Megh Raj Bansal Vs Commissioner of Central Excise (CESTAT Chandigarh)
CESTAT Chandigarh held that sub-contractor is liable to pay the Service Tax even if the main contractor has discharged the liability. Accordingly, service tax payable on ‘Commercial or Industrial Construction Service’.
Facts- The appellant is a partnership concern. The records of the appellant was examined by central excise audit team from 02.04.2007 to 03.04.2007 for the period 2004-05, 2005-06 upto 30.09.2006 and raised objection that the appellant is liable to pay service tax on the services rendered by them to the main contractors.
Accordingly, the show cause notice dated 25.03.2009 was issued to the appellant demanding service tax amounting to Rs. 59,69,183/- besides interests and penalty by invoking the extended period of limitation.
After following the due process the adjudicating authority confirmed the demand of Rs. 54,16,682/- after giving cum duty benefit and imposed penalty u/s. 76, 78 and demanded interest u/s. 75. Aggrieved by the said order, the appellant has filed the present appeal.
Conclusion- We have no hesitation to hold that the appellant/sub-contractor is liable to pay the Service Tax even if the main contractor has discharged the liability. The issue on merits is found against the assessee and in favour of the Department.
Held that the appellant being a subcontractor is liable to pay service tax on of ‘Commercial or Industrial Construction Service’. But, extended period cannot be invoked to demand service tax from the appellant and in the present case the entire demand is barred by limitation as the demand pertains to the year 2004-05 and 2005-06 whereas show cause notice was issued on 28.03.2009 which is completely time barred.
FULL TEXT OF THE CESTAT CHANDIGARH ORDER
The present appeal is directed against the impugned order dated 30.04.2010 passed by the Commissioner of Central Excise and Service Tax, Chandigarh whereby he has confirmed the demand of service tax of Rs. 54,16,682/- with equivalent penalty under section 78 and penalty under Section 76 along with interest under Section 75 of the Finance Act, 1994.
2. Briefly the facts of the present case are that the appellant is a partnership concern and registered with the Central Excise Department under the category of ‘Commercial or Industrial Construction Service’ and were duly paying service tax and filing ST-3 The records of the appellant was examined by central excise audit team from 02.04.2007 to 03.04.2007 for the period 2004-05, 2005-06 upto 30.09.2006 and raised objection that the appellant is liable to pay service tax on the services rendered by them to the main contractors. The stand of the appellant was that in view of the trade notices issued by the department they were not liable to pay service tax. The appellant also submitted letters received from the main contractor showing that the service tax has been paid by the main contractor on the activity undertaken by the sub contractor in pursuance of the contract. Thereafter, the show cause notice dated 25.03.2009 was issued to the appellant demanding service tax amounting to Rs. 59,69,183/- besides interests and penalty by invoking the extended period of limitation. After following the due process the adjudicating authority confirmed the demand of Rs. 54,16,682/- after giving cum duty benefit and imposed penalty under Section 76, 78 and demanded interest under Section 75. Aggrieved by the said order, the appellant has filed the present appeal.
3. Heard both the parties and perused the record.
4. Ld. Counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and binding judicial precedents. He further submitted that the appellant being a subcontractor is not liable to pay service tax when the main contractor has paid the service tax on the entire work. The appellant has also attached the copies of letter received from their main contractor showing that the service tax has been paid by them on the entire activity. The appellant has also relied upon the trade notice 98 ST dated 14.10.1998 and various other decisions of the Tribunal wherein it has been held that the sub-contractor is not liable to pay service tax on the services provided by it when the main contractor has paid the service tax on the entire activity. For this submission, he relied upon the following decisions as under:-
_ Vinoth Shipping Services Vs. CCE- 2021 (55) GSTL 313 (Tri.- Chennai)
_ Semac Pvt. Ltd. Vs. CCE – 2006 (4) STR 475 (Tri.-Bang.)
_ Koch-Glitsch India Ltd. Vs. CCE – 2009 (13) STR 636 (Tri.- Ahmd.)
