TaxTMI 
TaxTMI 
2024 (1) TMI 1563
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....and Installation service" and "Maintenance or Repair service" with effect from 07/01/2003 and is registered with the service tax department 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 f....
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....3,916/- 12.24% 31,29,023/- -- 31,29,023/- 2007- 08 5,18,57,781/- 12.36% 64,09,622/- -- 64,09,622/- 2008- 09 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 t....
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....Projects who are sub-contractors to Power Mech Projects Ltd also certified that Power Mech have paid the service tax on the declared turnover 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 cont....
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...., is execution of structural and piping works in the premises of APL Mundra Power Plant, which is a notified SEZ. Hence for the work done or 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 su....
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....either by the main contractor or through the sub-contractor. Service Tax being the other part of the same transaction, there cannot be two services 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 29/1/9....
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.... [2018 (2) TMI 1325]. 17. So far the demand of service tax is concerned, with respect to service rendered admittedly in the SEZ premises, 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 p....
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....e subcontractor provided the principal architect/decorator had paid the service tax. However, the trade notice/ instructions/ circulars were 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 ta....
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....r noticing that subcontractor 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 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 taxat....
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.... Hon'ble Supreme Court in L & T Ltd vs Addl. Deputy Commissioner of Commercial Taxes (supra) and the Apex Court held that the value of work 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 Suprem....
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....on. 31. So far the service provided in the SEZ area is concerned, we hold that the same is exempt from the levy of service tax as the provisions 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 cont....
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.... I rely on the judgment passed by the Larger Bench of this Tribunal in the case of CST, New Delhi vs Melange Developers Private Limited (supra), 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....
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....anding whether there was any intent to willfully evade tax or otherwise in a given set of facts, and such understanding would have bearing in 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....
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....n that even subcontractor is required to discharge service tax, when he is providing services through the main contractor. In the instant case, 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 suppresse....
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....rim Order No. 26/2023 Dt. 15-12-2023 PER: SULEKHA BEEVI C.S. 1. I have perused the orders recorded by brother Member (Judicial ) Shri Anil Choudhary and brother Member (Technical) Shri A.K. Jyotishi. The point referred for resolving the difference of opinion between the two Members is as under: DIFFERENCE OF OPINION "The Appellant/sub-contractor is not liable to pay service tax as admittedly, service tax has been paid by the main contractor on the whole contract value as held by Member (Judicial) (OR) Service Tax is payable on the value of sub-contract/work done by the Appellant in spite of the fact that the main contractor has discharged the service tax on the whole contract value (including the value of sub-contract) as held by Member (Technical)." 2. The parties were heard on 14.12.2023. The facts having been narrated in the Order recorded by brother Members, I do not wish to repeat the same. 3. The Learned Counsel Ms A.S.K. Swetha appeared and argued for the Appellant. It is submitted that once the tax has already been collected at the end of the main contractor, the same cannot be taxed again in the hands of the sub-contractor....
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.... of Bihar Finance Act and the Bihar Sales Tax Rules the Hon'ble High Court held that if the sub-contractor had already been assessed, and if in the order of assessment passed, the assessing authority had already taken into consideration the goods which were supplied in execution of his portion of the contract, no further sales tax would be leviable thereupon. In respect of the supply of goods the property wherein passes to the other, the sales tax is leviable only once. 3.4 The decision in the case of R.K. Infra Pvt Ltd., Vs Deputy Commissioner of Commercial Taxes, Bangalore [2016 (1) TMI 1420 (Karnataka High Court)] was adverted to by the Learned Counsel for Appellant that while considering the provisions of Karnataka VAT Act, the Hon'ble High Court has held that amounts paid to the sub-contractors by the main contractor which has suffered tax at the hands of the main contractor, cannot be subject to sales tax again at the hands of the sub-contractor as it would be a case of double taxation. 3.5 The Learned Counsel drew assistance from the decision in the case of Nana Lal Suthar Vs CCE, Jaipur-I [2015 (9) TMI 1446 - CESTAT, New Delhi] to support her contentions. The decision....
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....tractor is eligible to take credit on the service tax paid by the sub-contractor. This is clarified by the Board in its' Circular No. 96/7/2007-ST dated 23.08.2007. The Larger Bench of the Tribunal in the case of Melange Developers Ltd., has also noted this in para 28 of the Order wherein the decision of the Hon'ble Supreme Court in the case of Larsen & Toubro Ltd., Vs Deputy Commissioner of Commercial Taxes & [2016 (9) TMI 519 = 2016-TIOL-155-SC-VAT] was referred. It was noted by the Larger Bench that there is no provision for input credit on deemed sales in levy of VAT. After noting these decisions the Larger Bench has observed that the payment of service tax by the sub-contractor even if the main contractor has paid tax would not amount to double taxation. 4.2 It is submitted that the decision rendered by the Larger Bench in the case of Melange Developers Pvt Ltd., would apply. 4.3 The Learned AR argued that the decision rendered by Larger Bench in the case of Vijay Sharma & Co. Vs CCE, Chandigarh [2010 (4) TMI 570 - CESTAT, New Delhi - LB] is of no assistance to the Appellant. In para 9, the Larger Bench has categorically held that if service tax is paid by sub-broker in ....
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.... Act, 1994 it is not only transfer of property in goods ( deemed sale) and moreover the taxable event is not sale of goods. The activity of rendering Works Contract Service is the taxable event. When the customer pays consideration to the main contractor it is a taxable service rendered by main contractor to the customer. Then, the main contractor is the service provider and is liable to discharge service tax on the consideration received. While sub-contracting, the sub-contractor is the service provider to the main contractor and is liable to pay service tax on the consideration received. As clarified by the Board Circular, the main contractor would be eligible to avail Cenvat Credit of the service tax paid by the sub-contractor. Then there is no situation of double taxation. 5.2 Section 65(7) of the Finance Act 1994 defines "assessee" as a person liable to pay the service tax and includes his agent. Rule 2(1)(d) of Service Tax Rules 1994 defines "person liable for paying service tax". As per the said Rule, in respect of services other than in Rule (2)(1)(d)(i), it is the provider of service who is the person liable to pay service tax. When the law fixes the liability to pay ta....
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....ench in Melange Developers Pvt Ltd. 5.5 In the case of Sew Infrastructure Ltd., Vs CCE & C, Raipur [2015 (3) TMI 791 (Chattisgarh)] the Hon'ble High Court had relied on the decision in the case of Larger Bench in Vijay Sharma & Co which has been considered by Larger Bench in Melange Developers Pvt Ltd. The decision rendered in Vijay Sharma is prior to Melange Developers Pvt Ltd. 5.6 The Learned Counsel has relied on the decision in the case of M/s Credible Engineering Construction Projects Ltd., vide Interim Order No. 01/2022 dated 08.02.2022 wherein the decision in the case of M/s Atma Steels Pvt Ltd., [1984 (17) ELT 331] has been referred. It is argued that the decision of Jurisdictional High Court would prevail. As already stated since the decision of Andhra Pradesh High Court is on VAT law and it's ramification of eligibility of input tax credit and not being rendered under service tax law, the decision in the case of Melange Developers Ltd., having decided the exact issue, would apply. Further, Melange Developers in para 28 has indeed noted the decision rendered under VAT law. In the case of M/s Om Sai Fabricators Vs CCE & ST, Raigad [2022 (10) TMI 60 - CESTAT Delhi] whi....