruling of the Hon'ble High Court (supra) which have been relied upon by Coordinate Bench of this Tribunal. 14. Learned Counsel further relies on the ruling in the case of Hindustan Coca-Cola Beverages Private Limited, which was under the Income Tax provisions, wherein the passing officer in charge was required to deduct TDS from the payments made to the assessee/deductee, but the deductor failed to deduct the tax at source. However, the deductee/assessee had admittedly paid the income tax. In such circumstances, the Apex Court observed that Circular No. 275/201/95 - IT (B) dated 29/1/97 issued by the CBDT, in our considered opinion, should put an end to the controversy. The circular declares - no demand visualized under se....
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.... the same is exempt and the demand of tax for the work in SEZ is fit to be set aside. The Appellant relies on the ruling of Coordinate Bench in case of CST vs FEDCO paints and contracts [2017 (5) TMI 338 (CESTAT-Mumbai)]. 18. Learned Counsel further urges that by a way of alternative argument it is urged that even if tax is found to be payable by the Appellant as a subcontractor, under the admitted fact that the Appellant have not charged or collected the tax, the gross receipts by the Appellant should be considered as cum-tax basis. The Appellant also relies on the ruling of Hon'ble Punjab & Haryana High Court in CCE & ST vs Lone Star Engineers [2019 (3) TMI 1515] wherein the question of law before the High Court was - whether the Tribunal is right in holding that service tax paid by the main contractor on behalf of the sub-contractor can be treated as payment made by the sub-contractor, when the service tax law in the instant case, provides for assessment and payment of the due tax by the service provider. The High Court held - since the payment made by the main contractor had not been disputed by the Revenue, it was treated as payment made by the Assessee/sub-contractor. Furt....
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.... superseded by the Master Circular No. 999.03/23-8-2007 dated 23.08.2007. This Master Circular clarifies that services provided by sub-contractors are in the nature of input services and since a sub-contractor is essentially a taxable service provider, service tax would be leviable on such taxable service provided. It has also been clarified that even if the taxable service is intended for use as input service by another service provider, it would still continue to be a taxable service. As regards the ground taken of double taxation, the Larger Bench examined the issue in light of the credit mechanism introduced or available under CCR, granting benefit of tax paid or credit on input service, if the input service is used for rendering output services which are taxable. In view of Rule 3 of CCR, Cenvat credit can be taken on input services and utilized for payment of service tax on any output taxable service. It is for this reason that the Master Circular superseding the earlier clarification/notifications, provided for payment of service tax both by sub-contractor as well as main contractor. It was further held that it is not in dispute that sub-contractor renders taxable servi....
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....the main contractor has also paid service tax, and observed that if the service tax is paid by a sub-contractor in respect of same taxable service provided by the stock broker, the stock broker is entitled to credit of the tax so paid, in view of the provisions of the CCR. 23. The Larger Bench also took notice of the ruling of the Hon'ble Supreme Court in the case of L & T Ltd vs Addl. Deputy Commissioner of Commercial Taxes [2016-TIOL-155-SC-VAT] which was relied upon by the Assessee. In this case, L & T had assigned part of the work to the sub-contractor who was also registered, and had submitted the returns and paid the tax for the execution of Works Contract. During the course of assessment of L & T, it was submitted that the sub-contractor had already been taxed and, therefore, the Appellant - L& T cannot be taxed again under Sec 6B of the Karnataka Sales Tax Act. It was held that the value of work entrusted to the sub-contractor could not be taken into account while computing the total/taxable turnover of L & T for the purpose of taxation under Karnataka Sales Tax Act. 24. The Larger Bench of the Tribunal diferred with the ruling of Hon'ble Supreme Court observing that ....
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....entrusted to the sub-contractor or the tax payment made by them shall not be taken into consideration while computing total taxable turnover of L & T for the purpose of Sec 6B of the Karnataka Sales Tax Act, as the same would amount to double taxation. We further find that Hon'ble Chattisgarh High Court in the case of Sew Infrastructure Ltd (supra), wherein the sub-contractor had contended that the demand has been raised on him of service tax after the main contractor had deposited the service tax. The High Court held - There was substance in contention of Assessee that demand should not be raised when main contractor had deposited the service tax. The High Court remanded the matter for the limited issue to verify service tax paid by the main contractor and in principle held that tax cannot be demanded again where the main contractor had already paid service tax. 28. We further observed that the ruling of the Larger Bench of this Tribunal in Melange Developers (supra) does not override the ruling of the Hon'ble High Courts and Hon'ble Supreme Court particularly in the case of L & T (supra). We find that Hon'ble Punjab & Haryana High Court have held in the case of Vijay Sharma & ....