_ Jac Air Services Pvt. Ltd. Vs. CCE – 2013 (31) STR 155 (Tri.- Delhi)
_ Larsen & Toubro Ltd. Vs. CCE – 2007 (211) ELT 513 (S.C.)
_ Jaiprakash Industries Ltd. Vs. CCE – 2002 (146) ELT 481 (S.C.)
_ Continental Foundation JT. Venture Vs. CCE – 2007 (216) ELT 177 (S.C.).
5. He further submitted that the whole of the demand is time barred because period in dispute is 2004-05 and 2005-06 and the audit was conducted on 02.04.2007 and 03.04.2007 whereas show cause notice was issued on 25.03.2009 which is entirely time barred. He further submitted that the earlier decisions cited (Supra) holding that sub-contractor is not liable to pay service tax when the main contractor has paid the service tax on the entire activity including that of sub-contractor have been overruled by the decision of the Larger Bench of the CESTAT in the case of CST Vs. Melange Developers P. Ltd., 2020 (33) GSTL 116 (LB). He further submitted that even after the decision of the Larger Bench in the case of Melange Developers P. Ltd (Supra) the appellant is not liable to pay service tax on the extended period of limitation. In this regard, he referred the decision of Max Logistics Ltd. Vs. Commissioner of Central Excise, Jaipur, 2017 (47) S.T.R. 41 (Tri.-Del.) and Vinod Shipping Services Vs. CCE & S. T. Tirunelveli, 2021 (55) GSTL 313 (Tri.-Chennai).
6. On the other hand, Ld. DR supported the findings in the impugned order and submitted that even if the main contractor has discharged the service tax on the ‘Commercial or Industrial Construction Service’, but still the appellant being the sub-contractor is liable to pay service tax because the appellant is providing the services to the main contractor, and the consideration received by the appellant from the main contractor is the consideration received for the services provided to the main contractor.
8. After consideration the submissions made by both the sides and perusal of the material on record, we find that the issue whether subcontractor is liable to pay service tax on the services on which the main contractor had paid the service tax, there were contrary decisions on this issue among the various benches of the Tribunal and the matter was referred to the Larger Bench and the Larger Bench has settled the issue in the case of CST Vs. Melange Developers P. Ltd., 2020 (33) GSTL 116 (LB). Further, we find that in the case of Vinoth Shipping Services Vs. Commissioner of Ex. & S. T., Tirunelveli reported in 2021 (55) GSTL 313 (Tri.-Chennai) where the Division Bench of the Tribunal after following the Larger Bench Decision has held as under:-
“8.1 It is seen that the amount received from the clients have been subjected to Service Tax at the hands of the main contractor. However, since the appellant, as a sub-contractor has provided services to the main contractor, is liable to discharge Service Tax on the consideration received from the main contractor namely, M/s. ACL. As correctly submitted by the Learned Authorized Representative for the Department, the main contractor would then be eligible to take credit of such Service Tax paid by the appellant as these are input services for the main contractor. This issue is no longer res integra and is settled by the decision of the Larger Bench of the Tribunal in the case of Commr. of S.T., New Delhi v. M/s. Melange Developers Pvt. Ltd. reported in 2020 (33) G.S.T.L. 116 (Tri. CB). It was observed as under:
15. It is not in dispute that a sub-contractor renders a taxable service to a main contractor. Section 68 of the Act provides that every person, which would include a sub-contractor, providing taxable service to any person shall pay Service Tax at the rate specified. Therefore, in the absence of any exemption granted, a sub-contractor has to discharge the tax liability. The service recipient .e. the main contractor can, however, avail the benefit of the provisions of the Cenvat Rules. When such a mechanism has been provided under the Act and the Rules framed thereunder, there is no reason as to why a sub-contractor should not pay Service Tax merely because the main contractor has discharged the tax liability. As noticed above, there can be no possibility of double taxation because the Cenvat Rules allow a provider of output service to take credit of the Service Tax paid at the preceding stage.
