Case Law Details
Pramukh Earth Movers Vs C.C.E. & S.T.-Vapi (CESTAT Ahmedabad)
CESTAT Ahmedabad held that it is settled legal position that sub-contractor is liable to pay service tax even though main contractor has paid service tax on total value. Accordingly, service tax demand sustained.
Facts- The appellant was engaged in providing services of “Supply of Tangible Goods, Site Formation/Leveling of Land and Construction Service in the capacity of Sub-contractor. The main contractors obtained the contracts out of which only partial of work was assigned to the appellant in respect of which appellant provided the aforesaid services. The appellant under the belief that main contract is discharging the service tax liability on the contracts awarded to them, they are not liable to pay Service Tax on the works/Services rendered by him. Therefore the appellant did not take service tax registration and also not paid the service Tax on the aforesaid service provided by him in the capacity of Sub-contractor.
Therefore, a show cause notice dated 07.06.2012 was issued to the appellant covering the period 13.11.2007 to 31.03.2011 by invoking the extended period of 5 years as per the first Proviso to Subsection(1) of Section 73 of Finance Act, 1994 for demanding Service Tax amounting to Rs 86,57,392/- by the Order-in-Original dated 03.09.2013. The commissioner confirmed the demand.
Conclusion- Held that in case of service provided by sub-contractor even though the main contractor have paid the service tax on total value the sub-contractor is liable to pay service tax. The bonafide belief of the appellant that they are not liability to pay service tax cannot be doubted, questioned. In such situation the extended period which can be invoked only on the ingredient such as suppuration of fact, misstatement, fraud, collusion with intent to evade payment of Service Tax, cannot be invoked.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
1. The brief facts of the case are that during the period 16.05.2008 to 31.03.2012 the appellant was engaged in providing services of “Supply of Tangible Goods, Site Formation/Leveling of Land and Construction Service in the capacity of Sub-contractor. The main contractors obtained the contracts out of which only partial of work was assigned to the appellant in respect of which appellant provided the aforesaid services. The appellant under the beliefthat main contract is discharging the service tax liability on the contracts awarded to them, they are not liable to pay Service Tax on the works/Services rendered by him. Therefore the appellant did not take service tax registration and also not paid the service Tax on the aforesaid service provided by him in the capacity of Sub-contractor. Therefore, a show cause notice dated 07.06.2012 was issued to the appellant covering the period 13.11.2007 to 31.03.2011 by invoking the extended period of 5 years as per the first Proviso to Subsection(1) of Section 73 of Finance Act, 1994 for demanding Service Tax amounting to Rs 86,57,392/- by the Order-in-Original dated 03.09.2013. The commissioner confirmed the demand holding that Master Circular No. 96/7/2007- Service Tax dated 23.08.2007 covers the issue of liability of sub-contractor.
1.1 As per the said circular, sub-contractor is liable to pay Service Tax is not absolved even when the main contractor discharge the service tax on the total value of the Service tax. The demand of service tax was confirmed invoking extended period of limitation under proviso to section 73(1) of Finance Act, 1994. The penalty under section 78 and 77 of the Finance Act, 1994 were also imposed therefore, the present appeal filed by the appellant.
2. A letter dated 03.08.2023 given by the Chartered Accountant Shri Hardik P. Shah and Company is placed on record, according to which it was requested to decide the present appeal considering submissions placed on record and in the light of the judgments, the same is taken on record.
2.1 As per the submission of the appellant, it was submitted that it is not in dispute that the appellant has provided the services ofsupply of tangible goods, site formation and clearance on construction service in the capacity of sub-contractor,where the main contractors have discharged their liability of Service Tax on the total contract value.