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....visions of SEZ Act read with Rules thereunder have overriding effect on the provision of Service Tax. 32. We also hold that, in the facts and circumstances, Appellant is not liable to pay any penalty and accordingly, we set aside all penalties imposed. 33. Thus, in view of aforementioned findings and observations, we allow the Appeal and set aside the Impugned Order. The Appellant shall be entitled to consequential benefits, in accordance with law. (Pronounced in the Open Court on 10.11.2023) (ANIL CHOUDHARY) MEMBER (JUDICIAL) (A.K. JYOTISHI) MEMBER (TECHNICAL) [Order Per: A.K. JYOTISHI] 34. I have perused the Order drafted by learned brother (Member Judicial) in the instant case. As I am unable to fully agree, I record my separate Order. 35. To me, the core issue is whether service tax is liable to be paid by a person (sub-contractor), who provides a taxable service to another person (main contractor) for a consideration, in a situation where the service tax is paid by another person (main contractor) on the entire contract value, a part of which he has passed to the said person (sub-contractor) or otherwise. 36. Sec 66 of the F....
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....ra), wherein, inter alia, it was held that in the absence of any specific exemption granted, a subcontractor has to discharge the tax liability. However, the main contractor can avail the benefit of input credit under CCR. 40. To me, the reliance placed by learned brother on the Coordinate Bench judgment in the case of Dotcom Advertising vs CCE, Lucknow [2019 (5) TMI 1482], which had in turn relied on the judgment of Hon'ble Patna High Court in the case of Hindustan Dorr-Oliver Ltd and another vs Union of India and others [1989 (9) TMI 355], is not correct, in as much as the principles which were followed in the case of Hindustan Dorr-Oliver Ltd case, and relied upon in the case of Dotcom Advertising case, are not squarely applicable to the service tax, which is a different statute under the Finance Act, 1994 and having its own distinct nature of levy, collection, discharge of duty and set off for credit taken at different stages to avoid tax cascading. The issue before the Hon'ble Patna High Court was in relation to levy of sales tax on the goods portion in the Works Contract Service (WCS), where the Hon'ble High Court said that in a project, if the goods are already charged to....
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....n deciding whether extended period can be invoked or otherwise as also whether penalty is leviable under Sec 78. 43. Therefore, in my view, Revenue's reliance on the Larger Bench ruling in Melange Developers Pvt Ltd (supra) is squarely applicable to the facts of this case. This judgment has covered entire gamut of circulars issued from 1997 till 2007, as also various judgments relied upon by the Appellants including BCC Developers and Promoters Pvt Ltd vs CCE, Jaipur [2017 (52) STR 22 (Tri-Del)], L & T Ltd vs Addl. Deputy Commissioner of Commercial Taxes [2016-TIOL-155- SC-VAT] & Power Mech Projects Ltd vs CC, Guntur [2017 (48) STR 165 (Tri- Hyd)], and finally after appreciating the cited case laws and entire relevant provisions under the service tax laws, came to the conclusion that it was not possible to accept the contention of the Counsel for the Respondent i.e., Melange Developers, that a sub-contractor is not required to discharge service tax liability, if the main contractor has discharged the liability on the work assigned to the sub-contractor. In fact, it went on to the extent of recording that all decisions, including those referred to in this Order, taking a contrary....
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....se, the SCN was issued on 20.10.2010 for the period 2005-06 to 2009-10. The SCN has been issued based on certain intelligence that certain service tax payers were suppressing the actual taxable value and pursuant thereto the documents including balance sheet, ledger account, etc., submitted by such providers were scrutinized. The statements were also recorded, wherein, inter alia, Shri Choppa Suribabu, power-of-attorney holder of the Appellant, admitted that they have rendered services under MRS/CAI but neither paid service tax nor filed ST3 returns during the period, due to non-receipt of amounts from their clients and have presumed that their clients might have paid. In fact, Department proceeded to check the veracity of the payment by principal contractor. They also admitted that when amount of service tax was received during the year 2009-10 has been paid under challans, as shown in ST3 returns filed. However, while adjudicating the SCN on the issue, the original authority came to the conclusion that service provider had willfully suppressed the value of taxable service and therefore, proviso to Sec 73(1) is invokable and also liable for penal action under Sec 78. 48. It is ....