Service tax duly payable by sub-contractor even if main contractor discharged tax liability

Vishal Engineering Company Vs Commissioner of Central Excise and Service Tax Commissionerate (CESTAT Chandigarh)

CESTAT Chandigarh held that sub-contractor is liable to pay service tax on ‘Erection, Commissioning and Installation service’ even if the main contractor has discharged Service Tax liability on the activity undertaken by the sub­contractor.

Facts- The appellant is engaged in providing the taxable services of ‘Erection, Commissioning and Installation’ falling under clause (zzd) of Sub Section 105 of Section 65 of the Finance Act, 1994 which are taxable in terms of Section 66 of the Act, 1994.

Department alleged that the appellant has provided the aforesaid taxable services but did not pay the service tax on the gross amount received in lieu of rendering the services. Accordingly, the department issued the show cause notice alleging the non payment of service tax on the taxable service of ‘Erection, Commissioning and Installation’ provided by the appellant.

Appellant filed detailed reply stating that they are not the direct or the main contractor but a sub-contractor and hence the service tax is not payable by the appellant being a sub-contractor of the work when its main contractor has paid the service tax on the entire work.

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