2.2 It was submitted by the appellant that the only issue that remains for consideration before this Hon’ble Tribunal is whether service tax demand can be sustained invoking extended period of limitation, where appellant has provided the aforesaid services in the capacity of sub-contractor and main contractor has discharged the service tax on the total contract value. It is submitted that the issue in no longer res-Integra in view of the following decision of this Tribunal wherein it was held that during the period of dispute the liability of sub-contractor for the payment of Service Tax was not free from doubt and which was only settled by the larger bench of Tribunal in the case of M/s Melange developers Pvt. Ltd reported in 2019(60) TMI 518 CESTAT (New Delhi), M/s. Synergy Engineers Group Pvt. Ltd. Reported in (2023) 5 CENTAX 158 (Tri.-Del), M/s. Vinoth Shipping Services reported in 2021 (55) GSTL 313 (Tri. Chennai), M/s. Vishal Engineering Company Vs. Commissioner of Central Excise and Service Tax Commissionerate, Panchkula reported in 2023 (7) TMI 260- CESTAT (Chandigarh).
2.3 It is further submitted that during the period under dispute because of conflicting decisions and ambiguity of the law the matter was not clear and finally it got settled in the year 2019 by the Larger Bench hence the benefit of this must be extended to the appellant having no established malafide intention. Since the entire demand is for extended period the same is liable to be set aside as it is beyond normal period of one year.
3. Shri Rajesh Nathan Learned Assistant commissioner (AR) appearing on behalf of the revenue reiterates the findings of the impugned order.
4. We have carefully considered the submission made by both the sides and perused the records. We find that only issue to be decided in the present case is whether the demand is hit by limitation or otherwise. We find that the period involved in the present case is 01.11.2007 to 31.03.2011 and the show cause notice was issued after one year i.e. 07.06.2012 therefore the entire demand is under extended period.
4.1 In the present case the appellant have submitted that the appellant was admittedly working as sub-contractor. They were under bonafide belief that since the main contractor has discharged the service Tax on the entire value including the value of the appellant’s service they are not liable to pay the service Tax. In this regard we find that the issue was not free from doubt and the matter was referred to the Larger Bench and due to conflicting judgments the larger bench has finally decided thatin case of service provided by sub-contractor even though the main contractor have paid the service tax on total value the sub-contractor is liable to pay service tax.Since there was serious doubt about the taxability of the sub-contractor and also due toconflicting judgment, which subsequently resolved by the larger bench in the case of M/s Melange developers Pvt. Ltd (Supra), the bonafide belief of the appellant that they are not liability to pay service tax cannot be doubted, questioned.In such situation the extended period which can be invoked only on the ingredient such as suppuration of fact, misstatement, fraud, collusion with intent to evadepayment of Service Tax, cannot be invoked.
4.2 On the identical fact this Tribunal has consistently taken a view that on the issue of taxability on sub-contractor the extended period cannot be invoked this has been considered in the following Judgments:
- In the case of M/s. Synergy Engineers Group Pvt. Ltd. Delhi Tribunal passed the following order:
“15. The issue as to whether the extended period of limitation could be invoked in such a situation when there are conflicting views of the Tribunal on a particular issue has been considered by the Supreme Court in various decisions.
16. In Jaiprakash Industries Ltd. vs. Commissioner of Central Excise, Chandigarh, the Supreme Court held that when there are divergent views of High Courts, there can be a bona fide doubt as to whether the activity would amount to manufacture and in such circumstances it cannot be urged that there was mis-statement or suppression of facts with intent to evade payment of duty.
17. In Commissioner of Central Excise, Vapi vs. Kolety Gum Industries’, the Supreme Court held that when there are conflicting judgments of the Tribunal, the assessee may have a bona fide belief that service tax is not payable and in such a situation, the extended period of limitation cannot be invoked by the Department.
18. In Continental Foundation Joint Venture vs. Commissioner of Central Excise, Chandigarh, the Supreme Court held that when there is a scope for entertaining a doubt about the view to be taken, the extended period of limitation cannot be invoked.
19. The finding, therefore, that has been recorded by the Principal Commissioner for denying the invocation of the extended period of limitation does not suffer from any illegality.
20. in this view of the matter, the appeals filed by the assessee and the Department deserve to be dismissed and are dismissed.”
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